What is SKU?
The term SKU might sound very familiar due to its prevalence in business and logistics, but there are always lingering doubts regarding the meaning of SKU. With time, SKU has gained quite some fame, yet it is not very well-known in terms of importance.
SKU’s full form expands to ‘Stock Keeping Unit’. It is an eight-digit alphanumeric code used by retailers to keep track of the products internally. It is straightforward to understand that having a record of each product in the inventory is a must for efficient inventory management, and SKU is the tool for it.
SKU and UPC, or Universal Product Code, are often used interchangeably, but there are some significant differences apart from their names. SKU tracks and manages products internally, and UPC is a code assigned to the products after they are sold.
Even being dubbed as an eight-digit alphanumeric code, the length of an SKU number might vary from one business to another. There are no such standards a seller must go through when allocating an SKU number. However, changes are often witnessed in SKUs based on attributes such as the length and color of different products stored in an inventory.
Let’s now delve into the details of how an SKU works.
How an SKU Works
As mentioned earlier, SKU is an alphanumeric code that usually ranges between eight to twelve digits, assigned to products in the inventory based on specific criteria. The primary use of SKUs is to ensure proper inventory management while negating the threat of phantom stock or unavailable recorded products.
In most cases, the products sold by the retailer will have different specifications, further divided into several classes. Each class or category has a similar or matching feature across all the products. Once a type or subcategory is created based on a specific specification, the SKUs are allotted.
For some classes, the string of SKU might be an eight-digit alphanumeric number, while for others, it might be a nine-digit alphanumeric number. In some cases, SKU is often denoted by specific codes, while the last few numbers indicate the stock quantity. Besides efficient inventory management and eliminating phantom inventory, an SKU provides a retailer with several options. It further allows one to get creative, thus assigning unique codes for better inventory management.
What are SKUs Used for?
An SKU code or concept might appear to be just a process for efficient inventory management. However, SKU has witnessed several forms of usage, allowing the retailer to extract every penny of efficiency in various ways. It has also helped SKUs become essential to any inventory management system.
SKU proliferation is essential for a growing business as it is directly linked to efficient catalog management. For a seasoned seller, SKU data analysis might help them to extract many actionable insights. Zeroing down on the stocking cycle of a particular product, identifying profitable and non-profitable products by deciphering the related carrying costs, and accurately managing the catalog across various channels are a few of the analyst’s duties.
A centralized coding system for every product helps retailers understand each channel’s profitability. SKU further provides insights into the stocking cycles of different products. With such intel, a retailer can clearly understand or determine the required SKU level for several goods in the inventory. A business shows exponential growth and scalability when such insights are coupled and used to optimize the stock and the catalog.
An interesting fact about SKUs is that higher relevancy promotes higher accuracy in inventory management. Including SKU in the equation allows one to effectively sort products based on similar qualities, which are further named based on specific attributes.
For example, an SKU is used to manage a massive inventory of roses. The seller can use certain alphabets like R, W, or P to denote the color of the rose, while the preceding number represents the count present in the inventory (R87, P21, W62).
It not only allows the retailer to keep track of the current quantity but also allows one to sort the product based on a specific attribute. With the luxury of alphabets and numbers, coupled with a length ranging from last eight to twelve places, an SKU code is used to efficiently manage tens and thousands of inventory.
Furthermore, an SKU code is unique, and each code denotes a specific product. Therefore, the most common inventory management problem, where a product is listed yet unavailable, is very easily negated. Some safe practices of using an SKU code for efficient inventory management are the exclusion of symbols, spaces, or any other unique characteristics.
Each SKU code denotes a specific product, and these codes allow a retailer to keep track of the product internally. Since the retailer can effectively track any sold product from the databases, they can provide exceptional after-sales support.
On the other hand, SKU’s efficiency dictates the catalog’s effectiveness, which is seen by the customer’s engagement with the business. Furthermore, the negation of phantom inventory saves the retailer from undertaking unnecessary hassles. The mentioned attribute also helps the customer support team to answer fluently on the availability of different products. Such acts highlight great assistance, even before a sale is made. The efficiency of assisting customers is gravely boosted, both pre and post-sale.
SKU numbers and SKU tracking also have a very ignored advantage, which is closely tied to customer assistance. With the increase in fraud, a retailer might often be harassed with requests ranging from a full refund to a replacement.
