What is a Stock Keeping Unit (SKU) & How to Use SKUs in Your Warehouse?


SKU (Stock Keeping Unit) is a unique code that you use to identify every inventory item in your warehouse. Inventory management using SKU codes helps you easily track your inventory items and their variants (e.g. color, size) in inventory lists, invoices, manufacturing and purchase orders. If you happen to sell on Shopify, make sure to check SKUs for Shopify.

1. Setting up your SKUs

SKU code should help you identify the exact product variant you are looking for. Therefore, you should incorporate information on color, type, size and other similar attributes into the SKU. This saves you time in decoding the SKU during everyday operations. For example, if your product list includes a Coffee table that comes in various sizes and colors then the following would be a good SKU code:

Coffee table (small, black) - COF-S-BK

SKU codes can include both letters and numbers (but beware of using letter O and number 0 - they are easy to mix up). Another example:

Jacket (size 12, white) - JAC-12-WH

The more important info should come first in the SKU code. For example, if your product assortment changes every season you might want to use S17 (for Summer 2017 season) in the front of your SKU code. Example:

Leather bag (Summer 2017 season, green) - S17-LBA-GR

Download our free SKU Generator from here!


2. Tracking inventory

If your warehouse is filled with hundreds or thousands of products and you have no SKUs, then having a clear understanding of stock levels of each product or material and its variants is difficult. Using SKUs allows you to track stock levels for each product and material variant. This is paramount when optimizing your inventory levels.

SKU codes are mainly used for communication by describing products in a way that everyone can quickly get on the same page. Describing products in communication using lengthy product names and variant attributes can cause mistakes. Ability to identify each variant also simplifies stock taking, making it easier to confirm if your inventory matches the actual stock levels in the warehouse. Faster stock takes saves you time and money. 

Using SKUs allows you to easily identify sales volumes for each product variant - perhaps certain color or size combinations are more popular than others.  

If you are using an inventory management system to store info on your stock levels, purchases, and sales orders, then SKU codes should be implemented into this system. Inventory management software should allow you to store unique SKU codes for each product or material variant. Using Katana MRP, you can set up efficient SKU system for your manufacturing.