SKU
Definition
Stock Keeping Unit: a unique identifier for a distinct item that is stocked, tracked, and sold, defined by attributes such as size, color, and pack configuration. Each variation that must be counted separately gets its own SKU.
In Practice
The SKU is the atomic unit of inventory management. A t-shirt in three colors and five sizes is fifteen SKUs, because each combination has its own demand pattern, stock level, and replenishment need. SKU codes are internal, unlike manufacturer part numbers or retail barcodes such as UPC and EAN, though systems map between them.
SKU design choices ripple through operations for years. Good practice keeps codes unique, stable, and free of overloaded meaning, letting attributes live in item master data rather than in the code itself. Every planning calculation on this site, safety stock, reorder points, turnover, runs at the SKU level or at a SKU-location level.
Example: an apparel brand assigns TSH-CRW-BLU-M as one SKU. When it also sells three-packs, the pack becomes a separate SKU with its own barcode, forecast, and inventory record, because a three-pack on the shelf cannot fill an order for a single unit.
Related Terms
The systematic review of the product portfolio to prune SKUs that add complexity without sufficient sales, margin, or strategic value. It reduces the long tail that consumes inventory, space, and planning effort.
ABC AnalysisA method of segmenting inventory into classes by value or importance, typically with A items representing the small fraction of SKUs that drive most of the value. It focuses management attention where it matters most.
On-Hand InventoryThe physical quantity of stock currently present in a location, regardless of whether it is committed to orders. It is what you would find if you walked out and counted the shelves.