In many cases, such attempts are carried out by scammers, who act as dissatisfied customers. Such frauds make up false accusations about products while looking for a solution through customer assistance. With a firm reliance on SKUs, such fraud attempts can easily be pointed out by a retailer, saving them from hassles and monetary loss.
Advertising and marketing
Convenience is often used to describe advertising and marketing in this digital era, where a retailer can automate everything. Speaking of popular advertising platforms like Facebook, Instagram, Google, and Youtube, one has the option to retarget visitors based on what they have seen on the website. Needless to say, retargeting constitutes the majority of the business done online, and ‘Dynamic Product Ads’ are the fuel to such forms of ads.
SKU numbers might not directly correlate to advertising and marketing, but due to the mentioned automation, SKUs form the base of the said ‘Dynamic Product Adverts’. Since these forms of retargeting ads rely heavily on the catalog of a shop, SKUs play a pivotal role here.
The optimization of an SKU code dictates inventory management’s efficiency, which, in turn, makes up for the relevancy of the catalog. In simpler terms, better SKU number optimization results in exceptional catalog management.
Catalog management is the base of marketing and advertising regarding retargeting adverts. Therefore, one can easily deduce that SKU indirectly plays the most crucial role in this case. Apart from inventory management, catalog management, and expert analytics, the ripple effect created by an SKU system branches out to all the essential aspects of a business.
In today’s digital era, it has been repeatedly proven that retargeting adverts drive the highest revenue for any business. In technical terms, these advertisements are known as ‘Dynamic Product Adverts’. A dynamic product advert is a retargeting ad, a picture of the product the customer browses on your website repeatedly appearing on their social media platform.
In other words, the person who left the website without completing the purchase is reminded and recommended of the product even after they leave the website. As catalog forms the base of these kinds of automated advert recommendations, an SKU system automatically comes into play, as the efficiency of the named system dictates the viability of the catalog, thus creating a ripple effect.
An SKU system is also accountable for another product recommendation form, usually applied to the customer. The marketing term ‘Cross-selling’ comes into play over here. ‘Cross-selling’ is primarily based on optimizing the Stock Keeping Unit, as products are automatically recommended to the customer based on their purchase behavior. It requires an interlinked Stock Keeping Unit System nomenclature.
In such scenarios of interlinks, an SKU code is generated and linked across different subcategories of products. Based on the data, such links are put to use, thus helping a retailer initiate intelligent product recommendations to the customers. However, one should be aware that the relevancy of this system only increases with time and the use of data. In other words, the more data you feed into the SKU system, the better the recommendations.
Why is SKU Important?
SKUs have been closely linked to a better inventory management system, but these eight to twelve-digit alphanumeric codes form the core of an excellent inventory management system. The method, in turn, gives birth to a ripple effect, which improves every aspect of a business.
The most common benefits of a Stock Keeping Unit are excellent inventory management and the reduction of phantom inventory. However, these are just the tip of the iceberg, as SKUs help a retailer identify fraudulent customer complaints.
On the other hand, these codes allow the sellers to effectively track the products, thus paving the way for excellent customer service. With the inclusion of data acquired easily with the help of an SKU code, a retailer can also pinpoint the stocking cycle of different products. It allows them to understand the demand for various products across the shelves, further helping them to identify the products with the minimum sales.
Since the digital marketing scene kicked in, the catalog has become increasingly important. As the most revenue-effective advertisements depend on the catalog, a good SKU supply chain is considered the backbone of a great catalog. It again allows the SKU scan system to emphasize its importance in a rather indirect approach.
Furthermore, a seasoned SKU system also helps a retailer to provide better product recommendations to the customers, thus initiating better sales and higher customer satisfaction. Even if only the inventory management perks are included, a sound SKU system is necessary for every business. Additionally, when extras created from its ripple effect are considered, one can easily say that a sound Stock Keeping Unit system is oxygen to any business.
Stock Keeping Units Vs. Universal Product Codes
SKU and UPC are two units often used interchangeably due to their similar functionality in the retail industry. Unlike an SKU number, a UPC is a numeric code issued by the GSI-US, which is always twelve digits in length. UPC was primarily introduced to establish a global standard for tracking a product removed from the retailer’s supply chain.
An SKU is an alphanumeric code only used internally to manage inventory while optimizing the business differently. Even so, there is no set global standard that determines the terminology of a particular SKU code for a retailer. However, in the case of a UPC, a retailer not only needs to buy it from the mentioned non-profit organization, but it has a set value.
