"SKU" is short for "stock keeping unit." An SKU number is a specific number assigned to a distinct product in a company's inventory. Companies assign product numbers to every item to track sales activity and to manage ordering activities for given products.
SKU Number Basics
The number of characters in an SKU varies by business. Typically, four to eight characters are adequate, according to online inventory solutions provider Clearly Inventory. The goal is to have enough characters that each product has its own number. The numbers are normally connected to a barcode, which is often placed by a manufacturer or distributor. In some cases, companies use the barcode or UPC number as the SKU number for inventory management. Other times, companies assign self-created numbers with a certain combination of letters and numbers. A company that sells "Widget Parts" might use a scheme such as WP10001 for one part, WP10002 for another and so on.
Retailers use SKUs for a variety of inventory-control activities. When an item is scanned for sale, inventory is updated for that SKU. When inventory gets low, the business orders new product. In some cases, retailers use vendor-managed inventory, where the supplier gets an automated alert when inventory reaches a minimum threshold. After inventory arrives, employees match the SKU to shelf labels to ensure proper placement and signage of items.