What Is an SKU? Meaning, Types, and How to Create One
An SKU (Stock Keeping Unit) is the unique alphanumeric code a company assigns to each product in its inventory to identify, locate, and track it throughout the supply chain. Unlike other identification codes, the SKU is defined by each company according to its own needs, not by an external body.
What is an SKU exactly
An SKU is a combination of letters and numbers that uniquely identifies a specific product, including its variants: size, color, model, or any attribute that distinguishes it from a similar reference. Two identical t-shirts in different sizes have different SKUs, even though they belong to the same model.
The SKU is for internal use. Each company decides its own structure, unlike standardized codes such as EAN or UPC, which are universal and assigned by an external body.
A typical example: a footwear company identifies boots from the “Aral” model, in black, size 40, with the SKU BOT-ARAL-BLK-40. The logic of the code is up to each company, but it usually follows a most-to-least relevant order: category, model, attribute, size.
What this code is used for
It serves several functions within inventory management and the supply chain:
- Fast, unambiguous identification of any item in the warehouse.
- Stock control: inflows, outflows, and exact stock levels per reference.
- Independent management of product variants (size, color, version).
- Batch traceability and tracking of product movement inside and outside the warehouse.
- Data foundation for sales analysis: which references turn over fastest, which need replenishment, what demand patterns exist per item.
These codes are usually generated by the company’s ERP, while the WMS (warehouse management system) connects to that information to manage physical operations: location, picking, dispatch.
Difference between SKU, EAN, and UPC
The SKU is often confused with other product identification codes, but they serve different purposes:
| Code | Who assigns it | Scope |
|---|---|---|
| SKU | The company itself | Internal, exclusive to that company |
| EAN | International body (GS1) | Universal, standard in Europe |
| UPC | International body | Universal, standard in the US and Canada |
A single product can have one EAN valid worldwide, but a different code at each company that sells it, according to its own internal coding system.
The different types by catalog complexity
Depending on catalog complexity, companies use different approaches:
- Simple: identifies a product with no variants. Example:
TSHIRT-001. - With attributes: includes information about color, size, or model. Example:
TSHIRT-XL-BLUE-001. - Hierarchical: organizes products into levels: category, subcategory, specific product.
- Dynamic: adapts to seasonal changes or shifting offers by adding suffixes or prefixes as needed.
- By channel: the same product has a different code depending on the sales channel (physical store, ecommerce, marketplace).
Best practices for building your coding system
A good internal reference system isn’t improvised. Some practical recommendations:
- Define which information matters most to your business (category, color, size, supplier) before building the code.
- Avoid letters that can be confused with numbers, such as I, O, or L.
- Don’t use special characters (quotes, parentheses, symbols) that can cause errors in IT systems.
- Keep the code as short as possible without losing essential information. An overly long one is hard to manage manually.
- Don’t copy the manufacturer’s codes as your own: build your own internal system, consistent with your catalog.
SKU and supply chain visibility
It isn’t just a warehouse label: it’s the data point that connects every system in the supply chain. When the ERP, the WMS, and a supply chain visibility platform share the same code, it becomes possible to know in real time where each reference is, in what quantity, and in what state, whether it’s in transit, in the warehouse, or in production.
Without a consistent reference system across platforms, visibility breaks down: the same product can appear under different codes in the ERP, the WMS, and the carrier’s system, creating inventory errors, avoidable stockouts, and lost traceability at exactly the points where it matters most.
That’s why, before investing in end-to-end visibility technology, many companies first need to clean up and unify their own coding system across departments and suppliers.
Frequently asked questions about SKU
What does SKU stand for?
SKU stands for Stock Keeping Unit. It’s the unique alphanumeric code that identifies a specific product within a company’s inventory.
What is the difference between an SKU and a barcode?
A barcode is the visual, scannable representation of an identification code, which can be an SKU, an EAN, or a UPC. The SKU is the data itself; the barcode is simply the way to read it automatically.
How many characters should the code have?
There’s no fixed rule, but it’s recommended to keep it between 8 and 12 characters. An overly long one is hard to manage and read for the people working with it daily.
Does it change depending on the sales channel?
Not necessarily. Many companies use a per-channel reference, where the same physical product has a different code depending on whether it’s sold in a physical store, a company’s own ecommerce site, or an external marketplace, to make differentiated stock management easier.
Who generates the SKU in a company?
It’s usually generated by the company’s ERP, following the coding rules the business itself has defined. The WMS and other platforms, such as supply chain visibility platforms, connect to that code to manage and monitor the product across the rest of the systems.