SKU (Stock Keeping Unit)

A code a manufacturer uses to identify one item in its product lineup.

Definition

A SKU is a unique identifier assigned to a product based on its specific attributes. It helps the manufacturer track production, inventory, shipments, and sales performance. Each SKU represents one item with a defined set of characteristics such as flavor, size, packaging, or count.

How to Calculate

A SKU is an internal code you create using your own naming rules. Most CPG teams build SKUs from a consistent pattern that combines short identifiers for the product family and key item attributes such as flavor, size, pack count, and pack type. Use letters and numbers only, keep the structure consistent across the portfolio and make sure each SKU is unique.

Why it Matters

It helps manufacturers track how each item contributes to volume, costs, and service levels. It also supports better planning across production, inventory, and distribution, which leads to fewer interruptions and more efficient use of resources. If any of these characteristics change, the manufacturer creates a different SKU.

Key Advantages

It gives manufacturers a reliable way to track each item on its own, which improves forecasting and inventory control and helps identify which products deserve more production focus and which add limited value to the portfolio.

Example

If you produce a ready‑to‑drink iced tea, the lemon bottle and the peach bottle each need their own SKU because the flavor is different. For instance, you could assign codes like 12045‑LEM and 12045‑PCH to show they are two separate items in your product lineup.

Use it to

Understand how each item behaves across production, inventory, and sales so you can plan more accurately, reduce waste, and ensure the right products are available in the right places.

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