UPCs can often be identified at the back of the product in the form of a barcode, establishing its global standardization. It allows the package to be correctly tracked even after it is released from the retailer’s supply chain. The significant difference between these two codes lies within the scope of their use. In simpler terms, an SKU number is used when the product is stored in the warehouse, while a UPC is only used when a sale is made, and the product is shipped.
Disregarding minor differences like the code structure, UPC allows the product to be listed in the global supply chain as a unique entity, thus making it subject to international laws. While on hindsight, an SKU number, being a retailer-generated code, does not have any such use as a UPC. The easiest way to differentiate a UPC from an SKU is by looking at the length of the codes at the back of the product.
To summarize the mentioned points, there are significant differences between an SKU and a UPC. They are listed as follows:
- SKUs are used to track and manage products internally, while a UPC number is used to track products externally.
- An SKU number is an eight to twelve-digit alphanumeric code with no naming standard, but a UPC is a twelve-digit numeric code with a specific number.
- A UPC is generally printed as a barcode, usually recognizable globally with the help of barcode scanners. An SKU is printed as it is and is only identifiable to the retailer.
- SKU is used for inventory management throughout the world. Still, even though UPC has the adjective ‘Universal’ to determine its scope of use, a UPC is mainly used in North America. Any business outside the United States requires a thirteen-digit serial number, often dubbed a European or International Article Number.
- To use a UPC, a retailer needs to purchase it from GS1 US, which is not the case for an SKU code.
Three Benefits of SKUs
Reduced human error
Alternatives to replacing human effort have always been appreciated in every sector for specific reasons. Inventory management as a whole is no stranger to such appreciation. Very effective management is required for a retailer stacking more than thousands of products for each variant. Without an SKU, advantages like subcategorization of product variants, exact determination of quantity in the warehouse, and tracking are omitted.
Now, with such benefits out of the equation, a seller still needs to ensure the deduction of essential factors such as the quantity of the product at any given time. At the same time, sorting the products correctly, yet manually becomes a big task. Instead of SKU, the second viable option is to hire individuals who can ensure the inventory management system’s minimum needs are sufficient, as mentioned above.
Considering a retailer with more than 1000s product variants, calculating the quantity of the product at any given time can be considered a very gruesome job. This specific issue, at some point, becomes prone to several human errors.
Furthermore, as the quantity of stocked products increases, the retailer might require more hands, which comes with the hefty blow of additional cost due to the added salaries of hiring more employees. Even with the increased wages, the inventory management system is still prone to errors. This is a necessary evil of scaling the levels of quantity. It means the more a retailer scales, the more employees he needs. Such an effort spirals down to lower profit margins and more human errors.
SKU has been widely appreciated and implemented for its ability to resolve these problems while allowing the retailer to save money from the mentioned salaries. With fewer human errors, the problem of phantom inventory is also solved as reporting becomes very efficient.
In other words, SKU helps with more efficient, real-time calculation of the stocks and omits human error while ensuring no loss to the profit margin. The exclusion of phantom inventory problems caused due to human errors is further accompanied by several other benefits, which have been discussed below.
Less inventory shrinkage
One of inventory management’s most common and mind-wrecking problems is inventory shrinkage. This specific name is given to a situation where the stored quantity is much lesser than what has been recorded in the books. From the mere definition of this problem, one can easily understand the number of follow-up problems it might cause.
In the case of a longer transportation cycle from the manufacturer to the retailer, inventory shrinkage only adds more fuel to the fire. The wait time for a customer increases indefinitely in such cases, resulting in poor customer satisfaction and, consequently, bad reviews. In some instances, these reviews are often accompanied by order cancellations.
With the help of an SKU barcode placed on every product in the warehouse, such a problem is easily negated from the whole equation. As a catalog is created using an SKU barcode, it becomes straightforward to keep track of every product, irrespective of the quantity present in the warehouse. Furthermore, products are better sorted using the SKU systems. Since the initial problem of phantom inventory is solved at the root, further follow-up problems, such as poor customer satisfaction, never occur in the first place.
The chances of theft also decrease for a retail store staking thousands of units from a manufacturer with an SKU system. For example, if a retailer ordered 1000 pieces of red rose and another 1000 pieces of white rose, which were grouped in SKU numbers – R1 to R1000 for the red roses and W1 to W1000 for the white roses. Now, suppose he received only up to R900. It would be easy for the seller to attribute the loss of the 100 red roses. However, if the SKU system were absent, the retailer would have lost many products for which he had already paid.
