How to Create Good SKUs
Once your operation grows large enough to maintain inventory, you need a reliable system for identifying every item in your warehouse, fulfillment center, or stockroom. That system starts with the SKU — the stock keeping unit.
A SKU is a short alphanumeric code — typically 4 to 8 characters — that uniquely identifies a product within your operation. It's the foundation of accurate inventory tracking, and the quality of your SKU structure directly affects picking speed, error rates, and system reliability.
Your SKU System Is the Foundation of Execution
Every downstream process — picking, replenishment, cycle counting, analytics — depends on the clarity and consistency of your SKU codes. A well-structured SKU lets your team quickly identify an item's location, check stock levels, and set reorder thresholds without ever looking up a full product name.
A poorly designed SKU system, on the other hand, creates confusion at the point of work. Workers misread codes, inventory software misinterprets values, and error rates climb. When you're running a pick-to-light system or any form of guided execution, clean SKU data is what makes the entire workflow reliable.
The Bottom Line
SKU stands for "stock keeping unit" (pronounced "skew"). It's a short string of letters and numbers — sometimes called an item number or product code — that serves as the fundamental building block of inventory management. Get the SKU right, and everything downstream works better.
Seven Rules for Building Better SKUs
These principles apply whether you're setting up your first warehouse or restructuring an existing inventory system.
Keep It Short and Meaningful
A string of 4 to 8 characters is sufficient for most warehouses. This compact format gives you enough room to encode useful information — product category, variant, color — while keeping codes easy to read on a picklist or display screen. Longer codes slow down workers and increase the chance of transcription errors.
Never Start a SKU with Zero
Leading zeros cause problems in spreadsheets, inventory databases, and bookkeeping software. Excel and similar tools will automatically strip a leading zero, turning SKU "0451" into "451" — which creates mismatches across your systems. Start every SKU with a letter or a non-zero digit.
Skip the Special Characters
Avoid slashes, dollar signs, percent symbols, ampersands, and similar characters. A forward slash between two numbers will cause Excel to interpret the value as a date. A dollar sign or percent can trigger calculation errors in bookkeeping software. Stick to plain letters and numbers — no exceptions.
Avoid Ambiguous Letters
The letters I, L, and O look too similar to the numbers 1 and 0, especially on printed picklists, barcode labels, and small device screens. Removing these three letters from your SKU alphabet eliminates an entire category of reading errors at the point of work.
Design for the Picklist
Think about how your SKU will look to a warehouse worker scanning a pick sheet or reading a display device. Build a logical structure: start with a supplier or category prefix, follow with a product identifier, and end with a variant code. For example, WID101BL for Widget 101 in Blue — then WID101RD for Red, WID102BL for the next product. Consistency makes patterns recognizable and reduces hesitation.
Don't Copy the Manufacturer's Part Number
Manufacturer part numbers are designed for their systems, not yours. They tend to be long, encoded with meanings that are irrelevant to your operation, and subject to change without notice. If a manufacturer renumbers a product, your entire inventory reference breaks. Create your own internal SKU and map it to the manufacturer's number separately.
Retire Discontinued SKUs Permanently
When a product is discontinued or permanently out of stock, retire its SKU. Never reuse a retired SKU for a different product. Reusing codes creates phantom inventory records, confuses historical reporting, and can cause fulfillment errors when the system thinks a discontinued item is still active. Treat every SKU as a one-time assignment.
Putting It Together
Here's how a simple, well-structured SKU system looks in practice. Suppose you're receiving parts from a supplier called Widget Co, in multiple colors and models:
The pattern is predictable. A worker who sees WID103GN on a display immediately knows it's a green Widget 103 — no lookup required.
Clean SKUs Make Automation Work
When your SKU system is clear and consistent, automation tools can do their job. When it isn't, every downstream system inherits the confusion.
Display Accuracy
Light-directed systems display SKU codes on device screens at the point of work. Short, unambiguous codes mean workers confirm the right item without second-guessing.
System Reliability
Clean SKU data flows cleanly through your WMS, ERP, and API integrations. No character conflicts, no phantom records, no silent data corruption.
Faster Onboarding
New hires learn a logical SKU structure faster than a random jumble of manufacturer codes. Consistent patterns reduce training time and picking errors from day one.
Voodoo's wireless pick-to-light devices display SKU codes, quantities, and location data directly at the point of work — making clean SKU practices even more impactful.
Ready to Put Your Inventory to Work?
Good SKUs are the starting point. Light-directed execution is what turns that foundation into measurable speed, accuracy, and efficiency gains.