Glossary
Stock Keeping Unit (SKU)
Tags: Glossary
A category of unit with a unique combination of form, fit, and function (i.e., unique components held in stock). For example, if two items are indistinguishable to the customer, or if any distinguishing characteristics visible to the customer are not important to the customer, so that the customer believes the two items to be the same, these two items are part of the same SKU. As a further illustration, consider a computer company that allows customers to configure a product from a standard catalog of components, choosing from three keyboards, three monitors, and three CPUs. Customers may also individually buy keyboards, monitors, and CPUs. If the stock were held at the configuration component level, the company would have nine SKUs. If the company stocks at the component level, as well as at the configured product level, the company would have 36 SKUs (9 component SKUs + 333 configured product SKUs). If, as part of a promotional campaign, the company also specially packaged the products, the company would have a total of 72 SKUs.
What is Stock Keeping Unit (SKU)?
The term "Stock Keeping Unit" or SKU is a fundamental concept in the field of logistics. It refers to a category of units that have a unique combination of form, fit, and function. In simpler terms, an SKU represents a specific item or product variant that is held in stock.
To understand this concept better, let's consider an example. Imagine you are a customer looking to purchase a computer. You have the option to customize your computer by choosing from a catalog of components such as keyboards, monitors, and CPUs. Now, let's say there are three options available for each component.
If the company only keeps stock at the configuration component level, they would have a total of nine SKUs. This means that there are nine unique combinations of keyboards, monitors, and CPUs that the company can offer to its customers.
However, if the company also stocks at the component level, as well as at the configured product level, the number of SKUs increases significantly. In this case, the company would have a total of 36 SKUs. This is because there are now nine component SKUs (one for each type of keyboard, monitor, and CPU) and 27 configured product SKUs (three options for each component).
Now, let's consider a scenario where the company decides to run a promotional campaign and specially package the products. This means that each unique combination of components would have its own packaging. In this case, the company would have a total of 72 SKUs. This is because there are now two layers of uniqueness – the components themselves and the packaging.
The purpose of using SKUs is to efficiently manage inventory and track different product variants. By assigning a unique SKU to each item, companies can easily identify and locate specific products within their inventory. This is particularly important when dealing with large quantities of items or when offering a wide range of product options.
In conclusion, a Stock Keeping Unit (SKU) is a unique category of items or product variants held in stock. It allows companies to differentiate between different combinations of components or features, enabling efficient inventory management and tracking. Understanding SKUs is essential for anyone involved in logistics, as it forms the basis for effective inventory control and supply chain management.