Question:
What is a surrogate key and where do you use it?

Answer:

A surrogate key is a substitution for the natural primary key.

It is just a unique identifier or number for each row that can be used for the primary key to the table. The only requirement for a surrogate primary key is that it is unique for each row in the table.

Data warehouses typically use a surrogate, (also known as artificial or identity key), key for the dimension table’s primary keys. They can use Informatica sequence generator, or Oracle sequence, or SQL Server Identity values for the surrogate key.

It is useful because the natural primary key (i.e. Customer Number in Customer table) can change and this makes updates more difficult. Not only can these natural key values change, indexing on a numerical value is probably better and you could consider creating a surrogate key called, say, LocationId. This would be internal to the system and as far as the client is concerned you may display only the LocationName.

Another benefit you can get from surrogate keys (SID) is for tracking the SCD – Slowly Changing Dimension.

A classical example from Data warehouse IT Toolbox:

On the 1st of January 2002, Employee ‘E1′ belongs to Business Unit ‘BU1′ (that’s what would be in your Employee Dimension). This employee has a turnover allocated to him on the Business Unit ‘BU1′ But on the 2nd of June the Employee ‘E1′ is muted from Business Unit ‘BU1′ to Business Unit ‘BU2.’ All the new turnover have to belong to the new Business Unit ‘BU2′ but the old one should Belong to the Business Unit ‘BU1.’

If you used the natural business key ‘E1′ for your employee within your data warehouse everything would be allocated to Business Unit ‘BU2′ even what actually belongs to ‘BU1.’

If you use surrogate keys, you could create on the 2nd of June a new record for the Employee ‘E1′ in your Employee Dimension with a new surrogate key.

This way, in your fact table, you have your old data (before 2nd of June) with the SID of the Employee ‘E1′ + ‘BU1.’ All new data (after 2nd of June) would take the SID of the employee ‘E1′ + ‘BU2.’

You could consider Slowly Changing Dimension as an enlargement of your natural key: natural key of the Employee was Employee Code ‘E1′ but for you it becomes Employee Code + Business Unit, i.e. ‘E1′ + ‘BU1′ or ‘E1′ + ‘BU2.’