Stock keeping unit definition
/What is a Stock Keeping Unit?
A stock keeping unit (SKU) is a specific type of product, with attributes that distinguish it from other SKUs. These attributes may include different sizing, materials, color, and packaging. SKUs are typically used in warehouses, retail stores, and product fulfillment centers.
The concept also refers to a unique identification code for each SKU. This may be a meaningless string of characters, or it could assign characters with a specific meaning, indicating the product type, size, color, and so forth. In the latter case, the firm has its own system for creating unique SKUs, which is probably not changed for long periods of time (in order to maintain code consistency). Whatever method is adopted should be easy for the staff to understand, so that there will be no confusion about what a code stands for. For example, the SKU for an executive desk in walnut wood with a pencil drawer might be: EXEC-WAL-PEN.
When reselling goods, a business may adopt the SKU of the manufacturer, or it may create its own SKU for the goods. Thus, two companies selling an identical product may or may not assign the same SKU number to it.
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How to Use a Stock Keeping Unit
When a company tracks its inventory, it does so by counting up the total of each SKU. The easiest way to do so is to convert the SKU for each unit into a bar code, which is affixed to the unit and scanned as part of the counting process. The totals by SKU are then multiplied by their unit costs to arrive at the total inventory valuation.
SKU numbers are also used to track the amount of on-hand inventory in real time. This information is needed to ensure that customers can reliably be promised a delivery date, based on the seller’s records of how many units are currently in stock.