Glossary
SKU
Stock Keeping Unit
An SKU is the unique identifier given to a stocked item in its exact variant. One product available in three sizes and two colours counts as six SKUs. It is the elementary unit on which inventory, replenishment and order picking all rest.
What an SKU is for
The SKU answers a deceptively simple question: what exactly are we talking about? Without it, an inventory counts quantities without knowing precisely what it is counting, and two people can refer to the same thing in two different ways. With an SKU, every movement becomes traceable: receipt, issue, transfer, pick. That is the precondition for a reliable available stock figure, for triggering replenishment at the right moment, and for analysing turnover. The number of SKUs managed is itself a measure of complexity. A workshop that has gone from 300 to 900 SKUs in two years has changed business without always noticing: its storage layout and its workstations should have followed, and they almost never do.
How to build an SKU code
There is no standard: the code is internal and entirely yours. A few rules avoid the most common trouble. Choose between a meaningful code, where each segment carries information (family, model, size, colour), and an opaque one, a plain serial number. The first can be read without a tool but ages badly as the range evolves; the second never ages but forces you to consult the system. Avoid characters that are ambiguous to read or to dictate: zero and the letter O, the digit one, capital I and lowercase L. Rule out accents, spaces and special characters, which break exports and imports. And above all, never reuse a retired code: a recycled SKU pollutes the history for years.
SKUs and the physical layout of stock
A well-designed SKU is worthless if the warehouse does not reflect it. Two principles make most of the difference. The storage address must stay separate from the SKU. The SKU says what it is, the address says where it is. Merging them makes it impossible to move an item without renaming it — and relaying out a warehouse then becomes an IT project. Not every SKU deserves the same treatment. Those that move every day belong as close as possible to the point of use; the dormant ones belong far away. That is precisely the job of ABC analysis.
Not to be confused with
- A manufacturer reference names a product as its maker names it. An SKU names how you manage it: two companies buying the same part will give it different SKUs.
- A barcode or QR code is a reading medium. It often encodes the SKU, but it is not the SKU.
- An EAN or GTIN is a standardised, global identifier issued by a body. An SKU is internal, free, and never leaves the company.
- A storage address designates a location. Confusing the two freezes the warehouse layout in place.
Frequently asked questions
- What does SKU stand for?
- Stock Keeping Unit. In practice people often say "reference" instead, which is what keeps the confusion with the manufacturer reference alive.
- What is the difference between an SKU and a reference?
- The reference describes the product from the maker's point of view. The SKU describes the item from the point of view of whoever stores it, in its exact variant and packaging. The same product bought in boxes of 100 and individually may be two distinct SKUs.
- How many characters should an SKU code have?
- No rule imposes a length. In practice, eight to twelve characters cover most needs. Beyond that, keying errors rise, labels become unreadable and operators start taking shortcuts.
On the shop floor
The number of SKUs to present at a workstation drives the design of the equipment. Below roughly twenty items, one bin per SKU stays manageable on a fixed workstation. Beyond that, the operator spends more time searching than producing: that is the point where kitting takes over, presenting the kit for the order rather than the whole store.