Effective Inventory Management with Product SKUs

SKU inventory
SKU, stock keeping unit. Concept with keywords, letters and icons. Colored flat vector illustration on white background.

SKU stands for “stock keeping unit” and, as the name implies, is a number (often eight alphanumeric digits) that shops assign to items to maintain internal stock levels. Each variant of a product, including multiple colours and sizes, has its own SKU number.

Why are Stock keeping units Important

Product stock keeping units are used to enhance various inventory management techniques. Stock keeping units are essentially data-packed codes that include essential product information for merchants to comprehend the goods right away, whether viewed from a distance of 10,000 feet.

Stock keeping units are used by retail establishments, catalogue companies, online retailers, e-commerce consultants, warehouse managers, and order fulfilment businesses to process payments, pull, organise, and transport the appropriate goods from point A to point B.

The integration of scannable stock keeping units into retail point of sale (POS) software and e-commerce systems makes it simple to process orders and do inventory counts. The POS automatically modifies the inventory count for all items with the same product SKU once a product is scanned for purchase.

SKU Benefits in Inventory Management

  • Stock keeping units are an important component of barcode inventory systems. Retailers may better understand the speed and direction of inventory flow by using stock keeping units to identify and track items, including total inventory counts, maintain correct inventory turnover ratios, and identify and monitor products. 
  • Retailers can set up automated actions to be performed if the total count of a product SKU falls below a predetermined threshold using inventory management software.
  • Sending a fresh product order to the manufacturer or checking other retailers’ stock levels to determine if there is a surplus are some examples of these steps. 
  • If there is an excess of the product as a result of a previous overorder or a lack of anticipated sales, product stock keeping units and inventory management systems also act in a reverse manner by stopping automated reorders.

Enhanced Shopping Experience with Stock keeping units

  • Customised product suggestions are a further advantage that product stock keeping units are able to offer that is becoming more and more useful. 
  • These online suggestions most frequently appear in emails and follow-you-around-the-web display advertising. 
  • By showing customers the same things they looked at on your website or comparable products to those they previously bought, these personalised suggestions boost the likelihood that they will make a purchase. 
  • Product stock keeping units enable this by including all necessary details about the goods that are being browsed and suggested. For instance, you are already aware that the pair of shoes you are seeing online has a certain product SKU. 
  • Additionally, SKU provides the online retailer’s web platform with all the information necessary to distinguish between pairs of shoes that are comparable, items from the same brand, items made of the same material or colour, etc.

SKU-Based Sales Forecasting

  • Successful merchants must grasp forecasting, and product stock keeping units serve as the cornerstone around which forecasting is built. 
  • Manufacturers, online retailers, and retailers all rely on product stock keeping units to measure weekly, monthly, and annual variations in sales volume. 
  • It follows that using the same stock keeping units to predict future sales for a future time period makes logical. 
  • For effectively navigating highly seasonal products, such as Christmas items, winter clothes, summer wear, and more, this kind of forecasting is very helpful. 
  • To make the most of your resource allocation, you may buy seasonal items with the appropriate lead time thanks to your product SKU-based forecasting.

Difference between SKU and UPC

DefinitionUniversal Product CodeStock Keeping Unit
CompositionConsists of 12 numerical digitsAlphanumeric (letters and numbers)
OriginAssigned by GS1 organizationCreated internally by a company
ChangeabilityPermanent, not easily modifiedEasily changeable within a company
External UseExcellent for external usePrimarily used internally
UniquenessUniversally recognizedBespoke to a particular merchant
PurposeIdentifies products in commerceUsed for inventory management, tracking, and organization.
BarcodesAlways have unique barcodes associatedCan have barcodes associated if desired for automation
Product OwnershipFacilitates product ownership in commercePrimarily for internal tracking and management
Requirements for useEssential for external product identificationNot a requirement, but can be associated with barcodes for efficient tracking

How to Create SKUs

  1. Stock keeping units offer sales and inventory movement information that is useful for your interactions with suppliers and clients. However, you must build your product’s SKU numbers, sometimes referred to as your SKU architecture, before you can access that data.
  2. Your inventory control and POS system is the most convenient way to create SKU numbers. 
  3. Online SKU generators may also be of assistance. Stock keeping units can also be created manually as needed, however, this isn’t usually advised, especially for shops with a significant inventory.
  4. The widest attribute, such as the department, product category, or supplier, usually appears in the first section of an SKU. This is translated to the top two or three alphabetic qualities. 
  5. The following few characters stand for characteristics that are unique to each product, such as its colour, size, brand, or another subcategory. 
  6. Your stock keeping units can inform you how many items you have and what order they were bought and processed thanks to the last two to three features, which also serve as sequence identifiers.


Using manufacturing software that supports a variety of tracking codes makes tracking and maintaining stock keeping units and UPCs much simpler. Inventory management becomes more effective since it lowers human error and saves time that would otherwise be spent on manual data entry. Microproducers, on the other hand, combine spreadsheets and even manual procedures. 

SKU codes can assist you in precisely tracking inventory to avoid stock-outs as they are utilised for business-based inventory management. On the other side, producers buy and license UPC numbers, which are widely used in North America and are included with a product when purchased. UPCs facilitate worldwide product sales by ensuring their compatibility with the supply chain. For this reason, big merchants and online marketplaces on e-commerce platforms want UPCs.


What does SKU stand for?

SKU stands for “Stock Keeping Unit.”

Why are SKUs important for businesses?

Stock keeping units enhance inventory management, enabling businesses to process orders, track products, and manage inventory efficiently.

How are SKUs used in retail and e-commerce?

Stock keeping units are used to process payments, organize goods, and streamline inventory management in retail stores and online businesses.

How do scannable SKUs benefit businesses?

Scannable Stock keeping units integrated into POS systems simplify order processing and inventory tracking, automatically updating counts when products are purchased.

What role do SKUs play in barcode inventory systems?

Stock keeping units help identify and track products, manage inventory turnover, and trigger automated actions when inventory levels reach specific thresholds.

How do SKUs enhance personalized product suggestions?

Stock keeping units provide necessary product details, allowing businesses to suggest similar items to customers based on their browsing and purchase history.

How are SKUs used in sales forecasting?

Businesses use Stock keeping units to measure variations in sales volume over time and predict future sales, particularly for seasonal products.

Can businesses create SKUs manually?

 While Stock keeping units can be created manually, it’s not typically advised, especially for businesses with significant inventories. Inventory control systems or online generators are more practical options.

What information is typically included in an SKU?

An SKU often includes information about the department, product category, supplier, and unique product characteristics like colour, size, or brand.

What do the last few characters in an SKU represent?

The final characters in an SKU often serve as sequence identifiers, helping businesses track item quantities and purchase order history.

Shraddha Thuwal

Shraddha Thuwal

Shraddha Thuwal worked as a content writer at WareIQ. She actively contributes to the creation of blog posts centered on eCommerce operations, fulfillment, and shipping, in addition to providing insights on various strategies and techniques tailored for eCommerce sellers. With an impressive track record, Shraddha boasts over two years of content writing experience, spanning a spectrum of industries including logistics, supply chain, and media.

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