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What is a Stock Keeping Unit?

By A. Gabrenas
Updated May 17, 2024
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A stock keeping unit, or SKU, is a code typically used by businesses and stores to keep track of how much of a product is on hand and/or how much of it has been used. SKUs are often unique to individual organizations. They are generally used for record-keeping purposes inside the business, rather than for outside purposes like pricing.

In general, a string of letters and/or numbers, or a combination thereof, makes up a stock keeping unit. The method for creating this code may vary by organization. Some may use a standardized method, such as using a model number, model name or the number associated with the universal pricing code (UPC). Others may use a randomly assigned code. In either case, the correlations between SKUs and product model numbers and/or descriptions are generally kept track of in a database.

The method for creating a stock keeping unit not only varies from organization to organization, so do the actual SKUs. For example, one big box retailer could sell the same television as another, but have a totally different SKU attached to it. This is because the stock keeping unit is usually used for internal purposes only. The code doesn’t have to mean anything to another business or store. This is one of the key differences between SKUs and UPCs, the latter of which are generally the same for a given item, regardless of the company that sells or keeps it in inventory.

Typically, a stock keeping unit is used to keep track of a company or store’s inventory, or how much of a product it has on hand. The number of units is usually listed in an inventory database. Each time an item is used or sold, the SKU is typically looked up in the database and the number of units on hand is usually adjusted accordingly. When new units are ordered or made, the database is also typically updated to reflect an increase in units on hand.

At regular intervals, companies often do inventory audits, where it'll check to see if the number of units listed in the database matches the number of units physically on hand. Checking the stock keeping unit physically listed on items can help with this. SKUs are not only used on physical objects, however. They may also be used for services, such as repair work, so a company can keep track of how much of certain services they provide over a given period of time.

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