Definition
A SKU (Stock Keeping Unit) is a string of characters used to identify a distinct item. A SKU must be:
composed of letters, numbers, underscores, or hyphens
25 characters or less
unique among all other items in your company
A unique SKU code is required for:
every possible permutation of an item;
every possible permutation of bundled items -- e.g. a SKU sold in an online store that contains 3 other distinct SKUs;
every base component of an item that each will be received, stocked, and tracked in inventory, then later assembled into a different, distinct finished-goods item, which will also require a unique SKU code;
custom packaging.
Every product variation requires its own SKU code. Attributes which distinguish items and necessitate unique SKU codes include and aren't limited to color, design, size, style, and even production method and whether or not an item is signed.
Therefore:
A single screen-printed t-shirt design available in one color in both men's and women's styles with five sizes for each style would require 10 SKUs.
If a book is available signed and unsigned, two SKUs would be required.
A single design available in both white and black mugs in both 11-ounce and 15-ounce sizes would require four SKUs.
Regarding the production method, a given t-shirt that will be screen printed requires a unique SKU, and the exact same design to be printed on the exact same blank t-shirt also requires a distinct SKU code if the printing will be via Direct-to-Garment instead of Screen Print.
Formatting SKUs
Clients have flexibility regarding the naming and taxonomy of SKU codes. Each SKU code must be:
comprised only of letters, numbers, underscores, or hyphens,
unique, and
less than 25 characters in length.
SKU Logic
While not required, employing a bit of logic in naming SKUs can prove helpful since items can be readily identified based on the code alone. For example, a client with a black logo shirt in size small might use SKU code T-SHOPLOGO-BLA-1.
'T' could define a t-shirt, 'SHOPLOGO' would define the design,
'BLA' would define the color, and
'1' would define a size small.
Defining size numerically (1=small, 2=medium, 3=large, etc.) makes it easier to sort SKUs by size on reports and spreadsheets.
Of course, this is just an example, and clients are welcome to employ whatever format they deem works best, so long as SKUs are properly formatted.