Stock Keeping Unit
SKUA Stock Keeping Unit (SKU) is a unique alphanumeric code assigned to a specific product variant to track inventory.
A Stock Keeping Unit (SKU) is an internal identifier used by a manufacturer to track a distinct type of item. Each SKU represents a specific product variation, accounting for attributes like size, color, material, or packaging. For example, a single t-shirt design sold in three colors and four sizes would require twelve different SKUs.
On the shop floor, SKUs are central to inventory management. They are stored in an Enterprise Resource Planning (ERP) or Warehouse Management System (WMS). Barcodes corresponding to SKUs are scanned at various points. This includes receiving raw materials, moving work-in-progress between stations, and shipping finished goods. This process provides real-time visibility into stock levels and locations.
Using SKUs enables accurate inventory control. It helps prevent stockouts of critical components and reduces overstocking of slow-moving items. Accurate SKU data is necessary for Material Requirements Planning (MRP) systems to calculate raw material needs. It also simplifies order picking and fulfillment, reducing errors and improving shipping accuracy.
Manufacturers implement SKUs by first establishing a logical naming convention. The code often incorporates abbreviations for key product features. For instance, a metal fabricator might use `PNL-AL-48-GRY` for a 48-inch aluminum panel with a grey finish. This system ensures each new product variant receives a unique, understandable identifier.
A furniture manufacturer produces a specific wooden chair in oak and walnut with either a red or blue cushion. Each of the four variants has a unique SKU, like `CHR-OAK-RED-CUSH`. When a work order for 50 oak chairs with red cushions is created, this SKU ensures the correct wood and fabric are pulled from inventory.
What is the difference between an SKU and a UPC?
An SKU is an internal code created by a manufacturer for inventory management. A Universal Product Code (UPC) is an external, standardized 12-digit code used by retailers for point-of-sale scanning.
Do raw materials and components need SKUs?
Yes, assigning SKUs to raw materials, sub-assemblies, and components is critical for accurate inventory tracking and production planning.
How do you create a good SKU format?
A good SKU format is logical and consistent. It should use letters and numbers to represent the most important product attributes, such as item type, material, and size.
Can two different products have the same SKU?
No. The purpose of an SKU is to be a unique identifier for one specific product variant. Sharing SKUs would make accurate inventory tracking impossible.
What is a typical length for an SKU?
SKUs are typically between 8 and 12 characters. They should be long enough to be unique but short enough for employees to read and understand easily.
Bill of Materials
BOMA Bill of Materials (BOM) is a complete list of the raw materials, components, and assemblies required to build a product.
Finished Goods
Finished goods are products that have completed all manufacturing processes and are ready to be sold to customers.
Inventory Turnover Ratio
The inventory turnover ratio measures how many times a company sells and replaces its inventory over a specific period.
Warehouse Management System
WMSA Warehouse Management System (WMS) is software that directs and optimizes warehouse operations from receiving to shipping.
Work in Progress
WIPWork in Progress (WIP) is the inventory of partially finished goods waiting for completion and final inspection.