How to Create SKU Numbers: A Practical Inventory Management Guide

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There’s nothing better than selling your products successfully – unless you don’t have the proper resources to monitor your inventory as it sells. A stock-keeping unit (SKU) number is essential to identifying and keeping track of your products. However, knowing how to create SKU numbers is another story, and this process can be confusing if you don’t take the proper steps.

Understanding how to make SKU numbers is critical to inventory management processes. But what does SKU mean, and what is the SKU creation process? Read more to find everything to know about SKU numbers.

What is SKU Number?

Before exploring how to make SKU numbers, let’s define SKU. SKU is the abbreviation for a stock-keeping unit. SKU numbers are alphanumeric codes or abbreviations businesses use to identify and track inventory products. Individual products have unique SKU numbers to make them easily identifiable.

These numbers often include identifying information to better organize the product, such as special numbers for certain departments or sizes. How your SKU numbers look is entirely up to you and your business needs.

Aren’t SKU Numbers the Same as Universal Product Codes?

SKU numbers are often mistaken for universal product codes (UPCs), but they are two different things that serve unique purposes. A UPC is a 12-digit number that manufacturers use to identify specific products from one another. All products have a UPC issued by the Global Standard Organization (GS-1).

Unlike SKU codes, UPCs only contain numbers and don’t have any letters to identify the product. Additionally, UPCs are always 12 digits long, while SKU numbers vary depending on the identifying factors you include in the name. SKU numbers are used for your internal inventory processes and track everything within your organization, while UPCs are assigned externally and used in the POS system by distributors and retailers.

Here's a concise table for your convenience:

AspectSKU (Stock Keeping Unit)UPC (Universal Product Code)
DefinitionInternal code assigned by a retailer for tracking inventory.Standardized barcode used for product identification in retail.
PurposeUsed for internal tracking, inventory management, and organization.Designed for universal product identification in the retail supply chain.
UniquenessCan be unique to each retailer and may vary between businesses.Globally standardized, providing a unique code for each product.
FormatAlphanumeric code, often customized by the retailer.Consists of a numerical barcode recognized internationally.
ApplicationUsed for internal purposes, such as inventory control and order fulfillment.Utilized externally for product scanning, pricing, and sales tracking at the point of sale.

Why are SKU Numbers Important?

SKU numbers aren’t too difficult to create once you understand them. But why do you need them for inventory management? Let’s look at a few reasons.

SKU Numbers Simplify the Checkout Process

Well-defined, comprehensive SKU numbers are essential to simplify checkout and ensure customer satisfaction. SKU numbers are easily scannable, so during checkout, you’ll have updated information about which products have sold and how many are left in stock.

SKU numbers also simplify the checkout process online by providing an identifier customers can use to find the products they’re looking for in your stores. When a customer struggles to find an item in-store, employees can quickly use SKU numbers to check whether the item is in stock and where it can be located, ensuring a successful sale and checkout process. When combined with SKU-based checkout solutions like Quick Order, SKUs ensure a seamless checkout experience.

SKU Numbers Make Inventory Tracking Easier

SKU numbers are vital because they make inventory tracking much easier and more accessible. When you use SKU numbers, you can track individual products from the time they are entered into your inventory management system to the time they sell, getting complete insights into how customers are responding to your offerings. This system also gives information about what products are selling successfully and which aren’t as popular with customers.

SKU Numbers Promote Efficient Warehouse Processes

SKU numbers are one of the most important components of efficient warehouse processes as they provide guidelines on organizing products into categories and arranging them within a warehouse. SKUs eliminate the need to remember where all of your items are as you can quickly track and locate products by looking up the SKU. You no longer have to worry about losing items in a sea of other products.

SKU Numbers Streamline Order Fulfillment

Failing to fulfill orders can cause severe problems for your business, making it essential to have a system that’s proven to be effective for order fulfillment. SKU numbers provide a quick reference to pick and pack items efficiently, which is especially important for timely pre-orders and backorders or businesses managing high order volumes.

