What Is an SKU? Meaning, Examples, and How to Use It

An SKU (Stock Keeping Unit) is a unique alphanumeric code that a business creates to identify and track each product in its inventory.

To use SKUs effectively, you assign a custom code to every product variant so you can manage stock, reduce errors, and make smarter reorder decisions.

Here's exactly how SKUs work — and how to build a system that works for your operation.

What is an SKU?

SKU stands for Stock Keeping Unit. It's a unique identifier a business uses to track its inventory. Every product — and every variation of that product — gets its own SKU.

There isn't a universal standard for how to format an SKU, unlike a UPC. But you should use an approach that's simple enough for your employees to read the code and immediately understand what product it represents. Here are the key characteristics:

Alphanumeric (letters and numbers)

Typically between 8 and 12 characters

Encodes product attributes — such as color, style, brand, gender, type, and size

Unique to each business

For example, a blue medium men's t-shirt from your "Basics" line might get an SKU like BAS-TSH-BLU-M. Someone on your warehouse floor can glance at that code and know exactly what they're looking at.

What does an SKU look like?

An SKU is a short string of letters and numbers, usually separated by dashes or grouped in segments. Each segment represents a product attribute.

Here's a real-world example. Say you sell candles and need an SKU for a large vanilla-scented candle in a glass jar:

CND-VAN-LG-GLS

The exact format is up to you. Some businesses start with a category code, others lead with the brand. The important thing is consistency — every SKU in your catalog should follow the same structure so your team can decode them without a reference sheet.

If you want a step-by-step walkthrough for building your own system, check out our guide on how to create SKU numbers.

SKU vs UPC: what's the difference?

SKUs and UPCs both identify products, but they serve different purposes and work in different ways.

A single product can have both an SKU and a UPC. The UPC stays the same no matter who sells it. The SKU changes from business to business.

For instance, two different retailers might sell the same branded coffee mug. The UPC on the packaging is identical. But Retailer A might assign the SKU MUG-BRN-12OZ while Retailer B uses HW-CM-BROWN-12.

If you're also wondering about manufacturer part numbers (MPNs), those are yet another identifier — assigned by the manufacturer, not the retailer.

Want real-time visibility into every SKU? See how Brahmin tracks inventory across all your channels →

Why are SKUs important?

SKUs are vital for inventory management because they let you track stock in real time and alert you when you're running low. Defining them correctly keeps your operation running smoothly and prevents costly stockouts.

Can two products have the same SKU?

No. An SKU is unique within the business that created it. However, two different products could share the same UPC or manufacturer part number if they're sold by different companies.

Benefits of SKUs: speed, insights, and efficiency

Tracking inventory

A well-designed SKU system improves your inventory control. By giving each product a unique SKU, you can quickly locate stock, trace orders, check shipments, review vendor information, and forecast sales.

Import your SKUs into a cloud-based inventory management system and track inventory as it's received, moved, and shipped.

Identifying shrinkage

One important aspect for any business managing stock is tracking inventory shrinkage — when your actual inventory is less than what's recorded. This can result from data entry errors, damage, loss, or theft. Shrinkage directly affects your bottom line.

Categorizing inventory with SKUs lets you see stock movements and pinpoint when, where, and how stock goes missing. That visibility helps you decrease theft and damage while increasing profits.

Better insights

Managing large quantities of inventory can be difficult for a growing business. Assigning a unique SKU to every product variation means the quantity of on-hand products is readily known — and it gives you deeper insight into your business.

For a fast-growing manufacturer, in particular, having these insights on hand means better sales and marketing decisions.

By analyzing sales and costs associated with each SKU, you can quickly identify which products perform well and which don't. Knowing this lets you discount low-performing products or bundle them with stronger sellers to boost revenue.

Improving customer satisfaction

The ability to set a unique code for each variant lets you track on-hand quantities for every product variation. It also helps your sales and customer service teams locate products quickly.

Using SKUs, you can set reorder points like min and max levels so you know when to purchase new inventory. Setting these reorder points ensures you have enough stock to meet customer demand while cutting down on excess holding costs.

Connecting with eCommerce platforms

If you sell products across multiple online stores, having a standardized SKU system lets you link all your channels with your inventory software.

By connecting all your channels, your inventory software can provide real-time updates across every storefront — so you don't oversell or miss a restock.

SKU meaning in manufacturing and supply chain

If you work in manufacturing, warehousing, or distribution, SKUs take on extra importance. They don't just track finished goods — they can also identify raw materials, sub-assemblies, and packaging components.

For example, a food manufacturer might assign SKUs to individual ingredients, intermediate batches, and final packaged products. Pairing SKUs with lot numbers gives you full traceability from raw material to finished good — which is essential for FDA compliance and recall readiness.

In a warehouse setting, SKUs map directly to bin locations, pick lists, and receiving documents. The more consistent your SKU structure, the faster your team can pick, pack, and ship orders.

Whether you're in food and beverage, supplements, cosmetics, or general manufacturing, a strong SKU system is the foundation for everything else — from MRP planning to production scheduling.

How to create SKU numbers

Creating SKUs doesn't need to be complicated. Here's a simple process:

Choose your top-level category — group products by type (e.g., "CND" for candles, "TSH" for t-shirts)

Add key attributes — include the details that differentiate variants, such as color, size, scent, or material

Keep it short — aim for 8–12 characters total

Use dashes or segments — separate each attribute so the code is readable at a glance

Avoid starting with zero — some software trims leading zeros, which can cause confusion

Stay consistent — every SKU in your catalog should follow the same structure

Document your system — write down your naming rules so new team members can follow them

For a more detailed walkthrough with examples, read our full guide on how to create SKU numbers.

Frequently asked questions

What exactly is an SKU?

An SKU (Stock Keeping Unit) is a unique alphanumeric code that a business assigns to a product to track it in inventory. It typically encodes attributes like product type, size, color, and brand. Each business creates its own SKUs, so the same product can have different SKUs at different companies.

What does an SKU look like?

An SKU is a short combination of letters and numbers — usually 8 to 12 characters. For example, a large red hoodie might have an SKU like APR-HOD-RED-LG. The format varies by business, but each segment typically represents a product attribute.

What is a SKU for jobs?

In job postings, "SKU" sometimes refers to a specific role or job requisition code within an HR system. It follows the same concept — a unique identifier for tracking and categorizing. However, the term is far more commonly used in inventory and retail contexts.

What is the difference between an SKU and a UPC?

An SKU is created internally by a business and uses letters and numbers. A UPC (Universal Product Code) is a standardized 12-digit barcode assigned by GS1 that stays the same across all retailers. A product can have both — the SKU for internal tracking and the UPC for universal identification at the point of sale.

How Brahmin Solutions can help

Brahmin Solutions is a cloud-based manufacturing platform built for growing manufacturers doing $500K–$50M in revenue. It handles inventory management, MRP, production planning, and lot tracking in one system — so your SKUs, reorder points, and stock levels are always up to date across every location.

If you're ready to move beyond spreadsheets, book a demo and see how it fits your operation.