What Is a SKU Number and How to Create One

Open any inventory spreadsheet at a small business and you will likely find a column of short, cryptic-looking codes like TSH-BLU-M-01. Those are SKUs, and despite looking like an afterthought, they are one of the most useful tools a business has for keeping track of what it actually owns and sells.

Try it yourself: Scan any product's barcode with our free online barcode scanner to see the number encoded underneath.

What Is a SKU Number?

A SKU, short for Stock Keeping Unit, is an alphanumeric code that a business creates on its own to identify a specific product or product variant inside its own inventory system. A SKU is assigned entirely by the seller, so the same physical product sold by two different businesses will typically carry two completely different SKUs, since each business builds its own SKUs around its own internal logic.

This sets a SKU apart from identifiers like a UPC or GTIN, which are issued through GS1 and stay fixed to a product no matter who sells it. A SKU exists purely for the seller's internal bookkeeping, which is exactly what makes it flexible: a business can bake as much or as little information into a SKU's structure as it finds useful, from product category to size to which warehouse shelf holds it. For a closer look at how SKUs relate to those other identifiers, see our guide to GTIN vs UPC vs SKU.

What Is a SKU Number Used For?

Businesses use SKU numbers to track exactly which products, and which variants of those products, move through their inventory. A single T-shirt style sold in three colors and four sizes needs twelve distinct SKUs if a retailer wants to know precisely how many of each combination remain in stock, since a single generic "T-shirt" listing would not capture that detail.

Beyond basic stock counts, SKUs support reordering, sales reporting, and warehouse organization. When a specific SKU's stock drops below a set threshold, a reorder can trigger automatically for that exact variant rather than the product line as a whole. Sales reports broken down by SKU reveal which size or color actually sells, information a shared product-level barcode cannot provide on its own. Warehouses also use SKUs to assign storage locations, so staff can find and pick the right item without confusion, a workflow covered in more detail in our barcode scanner for inventory guide.

How Do I Create SKU Numbers?

Building a SKU system starts with choosing the product attributes that matter most to your business, such as category, brand, color, size, or material, and arranging them in a consistent, hierarchical order. A common pattern places the broadest identifying detail, like product category or department, at the start of the code, followed by more specific attributes like color and size toward the end.

A few practical guidelines make a SKU system easier to manage as a catalog grows:

• Keep it short. Aim for roughly 8 to 12 characters, and rarely more than 16, so codes stay easy to read and type.
• Use letters and numbers together. An alphanumeric format, such as TSH-BLU-M-07, is easier to scan visually than a long string of digits alone.
• Avoid characters that look alike. Skip the letter O next to the number 0, and the letter L next to the number 1, since both pairs are easy to misread.
• Don't start with a zero. Some spreadsheet and database systems strip leading zeros automatically, which can silently corrupt a SKU.
• Apply the format consistently. Every team member should be able to read a SKU and understand its structure without needing a lookup table.

Small businesses just starting out can build this manually in a spreadsheet, while larger catalogs typically generate SKUs automatically through inventory or point-of-sale software once the naming convention is set. Our guide to creating inventory barcodes walks through pairing a SKU system with a printable barcode label once your codes are defined.

What Does a SKU Number Look Like in Practice?

A typical SKU packs several short attribute codes into one string, each segment standing for a different product detail in a fixed position. Reading TSH-BLU-M-07 from left to right might tell an employee that the item is a T-shirt (TSH), in blue (BLU), size medium (M), style number 07, all without opening a spreadsheet to look it up.

That same logic scales to far larger catalogs. A furniture retailer might use a segment for room type, another for material, and another for a finish code, while a grocery store might lead with a department code before adding a supplier or size identifier. There is no universal template GS1 or any other body defines for this, since a SKU only has to make sense within the business that created it. The tradeoff is that a business selling across multiple channels, such as its own site plus a marketplace like Amazon or Etsy, needs to keep its own SKUs distinct from whatever product identifiers those platforms require separately, since a marketplace listing typically still needs a GTIN or UPC in addition to your internal SKU.

What Is the Difference Between a SKU and a Barcode?

A SKU and a barcode solve different problems: a SKU is the internal reference code your business invents, while a barcode is the scannable symbol, typically printed to represent a UPC or EAN, that follows a global standard so any retailer, distributor, or marketplace can read it consistently. A UPC assigned through GS1 stays the same for a given product no matter who sells it, while a SKU for that same product will differ from seller to seller.

In practice, the two work side by side rather than replacing one another. A product label commonly shows a scannable UPC barcode alongside a human-readable SKU printed in plain text, letting a cashier's scanner read the universal code while a warehouse worker refers to the SKU for internal picking and stocking. Businesses setting up this kind of system for the first time, including sellers on marketplaces or in physical retail, can find a fuller walkthrough in our small business barcode guide.

Sources

• ShipBob: SKU vs UPC vs Barcodes: What's the Difference? - comparison of how SKUs, UPCs, and barcodes relate to each other.
• Linnworks: How to Create SKU Numbers: A Simple System for Sellers - structure and formatting guidance for building a SKU system.
• G2: SKU Number Explained: Meaning, Uses, and How to Create One - definition and overview of SKU usage in inventory management.
• Lightspeed: SKU Numbers Explained: What Retailers Need to Know - retailer-focused overview of SKU number practices.