SKU Numbers are Necessary for Product Differentiation

Telling products apart when there aren’t many differences is challenging without a comprehensive SKU system. SKUs play an instrumental role in distinguishing between product variations, such as products that look the same but have different insides (for instance, laptops). For retailers with a large range of similar products, SKU numbers are invaluable for monitoring a diverse assortment of products.

SKU Numbers are Essential for Stock Replenishment

Ensuring your business is properly stocked with well-selling items is key to your success. SKU numbers are critical for replenishing stock when items are running low and can prevent stockouts from occurring and causing customer issues. SKUs promote visibility into product movements and play a significant role in inventory management because they help identify when to restock a popular item. Without SKU numbers, your business would struggle to determine when items are running low. 

If you want to ensure 100% efficiency of stock management, leverage Stock Notification

  • Get automatic alerts about low-stock SKUs.
  • Introduce stock status and price change subscriptions.
  • Receive notifications about SKU subscriptions.

Track shopper behavior with an analytics dashboard, discover the most-wanted products, and timely restock on popular SKUs.

How to Create SKU Numbers

Now that you know what SKU stands for and why it’s important, let’s explore how to create these numbers to identify products in a multi-source inventory system. Below is a breakdown of the process to create SKU numbers effectively.

1. Have a Top-Level Identifier

Your SKU number should start with a top-level identifier that explains the core characteristics of the product in 2-3 letters. This identifying characteristic might represent a specific product category, department, store location, manufacturer, or other factor that makes the product easily identifiable.

2. Create the Middle Section

The middle section of an SKU number should be used to further identify the product with easily recognizable identifiers. This identifier should dive into smaller details about the product, including features like the product’s color, size, type, or other individual characteristics that define what the product is.

3. Use a Sequential Number

After using letters for the first and second steps in creating an SKU number, add a sequential number to finish the SKU code. This number should be simple – think 001, 002, and 003 – to determine how old a product is. Items in stock for longer periods typically have smaller numbers, indicating that they should be prioritized for selling.

4. Add SKUs to Your Inventory Management System

A product SKU is only useful if it’s properly implemented into your inventory management system – so make sure you take this step to make the most of your new organization method! You can add SKU numbers to your inventory management system using a point-of-sale system with inventory tracking capabilities. Though some businesses opt for tracking inventory manually or with spreadsheets, using a POS system will be more efficient for managing your inventory.

Some of these systems will also provide a business SKU number generator, which is helpful if you need SKU numbers but don’t want to take the extra time to create these numbers yourself. However, creating SKU numbers independently can help you become more familiar with your organization system, so keep that in mind when deciding between creating your own SKU numbers or using a generator.

5. Create and Attach SKU Barcodes

Once SKU numbers are added to your inventory management system, a barcode will be created for individual items. These codes are scannable versions of your SKU number that can be scanned during checkout, allowing your inventory management system to update when items are sold to reflect your current inventory. Ensure there’s an SKU number on package boxes before selling or shipping items.

Example of SKU Numbers

Now that you understand how to create SKU numbers, let’s look at some examples of what these numbers look like once they’re created.

Department: 02

Color: Blue

Size: Large

Item number: 300

SKU: 02-300-BL-L

If you don’t want to use the department number as your top-level identifier, you can also use identifiers like product categories. Below is an example of a potential SKU for the product category of women’s shirts.

Category: Women’s t-shirts

Color: Green

Size: Medium

Item number: 200

SKU: TS-200-GR-M

Master Your Online Store With Amasty

Establishing SKU numbers is pivotal for effective inventory management in any thriving business. Recognizing the significance of these numbers marks the initial stride toward SKU system proficiency. While these codes are indispensable, they represent just one facet of a prosperous store. Exploring additional solutions may further optimize your business operations.

December 4, 2023
December 4, 2023
November 30, 2023
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