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SKU Naming: A Complete Guide to Best Practices

Learn how to create clear, consistent SKU codes that make inventory management easier and help your team quickly identify products without the confusion.

What is a SKU?

A SKU (Stock Keeping Unit) is a unique identifier assigned to each product in your inventory. Think of it as a product's fingerprint that helps you track, manage, and locate items in your warehouse and systems. Unlike universal product codes like UPCs or barcodes that are standardized across all retailers, SKUs are internal codes that you create specifically for your business.

Every variation of a product gets its own SKU. For example, a red t-shirt in size medium would have a different SKU than the same t-shirt in blue or in size large. This granular tracking is what makes inventory management possible.


Why SKU Naming Matters

A well-designed SKU system is the backbone of efficient inventory management. Good SKU names allow your team to quickly identify products, reduce picking errors, streamline reordering, and provide accurate inventory reporting. Poor SKU naming leads to confusion, mistakes, and wasted time as employees struggle to decipher cryptic codes or distinguish between similar products.

When your business is small, you might get away with random or inconsistent SKU names. But as you grow, a logical SKU structure becomes essential for scaling operations, onboarding new team members, and integrating with various software systems.


Best Practices for Creating SKUs

Start with the Most Important Information

Place the most critical identifying information at the beginning of your SKU. This is typically the product category or type, as it allows for quick visual scanning and logical grouping. For example, all shirts might start with "SHR" while pants start with "PNT".

Use Meaningful Abbreviations

Your SKU should be readable by humans, not just computers. Use abbreviations that make intuitive sense to your team. "BLU" for blue is better than "B03". "LRG" for large is clearer than "L". The goal is that someone looking at the SKU can roughly understand what product it represents without needing a decoder ring.

Keep It Concise

While you want SKUs to be descriptive, they shouldn't be novels. Aim for 8 to 12 characters as a sweet spot. This length provides enough detail to be meaningful while remaining easy to read, type, and scan. Excessively long SKUs increase the chance of data entry errors and make inventory sheets harder to read.

Maintain Consistent Formatting

Decide on a structure and stick to it religiously across all products. If you use hyphens or underscores as separators, use them consistently. If category comes first, it should always come first. Consistency makes SKUs predictable and reduces confusion. Your team should be able to look at any SKU and immediately understand which segment represents what information.

Avoid Confusing Characters

Skip letters and numbers that look similar, such as "O" and "0" (letter O and zero) or "I" and "1" (letter I and number one). These cause misreads and data entry errors. Also avoid special characters that might cause issues in different software systems. Stick to alphanumeric characters and perhaps hyphens or underscores.

Don't Embed Vendor or Supplier Names

Suppliers change, but your SKUs should remain stable. If you include a vendor code in your SKU and switch suppliers, the SKU becomes misleading. Instead, link vendor information to the SKU in your inventory management system rather than encoding it in the SKU itself.

Avoid Starting with Zero

Many systems automatically drop leading zeros, which can cause headaches. Start your SKUs with a letter or non-zero number to prevent this issue.

Make It Scalable

Design your SKU system with future growth in mind. Leave room in your numbering scheme for new product lines, variations, and categories. If you only have 50 products now but plan to have 5,000, make sure your structure can accommodate that expansion without requiring a complete overhaul.

Never Use Manufacturer SKUs Directly

While it might seem convenient to use the manufacturer's part numbers, this creates problems when you source from multiple manufacturers or when products are private labeled. Create your own internal SKU system that remains consistent regardless of your supply chain.


Example SKU Structure

Here's a practical example of a well-structured SKU system for an apparel company:

Format: [Category]-[Color]-[Size]-[Sequence]

  1. SHR-BLK-MED-001 = Shirt, Black, Medium, Style 001
  2. SHR-BLU-LRG-001 = Shirt, Blue, Large, Style 001
  3. PNT-GRY-032-002 = Pants, Gray, Size 32, Style 002

This structure immediately tells you what the product is, what it looks like, and what size it comes in, all in a concise 15-character code.

For a consumer electronics retailer, you might use:

Format: [Brand]-[Category]-[Model]-[Color]

  1. APL-PHON-14PR-BLK = Apple, Phone, 14 Pro, Black
  2. SAM-TABL-S9-SLV = Samsung, Tablet, S9, Silver


Common Mistakes to Avoid

Don't create overly complex systems that require extensive training to understand. Your SKU structure should be intuitive enough that a new employee can grasp it within a day. Avoid encoding too much information into the SKU; save detailed specifications for your product database.

Never reuse SKUs, even for discontinued products. Once a SKU is assigned, it should remain associated with that specific product permanently. Reusing SKUs creates historical reporting nightmares and potential inventory mix-ups.

Don't make SKUs case-sensitive. "SHR-BLK-001" and "shr-blk-001" should be treated as identical to prevent duplicate entries and confusion.


Getting Started

If you're creating a SKU system from scratch, start by listing your product attributes in order of importance. Common attributes include category, brand, color, size, style, and material. Decide which 3 to 5 attributes are most critical for identification and build your structure around those.

Document your SKU logic in a written guide that explains each segment's meaning, acceptable abbreviations, and examples. This documentation ensures consistency as your team grows and serves as training material for new hires.

If you're reformating an existing messy SKU system, create the new structure for all new products while gradually migrating old inventory. Trying to change all SKUs at once typically creates more problems than it solves.


The Bottom Line

Good SKU naming is an investment in your operational efficiency. Taking the time to design a logical, consistent, and scalable SKU structure pays dividends through reduced errors, faster training, and smoother inventory management. Your future self and your team will thank you for implementing a thoughtful SKU system from the start.