Definition: Stock Keeping Units are unique alphanumeric codes used by merchants to identify product types and variations. Online businesses use SKUs to manage inventory and ensure that the proper items are packaged and shipped to customers.

Why — and how — online businesses use SKUs

Most commerce businesses use SKUs to . SKUs serve these three basic functions:

  • Inventory: Making sure that an acceptable quantity is always on hand.
  • Warehouse logistics: Makes it easier to quickly find and package the correct product.
  • Item specification: Denotes different product variations such as size and color.

SKUs were traditionally used to identify purchasable items in retail stores or catalogs. Online businesses now use these identifiers for the same purpose, with websites replacing — or integrating with — physical storefronts. Consider the following example: a woman's shirt in a specific style and size can be assigned a stock keeping unit like “4287-6.” This means it is style 4287 in a size 6. In other instances, SKUs can contain characteristics including:

  • Item description
  • Packaging information
  • Color identification
  • Warranty terms
  • Manufacturer information

SKUs are oftentimes not visible to customers, as they are primarily useful for merchants and product suppliers. The customer should never need the SKU for personal purposes.

SKUs vs. Product Models

It is important to distinguish between a stock keeping unit and product model numbers that are assigned to items by manufacturers. Model numbers can form part or all of the SKU, commonly as a hyphen-separated variation on the tail-end of the primary code. In a retail environment, they serve as a component of the back-end inventory control system to empower retailers to track products that are in inventory at warehouses or retail outlets.

SKUs can be used for any type of order fulfillment

In some instances, the SKU is not physically placed on products that temporarily reside in inventory. SKUs can actually be applied to intangible products that are billable but not visible to the naked eye. Examples are vehicle/home appliance warranties and units of repair time. It is prudent to think of them as codes assigned to a producer's billable entities. Regardless of appearance, the SKU facilitates the product tracking and inventory processes.

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