SKU (stock keeping unit)
The smallest distinct item you buy, hold and sell as one thing, with its own code. Each size, colour or pack of a product is a separate SKU.
An SKU is one line in your stock. If two things must be counted separately, priced separately or ordered separately, they are two SKUs — however similar they look.
Where the line falls
A shirt in three sizes and two colours is six SKUs. A shampoo in 100 ml and 400 ml bottles is two. A carton of twelve, if you also sell singles, is a pack of one SKU rather than an SKU of its own — which is what unit conversion is for.
Codes that survive contact with the counter
Keep them short, consistent and readable. A structure that encodes something useful — category, brand, size — helps staff find the right item without a search. Avoid characters that get confused when read aloud or typed in a hurry.
The cost of getting the level wrong
Too coarse and you cannot see which size sells, so your reorder is a guess. Too fine and every count takes twice as long and no line has enough history to plan from. Aim for the level at which you would actually place a purchase order.
How KillStock handles it
SKUs carry categories, units, tax rates and per-location stock on hand. Item codes are suggested from the product name, so the catalogue can be built quickly without inventing a scheme first, and batch or serial tracking can be switched on for the items that need it.
A common mistake
Creating a second SKU for the same item because the name was typed differently. Two half-histories are worse than one, and the reorder point on both will be wrong.