Retailers and manufacturers use a variety of identification methods during inventory management. These codes help you organize products and maintain inventory accuracy, which is crucial for business success.
One example is a SKU. Inventory professionals use these frequently for various inventory operations. But what does SKU stand for, and how are they used in inventory management? Here is an overview of SKU numbers.
What Is a SKU Number?
First things first, the term SKU refers to a stock keeping unit. SKU numbers are unique for each product in stores, warehouses and other retail management systems. You can view stock keeping units on each product’s barcode. Typically four to eight units long, a SKU consists of numbers and letters. The order of SKU numbers varies by retailer preference.
Each alphanumeric symbol in a SKU represents a different product detail, such as:
- Price
- Manufacturer
- Color
- Size
- Location
- Gender
For instance, a SKU example for a green shirt with a 40-inch chest size might look like: SH-40-GRN.
Retailers can use SKU numbers to organize their products and track inventory. Businesses can quickly scan barcodes to read information about product availability and other important data. Because all SKU codes are unique to each business, they can organize and use them according to their preferences. Each business serves as a SKU generator, as they create their own.
How Are SKUs Used?
Businesses use SKUs for many different functions. They are extremely helpful for managing inventory and differentiating between products quickly.
Here are other reasons that businesses use SKUs:
- Organization: After training, retail associates and managers can use stock keeping units to understand more about an item. By scanning the number, they’ll have information on where the product belongs. They can group items with similar SKUs together, making it simpler to count, record and manage inventory overall.
- Inventory management: A major part of the stock keeping unit definition is inventory management. Whether you work at a retail store or warehouse, inventory constantly moves in and out. Customers buy products, then return or exchange them as necessary. SKUs help you keep track of these products as they return to stores. These codes assist businesses with maintaining an accurate count of products on their shelves. Inventory accuracy is crucial for overall business success.
- Customer service: Stock keeping units can also help with enhancing customer experience. If a customer enters your store and requests a specific item, retail associates can type in the SKU code to quickly search the in-store stock. Then, they can accurately inform the customer about the item’s availability. This process streamlines a customer’s experience, keeping them satisfied during buying. You can also keep your stock more organized in your backroom with SKUs, which makes it easier for associates to retrieve products and bring them to buyers.
- Distribution: SKUs are particularly helpful for warehouse and stock management. Employees can use SKU codes to maximize the organizational space. By scanning the barcode, they can signal that a customer has purchased an item and keep inventory accurate. Employees can also use SKUs to find items more quickly, accelerating the distribution process.
What Is the Difference Between SKU and UPC Codes?
UPCs, or universal product codes, are also used frequently in retail. If you’re new to inventory management, you might be confused about the difference between SKU codes and UPCs. Both of these codes are included on barcodes and used for inventory tracking.
However, the two units have some key differences, such as:
- Format: SKUs use letters and numbers to identify products, and they can vary in length between four and eight units. In contrast, a UPC only uses numbers. UPCs are always 12 numbers in length. You can clearly distinguish between the two types by checking to see if it uses letters and if it’s any other length than 12 numbers long.
- Purpose: SKUs and UPCs also have different purposes. While businesses use SKUs to track internal inventory, UPCs have different uses. The UPC symbolizes the company that manufactured the product. They have more external use, such as tracking a product’s progress through the supply chain. Overall, UPCs are for sales, while SKUs are for inventory.
- Uniqueness: Every SKU is unique, according to the retailer’s preferences. But UPCs are the same across every product. The GS1 issues barcodes for items, and they’re identical in every area of the supply chain. For example, a pair of Air Jordan in size 9 would have the same UPC code as a size 10 Air Jordans.
The Benefits of Using SKUs
When you implement SKUs into your business, you could experience many benefits, including:
- See sales trends: When you use SKUs to keep track of inventory, you can closely view sales trends. SKUs allow you to see how frequently customers purchase certain products. In turn, you can order more products to fill up the inventory. You can also use these trends to influence future sales plans. For example, if a product with a particular add-on was successful, you could implement this add-on into new items, as well.
- Make product recommendations: SKUs differentiate products subtly. This means similar products are typically grouped together. If a customer wanted a certain item but it was out of stock, you could recommend another one with a close SKU. When you have multiple product types available for customers, this can increase customer satisfaction overall.
- Enhance the customer experience: SKUs are excellent for customer experience. You can provide accurate information on item availability, keeping customers from trying to purchase out-of-stock items. Associates can also retrieve items quickly due to the improved organization and distribute them to customers rapidly.