Customized reorder points
An integral part of inventory management is the ability to move the products faster off the shelves and capitalize on specific opportunities by understanding the stocking cycle of different products. As it is pretty well known, an SKU barcode is better when the products are divided into subcategories. Once a retailer starts selling, the store ages more with data. It allows the seller to understand the demand for all products.
A reorder point is typically considered a base level in an inventory, which is usually followed up by restocking. In other words, reorder points indicate that a particular product needs to be restocked. Factors such as demand for the development and maximum storage quantity of a specific product are considered while calculating a reorder point. Needless to say, the mentioned standard is unique for every retailer as having an accurate idea of a reorder point allows one to ensure a continuous flow of products from the warehouse to the hands of the customer.
Storing products for a long time is often considered a liability since it not only depreciates with time but also requires certain costs for maintenance. Therefore, not being able to move a product out of the supply chain can slowly eat up the seller’s profit. However, a store is not born with data on customer analytics. It means that initially, the seller can get creative by spending a little extra money on the suggested suggestions, but how fast they optimize the reorder points is primarily based on SKUs.
One might even negate the need for an SKU since identifying the products with the highest demand and those with the lowest order can be done manually. Reasonably enough, such an opinion is valid, but only for a store that hoards a minimal quantity of products or options. On the other hand, scalability becomes a massive problem without using SKUs. Identifying one, two, or three order points might be very easy, but trying to sort through 100s of products each day and understanding the same might be difficult and prove very frustrating. Not to mention the loss of time, which you could use in more productive ways.
Failing to ensure a continuous flow of products to the customers has often sparked negative comments on any seller or brand, as availability is often touted as a USP for many brands. Like the SKU system, a scalable solution ensures an easier flow when implemented from the beginning. Such an inventory ecosystem allows great scalability and helps retailers earn great comments.
A well-knit SKU system will give the retailer more control over the reorder points with minimum convenience. This specific act is followed up by a ripple effect that improves overall profitability when the storage of any product is being considered while also giving the brand better customer satisfaction.
How to Generate an SKU Number
SKU numbers do not follow any global standard or convention, which means the retailer is free to add some creativity to such kinds of terminology. However, to make the most out of the SKU system, this step-by-step guide with the required explanation will help you create a unique SKU system that is scalable and easy to manage.
Divide your stock into categories
An SKU code is an alphanumeric number that ranges between 8 to 12 digits. Usually, these codes start with alphabets known as the Top-Level Identifier. The top-level identifier is primarily used to determine variations based on specific attributes of the product or even its source. Therefore, the first and the most crucial step to generate an SKU number is dividing the products based on specific categories.
For example, if you want to develop the top-level identifier for three different colors of roses, say red, white, and yellow. The top-level identifier can be RR-XXX for red roses, WR-XXX for white roses, and YR-XXX for yellow roses. Now, the “XXX” determines the number of roses present in the stock at that given moment. For example, two similar products from two different manufacturers have been delivered. Let’s assume the red roses have been acquired from manufacturers A and B. Therefore, the top-level identifier for these roses can be RRMA-XXX and RRMB-XXX, where ‘MA’ represents manufacturer A, and ‘MB’ means manufacturer B. At the same time, ‘XXX’ determines the quantity at that given moment.
To further make an SKU code more convenient, the seller can also use the top-level identifier to determine more than one quality. Take the rose inventory into consideration. Say a retailer sells red, white, and yellow roses. Further, consider that every rose has been equally imported from two manufacturers, A, and B. To ensure an optimal SKU vocabulary, one can use RRMA-XXX and RRMB-XXX, as mentioned previously. However, this form of naming will extend to WRMA-XXX, WRMB-XXX, YRMA-XXX, and YRMB-XXX. It will allow one to quickly identify the product’s attribute, color, source, and quantity.
One might question the inclusion of references in an SKU code, which is explicitly done to identify which manufacturer provides better quality. Since an SKU system also allows analytics, you can create categories based on the factors you want to analyze while ignoring the random creation of classes.
Determine the length of the unit
One of the primary jobs of using the SKU system in the first place is to effectively optimize the reorder points by understanding the stocking cycles of the product in question. Therefore, the second step after assigning the top-level identifiers is determining the unit’s length.
