If you plan on managing inventory (and you had better), you’re going to want to get to know the abbreviation SKU. It stands for Stock Keeping Unit, which is a six to ten digit combination of numbers and letters assigned to every unique product you work with.

All online and offline retailers, warehouses, and fulfillment centers work with SKUs. And that’s because a SKU makes it easy for a business to keep tabs on product as it ventures throughout its supply chain and to the customer’s door.

Every business has its own unique SKUs for identifying its products. While two businesses might be selling the same product, their SKUs are likely different — SKUs are used internally.

For instance, a sportswear e-retailer might sell some “Black Basketball Shoes by Puma, Size 12” that plenty of competitors sell, but they’ll know it internally by a SKU that they create for it. Within those ten digits, every aspect of the unit, like its color, size, and manufacturer, is saved.

And those unique SKUs are useful for organizing products. If that sportswear e-retailer is fulfilling orders in-house, a SKU offers an easy way of labeling and categorizing units. For instance, those “Black Basketball Shoes by Puma, Size 12” might have an internal SKU of BBSH-PU-BK-12 defining each of its characteristics.

Here’s that example broken down:

  • BBSH = Type of Product, Basketball Shoe
  • PU = Manufacturer, Puma
  • BK = Color, Black
  • 12 = Size

Following a similar template as you start to organize your own products can help make that process less daunting and get you on the fast track to efficient inventory management.