Tips for Using SKUs
While there is no industry standard for creating and using SKU, some techniques make them easier to manage. These are some tips for using SKUs in your business:
- Use an adequate length: Most companies aim for a SKU length of four to eight units. Anything smaller than six numerals might be too small for recognition, while codes beyond eight could be too large to handle. Consider how much unique inventory you have to determine how long of a SKU to use.
- Order them by importance: Another tip is to place the most important symbol first in the code. What is most important will vary by retailer. For instance, if the product’s location is most crucial to your business, you can place that number or letter first. Then, associates can easily identify the significant trait first.
- Keep formatting simple: Keep your SKUs as simple as possible. Using dashes can help with readability and organization. Stick to using capital letters and numbers to make it easier. You should also avoid starting the SKU with an O or a zero, as those are easy to confuse.
Manage Your SKU Codes With Finale Inventory
Stock keeping units are crucial tools for inventory management. With more inventory efficiency, you can increase profits and maximize customer reach.
At Finale Inventory, we understand the importance of efficient inventory tracking. We offer a variety of inventory solutions, including our cloud inventory management software. This tool can help you manage SKU codes, along with many other aspects of inventory. Our solutions can fit any business model, and they can seamlessly align with marketplace platforms like Amazon and shipping software like ShipStation.
For more information, contact Finale Inventory or request a demo today.
What is the first thing I should fix if I want to scale operations?
Start with a unified view of inventory. The core of maturity starts with being able to accurately represent what you do have and make sure that you know where it’s located to get it to customers quickly. Without a unified view across your warehouses, 3PLs, and vendors, you cannot make the best decisions because you don’t have the best information at hand.
With Inventory Visibility, Businesses Can Make Smarter Allocation Decisions
Once inventory is centralized, businesses can move from reactive updates to intentional allocation. They can decide how much inventory to expose to each channel, when to use buffers, which marketplaces need extra protection, and how seasonality or campaign performance influence availability.
Once I know what inventory I have, how should I decide where to make it available?
Inventory allocation should reflect where orders are coming from, where marketing is working, and which channels carry the most risk. Once you know what you have and where it is located, you can think more strategically using centralized inventory to make prioritization happen automatically. One fertilizer company lost a little over 5,000 orders in one weekend because someone manually uploaded the wrong available inventory to Amazon.
Better Inventory Data Improves Planning, Purchasing, and Growth Bets
Better visibility turns inventory data into a planning tool. With insight into sales velocity, inventory levels, vendors, and channel performance, businesses can make more informed replenishment decisions, avoid overbuying, and test new product lines or vendor-supplied inventory without taking on unnecessary risk.
How does better inventory data help me make smarter buying decisions?
It lets you measure whether your plan is working before you commit more capital. A key question becomes: “Did my plan work? Am I overleveraged in one place or another?” Centralized systems can also help businesses test new product lines or vendor relationships by looking at sales velocity by channel, allowing them to take risks in a calculated and measured way.
Intelligent Order Routing Turns Inventory Complexity Into Automation
Once inventory and supplier data are reliable, businesses can automate fulfillment decisions. Orders can be routed based on cost, speed, margin, location, warehouse priority, vendor fallback, split-shipment rules, or customer expectations. This helps hybrid fulfillment scale because every order does not need a manual review.
How do I decide the best way to fulfill each order?
There is no single answer, which is why order routing needs to account for the context of each order. Intelligent order routing is not just sending an order to someone who has stock; it is taking each and every order and treating it like its own unique use case. Depending on the order, the business may prioritize speed, margin, an internal warehouse, vendor fallback, or preventing split shipments.
Supplier Inventory Sync Extends Inventory Beyond the Four Walls
For hybrid fulfillment to work, supplier inventory needs to become part of the operating model. Supplier sync does not always require advanced technology; it can happen through automated files, FTP, email, APIs, EDI, or ecommerce storefront integrations. The key is replacing manual updates with automated, reliable supplier data.
Can supplier inventory really be treated like part of my own inventory?
Yes, but the goal is not necessarily to force every supplier into a complex integration. Real-time supplier sync can be defined as any way to get an automated update from a supplier, such as Google Sheets, email, FTP, API, EDI, or ecommerce storefront connections. The key is that accurate supplier stock is foundational. If you don’t have an accurate view of what is in stock with your suppliers, you cannot tell your sales channel accurately what’s available.
