What Is a Product SKU?

SKUs are used by retailers, manufacturers, and distributors to facilitate the accurate and efficient handling of merchandise throughout the supply chain, from warehousing and order processing to point-of-sale transactions and reporting. They are designed to be easily interpreted by humans and automated systems. They provide a standardized means of identifying products based on their attributes, such as brand, model, color, size, or other distinguishing features.

By assigning a unique SKU to each product variant, businesses can efficiently differentiate between items, monitor stock levels, and streamline order fulfillment processes.

Key benefits of using SKUs include:

1. Inventory Management. SKUs enable businesses to maintain accurate and up-to-date inventory records, simplifying tracking stock levels, reordering, and handling returns. This allows for more informed decision-making regarding inventory replenishment and helps prevent stockouts or overstocking.
2. Order Fulfillment. SKUs streamline order processing and fulfillment by providing a clear, standardized reference for warehouse staff and automated systems. This minimizes the likelihood of errors, such as shipping incorrect products or quantities, and ultimately improves customer satisfaction.
3. Sales Analysis. SKUs facilitate sales data analysis, allowing businesses to monitor product performance and identify trends or patterns. This valuable insight can inform pricing, marketing, and merchandising strategies, driving more targeted and effective decision-making.
4. Point-of-Sale Transactions. SKUs simplify the checkout process by providing a unique identifier for each product, enabling easy scanning or manual entry at the point of sale. This accelerates transaction times, reduces the risk of errors, and enhances the overall customer experience.
5. Product Information Management. In eCommerce, product catalogs, and information management systems, SKUs are unique identifiers for each product variant, ensuring accurate and consistent product data across various channels, such as websites, marketplaces, and other sales platforms. This makes your product taxonomy strategy easier to develop.

It is important to note that while SKUs are internal to a specific organization, they should not be confused with Universal Product Codes (UPCs) or European Article Numbers (EANs), which are standardized, globally recognized identifiers used for product identification and barcode generation.