SKU

A SKU (Stock Keeping Unit, pronounced "skew") is a unique alphanumeric code assigned to a specific, distinct product within a company's inventory system. Every variation of a product that is tracked, stored, and sold separately gets its own SKU. A single T-shirt in five colors and four sizes, for instance, represents 20 different SKUs — because each color-size combination is a distinct item that can be stocked and sold independently.

What Makes a SKU Unique

SKUs are internal codes created by the seller or manufacturer. Two companies selling the same product will have different SKUs. This distinguishes the SKU from:

• UPC/EAN (barcode): A universal standard code defined by GS1, the same on every retailer's shelf
• GTIN (Global Trade Item Number): The underlying global identifier that UPC and EAN encode
• Part number: A manufacturer's internal product reference, often used in B2B contexts
• ASIN: Amazon's internal product identifier (Amazon Standard Identification Number)

A product typically has all of these identifiers; SKUs are the internal-facing ones used in inventory management, while barcodes and ASINs face external systems and customers.

SKU Structure

There's no universal format for SKUs, but best practice recommends structured codes that encode meaningful attributes. A typical apparel SKU might look like: TSHIRT-RED-M-2024 encoding product type, color, size, and season. This makes SKUs human-readable and allows bulk operations by filtering on SKU prefixes.

Poor SKU design (random numbers, no structure) makes operations harder — especially at the warehouse level, where workers benefit from SKUs they can visually verify.

SKU Proliferation

As product catalogs expand to offer more variations, colors, and sizes, SKU proliferation becomes a significant operational problem:

• More SKUs = more storage locations needed in the warehouse
• More SKUs = more purchase orders to manage
• More SKUs = more complexity in demand forecasting
• More SKUs = higher risk of slow-moving or obsolete inventory

Retailers periodically conduct SKU rationalization exercises — analyzing sales velocity and profitability by SKU to identify items that don't justify their operational overhead and discontinue them.

Active vs. Inactive SKUs

Inventory systems distinguish between active SKUs (currently sold and stocked) and inactive/archived SKUs (discontinued or temporarily unavailable). Inactive SKUs should remain in the system for historical sales analysis and to handle returns, but shouldn't appear in active pick lists or replenishment processes.

SKU Count Benchmarks

The number of SKUs in a warehouse dramatically affects operational complexity:

• Small e-commerce brand: 100–500 active SKUs
• Mid-size retailer: 5,000–25,000 SKUs
• Large e-commerce or department store: 100,000–1,000,000 SKUs
• Amazon: Over 350 million SKUs across its marketplace

Managing a large SKU catalog requires robust WMS, ERP, and product information management (PIM) systems to maintain data quality at scale.