SKU Definition

See Also:
Vendor Finance
Inventory Cost
Perpetual Inventory System
Just in Time Inventory System
Open Account

The SKU Definition

A SKU, defined as a stock-keeping unit, is a unique number which distinguishes one product from another. It is used, most often, for the purpose of accounting for inventory. Each product has a unique number, allowing smooth tracking as products move in and out of a warehouse or store. An SKU number is not unique to each item, as the bar code on common consumer products, but more is the number used to for each product type. This is the difference between SKU vs UPC.

SKU Explanation

SKU, explained also as the only thing that makes sense of products in inventory, is an extremely useful tool. An SKU code is the base number for each type of product. From there, the SKU is entered into records. Inventory is counted, often by bar code or automatic radio frequency identification tag, as it moves in and out of the distribution center. This information is then placed with the SKU of the product in a database. An SKU, meaning the unique marker for a product, can then be combined with inventory levels for smooth processing and tracking.

SKU Example

Ira is the distribution warehouse manager for a toy company. His attention to detail and consistent methods have aided him in his work. These traits are essential to someone with his position. Aside from this, the other important trait is leadership. Ira has showed this ability time and time again.
Ira’s leadership skills are to the test again. In this situation, product names have somehow become disassociated with their place in the inventory database. This could prove to be a huge catastrophe. Ira is worried but keeps his cool as he formulates a plan.
Soon, Ira is able to find an old record of inventory rates with their SKU configuration. Due to the fact that this is a direct printout from the database, Ira can task someone with simply reentering the Product names. Though the product name is not listed on the record Ira is hoping the SKU is. SKU, functioning similarly to product name, allows this situation to be simply fixed.
Ira resolves to keep a daily copy of the inventory database. He has learned his lesson and does not want this problem to happen again. Rather than blame workers, Ira is a leader who can find the simple solution to a tough problem.
Keeping track of your inventory is an important factor in knowing your economics. If you want to find out more about how you could utilize your unit economics to add value, then click here to download the Know Your Economics Worksheet.