This step is a further extension of the previously mentioned process. As analytics will play an essential part in inventory management, the seller needs to understand and point out the specific factors on which they will base the analytical results. The seller can determine the unit’s length depending on the pointed factors.
For example, a seller is importing similar products, say marker pens, from four manufacturers, A, B, C, and D. Given the type of the products, we can assume MP(Marker Pens) as the top-level identifier. The main goal is to understand which manufacturer sells better quality products using the naming guide. Therefore, the length of the unit is determined by including the mentioned factor, such as MP-A, MP-B, MP-C, or MP-D. Now, after making a few sales, based on the customer satisfaction level, the seller can judge the quality of these products by looking at the SKU number.
It is an over-simplistic example, but the main point here is to determine the length not based on random factors but by selecting particular characteristics. For the previous example, the size of the SKU code was four since only two factors were being considered. However, this length is unique to every seller, and the length should always depend on the factors that will form the seller’s analytics base.
Assign meaning to each character
After determining the SKU unit’s length and the top-level identifier, it is time to decide the meaning of each character. It is always ideal to use a standardized naming method throughout the whole inventory of a specific retailer.
The lack of any global standard allows any retailer to be creative and make the most out of an SKU code. However, having a standardized SKU system makes the retailer’s job easier at many levels. Therefore, for example, if the supposed unit length is 6, where the first and second characters denote the top-level identifier, the remaining four units can be used to determine the stock quantity. A retailer can use the last four characters to indicate specific traits of the categorized products, where characters in each position define a particular attribute, which will later be used for analysis and inventory optimization.
Consider an instance of blue and black pens that include both ball and gel pens in specific quantities. Items are imported equally from three manufacturers – A, B, and C. A great SKU code, in this case, can be ABEB-XXX, ABKG-XXX, BBEB-XXX, BBKG-XXX, CBEB-XXX, and CBKG-XXX. Now the ‘A’, ‘B’, and ‘C’ can be considered top-level identifiers are denoting a specific manufacturer. ‘BE,’ and ‘BK’ are the characters that determine the ink color of the pen, whether it is blue or black. Lastly, the letters’ B’ and ‘G’ signify the pen’s nature, whether a ball pen or a gel pen, while ‘XXX’ underlines the available quantity. Including the top-level identifiers, where each character in the sequence denotes a specific trait of the product, will further help the retailer understand a few things listed below:
- Which manufacturer is providing better quality products?
- Customers prefer which color in pens – blue or black?
- Which type of pen is selling more, ball pen or gel pen?
Based on the sales analysis, the underlying meaning of each character will allow the retailer to quickly grasp the facts mentioned above. Besides indicating the advantage, this example provides a rough idea of how to assign each character’s meaning, and the reason behind it.
Attach sequential numbers to the end of the unit
The last but not the least important point is the generation of the SKU numbers. As previously mentioned, this is the part that helps a retailer deal with the problem of phantom inventory. As the name and the sequential number suggest, one needs to start with 001, 002, and go up to 00X.
There are two ways to use the sequential number in an SKU code. The first one follows the same sequence throughout the entire import lifecycle of a product. For example, 1000 pens were imported in the first month. Thus they were assigned a series from 1 to 999. Now again, in the second month, another 700 pens were imported. Instead of giving a fresh set of sequential numbers, you can continue with the old ones. It means these products are attributed numbers from 1000 to 1699. In the case of the other method, the sequential numbering is refreshed every time a new batch of similar products is imported.
In both methods mentioned, a retailer can easily distinguish between old and new stock, but the problem with refreshing sequential numbering is evident. This method only applies when the previous store is wholly removed from the warehouse. Therefore, using the sequential numbering system without refreshing is recommended.
Tips for Generating SKU Numbers
Use a simple format
Minimum digits and complete information are the ingredients of a good SKU number. There is no need to add characters that denote the nature of the product, which will serve no use in the future. Despite the popular opinion, “the more, the better”, it is always advisable to only include the necessary information. It helps one to keep it simple.
Furthermore, the process becomes cumbersome when an SKU number denotes too many attributes. Using one or a maximum of two characters to underline a specific trait while considering only the necessary features is always recommended.
For example, if someone is selling shoes, traits such as ‘Manufacturing Year’ are unnecessary. However, the mentioned trait is essential for a fruit seller and should be included in the SKU number. Since a unique set of qualities determines every product, identifying and adding only the important ones will lead to lesser confusion.
