What SKUs can do for you: An overview on stock keeping units

By Oleg Mikhailenko
Published in Solutions
September 08, 2022
3 min read
What SKUs can do for you: An overview on stock keeping units

No matter how long you’ve been involved in e-commerce, you have to have an accurate and efficient way of tracking your inventory. Without accurate inventory management, your pickers have to spend all that much more time digging around in box after box and bin after bin looking for the items that your customers are so excited to receive. There’s even a chance that they might even grab the wrong item by mistake, and who could blame them, since there would be no overarching management system in place? That’s where SKUs (pronounced “skews”) come into play. Ask anyone well-versed enough in warehouse and inventory management and they’ll waste no time telling you just how important a robust and intuitive SKU system is to making sure that the warehouse operates smoothly and efficiently. But what are SKUs, and how do you use them? Why exactly are they so important? This article explains everything you need to know about SKU numbers and how they’re useful to you and your business.

What are SKUs?

Stock Keeping Units, or SKUs for short, are 8-12 digit alphanumeric codes that help retailers search for, label, and keep track of their inventory. They’re most often designated to products based on attributes such as manufacturer, color, style, type, or size. SKUs are created and used across the retail industry to manage inventory in warehouses and shops and ensure  stock levels aren’t somehow miscounted, leading to something called “phantom inventory”, where goods that aren’t actually in the warehouse or available for purchase are listed as present.

Now that you have a little bit of background information about SKUs, let’s define our terms a little more strictly. A SKU isn’t a serial number, a barcode, or a lot number. SKUs are only ever used internally, and therefore will be totally different depending on the retailer. Two different shops carrying the exact same item will have two totally distinct numbers representing said item.

Speaking of, what’s a lot number, anyway? Is it the same thing as a lot code?

If you’re looking for a specific product or hear about recalls on the news, you might have heard something about lot tracking. But what is a lot? What does ‘lot number’ mean? How exactly do you define the lot number or lot code on a product? Is there some sort of special significance to a lot number’s meaning? And where is the lot number found on a product?

The lot number on products, also occasionally known as a product batch number, is just that. When a group of items are all made together, the batch of inventory is assigned a specific number and defined as a lot so it can be tracked later just in case something goes wrong. This is especially true in the food, medical, and automotive industries where safety is key and it’s especially important to know how to read a lot number expiration date (tip: check the first six digits! The first two represent the year, the second two represent the month, and the final two the date. The number should be freely available and printed somewhere on the packaging. Practice checking yourself by finding a few lot number examples and you’ll be a pro in no time!). Now you’re free from having to scramble to search ‘what is the lot number’ or ‘what does ‘lot’ mean on a product’ because you already know.

And what’s a UPC?

A UPC (Universal Product Code, also sometimes known as a barcode), in contrast to a SKU, has been standardized by the Global Standards Organization for use in all companies. Two shops selling the same product will have different SKUs representing those goods, but the same item in both stores will have the exact same UPC. UPCs are universally 12 characters long and only have numbers, which is a handy way of telling the two apart.

So how do you make a SKU?

Generating SKUs is a breeze these days thanks to a whole host of automatic SKU-crafting software offerings. On the other hand, if you want to go old school and do it all yourself, that’s also 100% possible. Just be aware you’ll have to double-check often to make sure there aren’t any errors! SKU numbers should be easy to decipher at a glance, and you typically want to begin with the most distinguishing characteristic first (such as product type) before moving onto finer details such as size or color. Next, make sure your SKU codes never begin with zero. It interferes with many inventory tracking systems and generally causes no small degree of headaches. Finally, it’s best to separate distinguishing parts of your SKU with hyphens to make it easier to read. If you want your workers to be able to pick inventory quickly, then dashes and hyphens go a long way towards making that possible.

Managing and generating SKUs for businesses is never one-size-fits-all, so the more you tailor your labeling infrastructure to your own needs, the more you can help your business be the best it can be. By understanding your market niche, your vendors, and your customers, it’s a snap to drum up a functional and efficient set of SKU numbers that will help tracking go smoothly. We here at P2Pseller are always happy to help you along the way by providing revolutionary solutions on the free and open economy for e-commerce merchants of all sizes.


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Oleg Mikhailenko

Co-Founder, CEO P2Pseller

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