SKU (pronounced as skew) is the abbreviation of Stock Keeping Unit. SKU helps us to uniquely identify a product. Each organisation have their own SKU nomenclature policy, which refers to the methodology of numbering SKUs, governance and control. A given SKU number provides the same understanding to all the stakeholders not only inside your organisation, but also to your suppliers, customers and other stakeholders.
When a product has a different form or fit or function from another product it will gain a different SKU number.
Here one need to follow the concept of materiality, meaning whether the differences are significant or not. A good SKU Nomenclature Policy is the foundation of an effective and efficient inventory management.
Association of Supply Chain Management (ASCM) defines SKU as
An Inventory Item. For example, a shirt in six colours and five sizes represents 30 different SKUs.
In a distribution system, an item at a particular geographic location. For example, one product stocked at the plant and at six different distribution centres would represent seven SKUs.
SKU is also known by different names such as part number, item number, model number, product code, item code etc. There is no hard and fast rules for SKU numbering, but certainly there are best practices that can be adopted while developing your SKU Nomenclature Policy.
- SKU number shall have 6 to 13 characters in length. How many characters you need depends on the diversity and scale of your operation
- Once a product is discontinued its SKU number shall not be reused for a different product
- SKU number shall be alpha-numeric with alpha as the first part
- Do not use special characters, O, I and L in SKU number
- Develop your own criteria of key information you would like to build into the SKU nomenclature
- A meaningful SKU number is helpful, but do not try to build-in too much of information
- There shall be an approval process in place for the SKU number and SKU creation
- There shall be a check-digit at the end of the SKU number with a logic
- SKU numbers shall be maintained in two groups that are active and archived
- Take time to develop your SKU Nomenclature Policy at once. Do not frequently change this policy as it creates confusion among various stakeholders.