FREE Cheat Sheet: How To Set Up

SKU Numbers
Now that you understand why SKU numbers are important, let’s look at a basic
3-step framework for creating them. Whether you’re using a manual system or
POS to track inventory, the framework is the same. And yes, you can mix
numbers and letters in your SKU numbers system. Use whatever logic works for
your organization.

Source: ASAP Systems – an example of a custom SKU used together with a

UPC barcode.
 

 
 ❏ 1. Start SKU numbers with a top-level identifier 
❏ 2. Use the middle number series to assign unique 
identifiers 
❏ 3. Finish SKU numbers with a sequential number 

Below, we’ll explain how to do each of the major steps!

 
❏ 1. Start SKU numbers with a top-level identifier 

The first 2-3 digits/characters of each SKU number should represent a top-level
identifier. This can be a department, store category, or even a supplier. With this,
a quick glance at a SKU number identifies the top-level merchandising group and
location of any product in your store. You can even use this section to identify
store locations if you run more than one store.

❏ 2. Use the middle number series to assign unique 

identifiers 

It’s helpful to use the middle section of SKU numbers to assign unique features,
such as size, color, item type, or subcategory, to your product; whatever make
sense when organizing the products you sell.

❏ 3. Finish SKU numbers with a sequential number 

Using sequential numbering (ie: 001, 002, 003) for the final series of a SKU
number makes setup easy and also helps you identify older versus newer items
in a product line. In some cases, tying the final series of a SKU number to a
supplier product number can be helpful too. Again, use whatever makes logical
sense for the products you sell.
Now let’s look at some examples of our SKU number framework in action.

SKU Number Example 1: Simple Top-level 

Identifier 
Here’s a simple numeric SKU number system that uses just 1 top-level identifier
in a 6-digit SKU.

SKU Number Example for a Convenience Store 

SKU Numbers:
Category Category #
Category+Sequential #

Dry Grocery 01 010000, 010001, 010002

Pet Food 02 020000, 020001, 020002

Snacks 03 030000, 030001, 030002

Canned Soda 04 040000, 040001, 040002

Candy 10 100000, 100001, 100002

In the sample above, notice that the first 2 numbers represent each category of
goods in the convenience store. The next 4 numbers are a sequential numbering
system. As long as you don’t have more than 99 departments, or over 9999
products in a given department, this system works and is simple to enter and
maintain in any POS system.

But, if you want a SKU number to convey more information about each item, a
different system with more identifiers is needed.
SKU Number Example 2: Versatile 2-Identifier 
System 
Here’s an 8-digit SKU number system that uses 2 identifiers to represent a
top-level category plus an item type for each product.

SKU Number Example for a Fashion Boutique 

Cod SKU Numbers:

Category Item Type Code
e Category+Item Type+Sequential #

Jeans 01 Straight-leg 11 01110000, 01110001, 01110002

Jeans 01 Flare-leg 12 01120000, 01120001, 01120002

Blouses 02 Sleeveless 21 02210000, 02210001 02210002

Blouses 02 Long-sleeve 22 02220000, 02220001, 02220002

Dress Pants 09 Flare-leg 12 09120000, 09120001, 09120002

In this sample, the first 2 numbers represent the top-level category for this
fashion boutique: Jeans, Blouses, Dress Pants, etc. Then, the next 2 numbers
identify different item types such as Straight-leg; Flare-leg, Sleeveless,
Short-sleeve, etc. The last 4 numbers are simply sequential numbers.

Note! With this system, your Item Types don’t have to be category-specific. For
example:

01120000 = Jeans (01), Flare-leg (12)

09120000 = Dress Pants (09), Flare-leg (12)

Here, Flare-leg (12) applies to more than one category since it’s a style common
in both Jeans and Dress Pants. This is a very handy SKU number system for
stores that have item types, like styles or material, that cross multiple categories.
This type of SKU system helps staff recognize key details of any product at a
glance.

 
SKU Number Example 3: Include a Supplier 
Identifier 
Sometimes it’s helpful to have supplier information tied to your SKU number. If
you display or store products based on brands or suppliers, this 2-identifier,
10-digit SKU number system can cover all of the bases. In fact, it’s how I
managed my ecommerce inventory for 17-plus years.

SKU Number Example for an Ecommerce Business 

Cod Cod SKU Numbers:

Supplier Item Type
e e Supplier+Item Type+Sequential #

Bentley BP Tumbler - 063 BP063-0001, BP063-0002,

Plastics Lg BP063-0003

US Acrylic UA Wine Glass 064 UA064-0001, UA064-0002,

UA064-0003

Prodyne PD Wine Glass 064 PD064-0001, PD064-0002,

PD064-0003

Merritt USA MT Dinner 166 MT166-0001, MT166-0002,

Plate MT166-0003

Tervis Tumbler TT Tumbler-Lg 063 TT063-0001, TT063-0002, TT063-0003

In this type of alphanumeric SKU number system, staff can easily determine the
supplier and item typeof any product SKU number they encounter. Plus, being
alphanumeric, it’s easy for new and seasonal staff to understand and remember.
As in Example #2, this system uses item types that cross multiple suppliers, for
example:
BP063-0001 = Bentley Plastics (BP), Large Tumbler (063)

TT063-0001 = Tervis Tumbler (TT), Large Tumbler (063)

This is an especially helpful SKU number system in fulfillment warehouses where

goods are stocked and tracked by supplier rather than merchandised in a mix, as
in a retail store.