Exception-Based Workflows Keep Humans Focused Where They Matter
Automation does not remove people from the process. Mature operations let technology handle the routine majority while humans focus on exceptions, such as high-value orders, fraud risk, compliance requirements, restricted products, export rules, or unusual fulfillment scenarios.
If my business has special cases, can automation still work?
Yes. The point is not to automate every possible decision; it is to automate the routine work and surface the exceptions. Businesses should not have to look at every single order. Instead, technology can highlight high-value orders, risky locations, or compliance requirements. The goal is to take care of the 80% of workflows that are obvious while still allowing human review when specific exceptions arise.
The Right Inventory Technology Should Fit the Business, Not Overwhelm It
Software decisions should be based on business fit, not popularity, feature volume, or broad “all-in-one” promises. Growing ecommerce businesses should identify their highest-impact bottleneck, prioritize what matters now, and choose technology that is right-sized but flexible enough to support future phases of growth.
How should I choose software without overbuying or picking the wrong system?
Start with your priorities, not the biggest feature list. Avoid an all-in-one system that claims to “do everything under the sun” and look for a “best of breed approach” with systems that can scale as you add channels or vendors. The practical advice is to stack rank what matters now, make sure the system can support future phases, and choose technology that fits your business rather than overwhelming it.
How to Scale Ecommerce Operations Beyond Spreadsheets
For many growing ecommerce businesses, Finale and Flxpoint work together as a practical answer to these challenges. Finale helps centralize and manage internal inventory, purchasing, warehouse operations, and stock visibility, while Flxpoint helps connect vendor inventory, automate supplier sync, and route orders across hybrid fulfillment networks. Together, they give businesses a best-of-breed way to improve inventory accuracy, reduce spreadsheet work, and scale fulfillment without forcing every process into a one-size-fits-all system.
Ecommerce Fulfillment Operations FAQ
What Is Ecommerce Fulfillment Operations?
Ecommerce fulfillment operations are the processes that move an online order from purchase to delivery. This includes managing inventory, syncing product availability across channels, routing orders to the right warehouse, 3PL, supplier, or vendor, and making sure the customer receives the right product on time. As discussed in the webinar, fulfillment is no longer limited to “what’s in my warehouse these days”; growing businesses may rely on internal warehouses, 3PLs, marketplace fulfillment services, and supplier inventory at the same time.
What Are Ecommerce Fulfillment Operation Examples?
Examples of ecommerce fulfillment operations include updating inventory across Shopify, Amazon, Walmart, and other sales channels; allocating inventory to specific marketplaces; sending orders to an internal warehouse, 3PL, or vendor; syncing supplier inventory through files, APIs, EDI, email, or FTP; replenishing warehouse stock based on sales velocity; and flagging exceptions such as high-value orders, compliance requirements, or restricted products. In the webinar, the speakers also discussed hybrid fulfillment examples where a business may fulfill some products from its own warehouse and use vendors as a fallback or extension of available inventory.
How Can I Track My Inventory at an Ecommerce Fulfillment Center?
The best way to track inventory at an ecommerce fulfillment center is to create a unified inventory view that shows what is available, where it is located, and how that inventory connects to each sales channel. That means tracking inventory across internal warehouses, fulfillment centers, 3PLs, marketplace fulfillment programs, and supplier locations instead of relying on disconnected spreadsheets. The webinar emphasized that businesses need to “accurately represent” what they have and know where it is located so they can get products to customers quickly.
How Can I Connect My Inventory to My Supplier?
You can connect supplier inventory through several methods, depending on what the supplier supports. The webinar discussed low-tech and advanced options, including automated Excel or CSV files, Google Sheets, email updates, FTP servers, APIs, EDI, and direct connections to ecommerce storefronts such as Shopify, BigCommerce, or Magento. The key is to ask suppliers how they share inventory today, then use a system that can automate that data flow instead of manually copying supplier inventory into spreadsheets.
What Is Ecommerce Order Routing?
Ecommerce order routing is the process of deciding where an order is fulfilled from after a customer buys. In a simple operation, every order may go to one warehouse. In a more complex or hybrid fulfillment model, the best fulfillment source may depend on inventory availability, shipping speed, cost, margin, customer location, warehouse priority, vendor fallback rules, or whether the order should be split. The webinar described intelligent order routing as treating each order like its own use case, so businesses can automate the best fulfillment decision without manually reviewing every order.