Make your SKU number identifiable
The relevance of characters in an SKU code with the source of information is the key here. One can also assume an SKU number to be a collection of short forms of communication that will help the retailer. In other words, for a blue gel pen, the SKU number can have a string such as BP or BGP, a series of characters, which is more likely to remind the retailer of the product. However, instead of using the mentioned naming convention, if the same blue gel pen were to be denoted by only the letter ‘P’, the confusion would have been higher. A simple format works like a charm, but when each character in the SKU number is identifiable, the efficiency skyrockets.
Consider reusing SKU numbers
The length of an SKU number varies from 8 to 12 digits, but the alphabetical size of the code is determined after the quantity allocation is done. A retailer stocking 1,00,000 products can only allocate 2 to 6 digits for the alphabet. Such a scenario limits the availability of SKU numbers. Therefore, it is always recommended to reuse SKU numbers in such cases. A small addition of the letters’ E’ or ‘N’ might increase convenience.
For example, a retailer already has an SKU system for 1,00,000 apples procured from manufacturer X and another 1,00,000 from manufacturer Y. In this case, the SKU number ranges from XRA1 to XRA100000 for products imported from manufacturer A. At the same time, the products imported from manufacturer Y are named YRA1 to YRA100000. When the retailer gets a new import, they can reuse the SKU when the previous stock is sold or add a letter to the last SKU code, like NXRA1 to NXRA100000. The inclusion of N, meaning ‘New’, is a small addition, but it saved the retailer from creating a new series of SKU codes.
Invest in an SKU number generator
No doubt creating an SKU number requires some thought, as several factors need to be considered. SKU numbers act as real estate assets for retailers in the long run. The initial creation requires some time and effort from the seller, and this effort scales if someone is planning to stock up on a considerable quantity. However, several options for a good SKU number generator have been pre-fed with all the information provided here. Most e-commerce online store service providers have their version of an automated SKU system. SKU Shopify is one of the famous ones in the market.
Furthermore, with SKU marketing, generators are accompanied by the SKU number tracking feature, all cooped in one. There are several SKU software in the market, both offline and online. If you want to automate the whole store SKU system, there is always a great option ready to replace the manual work.
SKU Number Examples
Other SKU number identifiers to consider
As global standards do not limit an SKU, one might come across several new SKU numbers daily. Each SKU number is created to form an agile inventory management system, which is unique for each business. Information like manufacturing dates might be essential for a retailer selling fruits or other perishable items. Therefore, one should not be surprised if a character from the SKU number from that retailer points to that specific information. On the other hand, this information is irrelevant for a retailer selling clothes. Hence an SKU from their shop reflects the same.
Store or location identifier
Global businesses with a well-established real chain in the market have often used specific codes or characters in the SKU number of their products. It is essentially done to automate the process and decrease human labor.
When sending shipments to a particular retail chain, these companies quickly sort the requested products through the SKU number. Therefore, a brand or business established as a global retail chain might find it very convenient to add characters or codes in the SKU number, which denotes specific stores.
A department identifier is very similar to a store’s location identifier, yet there are some subtle differences. Instead of using the SKU number to sort and identify retail stores on the go, this specific identifier is used to locate the department where the product needs to be placed. This identifier benefits companies or stores with several departments working under its tutelage.
The variation identifier might need little explanation, as the name says it all. This kind of identifier in an SKU number highlights subtle variations in two batches of products with reasonably similar characteristics. When the T-shirt variation is considered (one with a crew neck and another with a V-neck), a seller can use an SKU number to differentiate between the two variations.
A customer complaint or other action needs a quick response in certain situations. The retailer or someone from their team only needs to refer to the SKU number of the product to identify the variation, thus allowing them to take prompt action. This identifier works excellently for products like clothes, shoes, wearables, or other products accompanied by several variations.
A subcategory identifier is often confused with a variation identifier, but they are two entities that accomplish one goal: convenience. As the name implies, these identifiers are included in the SKU numbers to determine the product category, not the variation.
In the case of a clothing business, men’s and women’s clothing are the categories. At the same time, a retailer can include subcategories like short-sleeve and full-sleeve dresses in an SKU number. If a variation identifier were to be ascribed to a short sleeve, this would indicate the differentiation between a crew neck and a V-neck.