What is an SKU?
An SKU (stock keeping unit) is the code you give each distinct item you stock: every size, colour, grade or pack of a product gets its own SKU. Stores, purchase, sales and accounts all use it to mean exactly the same item.
A good SKU can be read by a person. PLY-BWP-18M-8X4 tells anyone it is 18 mm BWP plywood in 8x4 sheets, while a random number tells them nothing.
Rules for good SKU codes
- Go from general to specific: category, product, then attributes such as size and colour.
- Keep the same order and length for every item, so codes sort and filter cleanly.
- Use letters and numbers only, with one separator. Avoid spaces and symbols that break barcodes and spreadsheets.
- Avoid look-alike characters such as O and 0, or I and 1, where they could be confused.
- Never reuse a code for a different item, even after the old one is discontinued.
- Do not put prices or supplier names in SKUs; they change, and the code should not.
SKUs are part of your master data. See our guide on master data management for keeping item masters clean.
SKUs for product variants
When one product comes in many sizes, thicknesses or colours, each combination needs its own SKU, but they should clearly belong together. That is what the attribute fields above do: three thicknesses and two sizes give six related SKUs that share a prefix.
In an ERP, the same structure lets you keep one product with variants, so stock, prices and BOMs can be managed together. See the BOM setup guide for variants in production.