Other SKU Number Identifiers to Consider 

Above we explored how common top-level identifiers such as category and
supplier can pair with item type codes to create versatile SKU number systems.
But, those are just a few of the many identifiers you can use. Here are some
other identifiers that may be useful for your operation.

Store or Location Identifier 

If you run more than one store or sell some items solely online or via fairs or
markets, you can also use a Store Identifier to group items by sales outlet. Even
if you don’t sell in multiple locations yet, if you think that’s in your future, leave a
placeholder for this identifier in your SKU framework. This is helpful for tracking
sales by location or outlet, and for tracking inventory quantities per store.

Department Identifier 

Departments are broad top-level identifiers that help you track merchandising
and store location. You can use a Department Identifier to quickly tell where an
item will be located or displayed on the sales floor. If you use a department
identifier in your SKU number, you can also segment sales reports by
department. This is helpful in spotting troubled areas of your store. If you have a
department with overall lackluster sales, you might need to move that section,
adjust your ​store’s traffic flow​, or boost your ​featured displays​ in that area.

Variation Identifier 

If you sell products that come in different colors or sizes, a Variation Identifier can
be a great help to both your customers and staff on the sales floor. Plus it lets
you easily track which colors and/or sizes are most popular. Here’s a look at how
easy it is to add a variation identifier to our sample SKUs:

01120001M = Jeans (01), Flare-leg (12), Medium (M)

09120001L = Dress Pants (09), Flare-leg (12), Large (L)

Sub-Category Identifier 

For small retailers, this level can be a bit fussy, But if you wish to track inventory
and sales at a very granular level, you can add a Sub-category Identifier to your
SKU. For example, if you have a Candy category, you can assign a numerical
code for sub-categories such as Candy Bars, Lollipops, Boxed Chocolates, etc.

Using the Data – Put SKU Numbers to 

Work for You 
However you design your SKU number system, a POS system like ​Lightspeed
gives you many tracking options. As shown below, you have a large field to
assign a Custom SKU in the Add Product screen, plus additional fields to help
organize and track your product data however you wish.
Once products are entered into your ​Lightspeed POS​, you can use different
segments of your SKU numbers to pull an array of sales, inventory, and reorder
reports.

For example:

● Use the supplier code to pull inventory counts for just one supplier for an
inventory spot-check
● Pull a sales report based on one item type code, such as Flare-leg, to see
all sales for Flare-leg products over a period of time
● Pull a restock order report for one department within one store

Along with SKU-based data, systems with advanced inventory management like
Lightspeed POS let you further organize products using built-in Category,
Manufacturer, and Custom tags. Tracking stock and sales data using both SKU
numbers and built-in tags give you the reporting you need to make informed
decisions every step of the way.

Setting up a SKU number system is clearly worthwhile if you want to track

products and sales data in an organized fashion. But if you’re asking yourself if
SKUs are worth the trouble when your products already arrive with scannable
barcodes, here’s the answer before we move on.

SKU Numbers vs. UPC Codes 

UPC codes are 12-digit codes assigned by the Global Standard Organization,
known as GS-1. GS-1 works with manufacturers and retailers to assign and
oversee the global use of UPC codes. UPC codes are placed on products by
your manufacturer. SKU numbers, by contrast, are an ordered stock numbering
system designed to fit your unique business needs.

You certainly can use your manufacturer’s UPC codes in lieu of SKU numbers to
track products in your system. But you’ll miss out on the many benefits of having
a SKU number system tailored to your specific operation. SKU numbers that you
create feature identifiers that are meaningful to you and your staff. With them,
you can sort, report, and view product data and stats based on your needs.
Supplier-generated UPC codes don’t contain unique or consistent identifiers that
mean anything to your operation.

UPC codes are helpful in other ways, though. You can use them to maintain
current MSRP pricing and even check out the local or online competition. You
can also use UPC codes to research products online or to use your cell phone to
scan UPC codes​ and scout for new products when shopping.

Set up SKU Numbers in a POS or 

Inventory Management System 
The framework and examples we covered above should give you a head-start on
creating a SKU number system for your business. You can create your SKUs
and track inventory by hand in notebooks or by using spreadsheets, but it’s far
easier and more efficient to use a retail POS with inventory tracking.

Our recommended POS for small and growing businesses is ​Lightspeed​. It’s very
affordable, starting at just $99/month for one station, and includes advanced
inventory management features and comprehensive reports. You can add more
features as you grow, too.

Here’s another look at Lightspeed’s intuitive product entry screen.

As shown above, you can enter as much product data as you wish to track. But
you don’t need to spend too much time entering data if you don’t need to track
every detail. Most small stores generally need to enter just the following to get
started:

● Item Name
● Custom SKU
● Manufacturer UPC and/or SKU
● Default Cost
● Default Price
● MSRP Price
● Vendor
● Reorder Point
● Low/desired Inventory Level