SKU stands for Stock Keeping Unit — the unique code a business assigns to each distinct product (and variant) it stocks, so it can be tracked through purchasing, warehousing and sales. A red T-shirt in medium and the same shirt in large are two different SKUs.
SKU meaning, in plain English
A SKU (pronounced "skew") is your internal name for one sellable thing. It's not the manufacturer's part number and not the barcode — it's the code your business uses to track a product through its systems. Every distinct variant gets its own SKU: size, colour, pack quantity and unit of measure all count.
SKU examples
- TSH-RED-M — T-shirt, red, medium
- BOLT-M8-100PK — M8 bolt, box of 100
- PAINT-WHT-5L — white paint, 5-litre tin
SKU vs barcode (EAN/UPC) vs part number
- SKU — your internal code. You control it; it can carry meaning (category, size, pack).
- Barcode (EAN/UPC) — a globally standardised number, so tills and scanners anywhere recognise the product. Two retailers selling the same item share the barcode but use different SKUs.
- Manufacturer part number (MPN) — the maker's own code. Useful for reordering, but suppliers change them.
How to structure SKU codes well
- Keep them short, unique and human-readable — warehouse staff say these out loud all day.
- Avoid characters that break spreadsheets and imports: leading zeros, O vs 0, commas, slashes.
- Never recycle a dead SKU for a new product — it silently corrupts your sales history.
- One SKU per unit of measure: if you sell singles and cases of the same item, they're two SKUs (or one SKU with a proper pack-size relationship in your system).
Why SKU discipline matters for forecasting
Every forecast, reorder point and stock valuation hangs off the SKU. Duplicate SKUs split one product's sales history into two thin, unforecastable streams. Recycled SKUs weld two unrelated histories together. Clean SKUs are the foundation of every number that comes after.
Optimal Chain works at SKU level from a simple spreadsheet export: every SKU gets its own demand forecast (18 methods compete per product), its own buffer stock sized from its real track record, and its own reorder recommendation. Messy SKU data? The Data Quality Dashboard flags duplicates, gaps and anomalies in plain English before they can distort a single forecast.