If you’re involved in retail or e-commerce, you already know how essential it is to keep your products organized and accessible. Maintaining control over your inventory is crucial, especially as the Philippine retail market is projected to grow by USD 66.35 billion by 2028, at a CAGR of 11.1%. To handle this rapid growth and increasing product volume efficiently, one of the most effective tools is implementing a Stock Keeping Unit (SKU) system.
An SKU system plays a vital role in tracking inventory, managing sales, and ensuring quick fulfillment. Without it, businesses risk losing valuable time, money, and resources. Let’s explore what SKUs are, how to create them, and the benefits they bring to your business.
What is an SKU?
An SKU, or Stock Keeping Unit, is a unique identifier assigned to each product or item in your inventory. Retailers and warehouses use it to track product availability, sales, and stock levels in real time. Think of it as a barcode or alphanumeric code that is specific to each product variant, such as size, color, and type.
An SKU is typically created using a combination of letters and numbers, making it easy to differentiate between products and track inventory movement. The format and structure of an SKU can vary depending on the business.
With a clearer understanding of what an SKU is and its role, let’s break down the steps to create it so that you can simplify your inventory management.
How to Create an SKU
Creating an effective SKU involves more than just generating random numbers or letters. It requires understanding your product’s attributes, inventory needs, and business requirements. Here’s a breakdown of the essential steps to create an SKU that fits your operations:
1. Identify Key Product Attributes
The first step in creating an SKU is identifying the key characteristics of the product. These can include:
- Product type (e.g., shirt, shoes, electronics)
- Size (e.g., small, medium, large)
- Color (e.g., red, blue, green)
- Material (e.g., cotton, leather)
- Brand (if applicable)
By noting down these features, you ensure that each SKU will be unique and clearly describe what the product is.
2. Develop a Consistent SKU Format
Consistency is key when creating SKUs. Develop a naming convention that works for your business. Here’s an example of how you can structure it:
- Product Type: A two-letter code for the product (e.g., TS for T-shirt)
- Size: One letter to indicate size (e.g., S for small, M for medium, L for large)
- Color: A two-letter code for the color (e.g., RD for red, BL for blue)
- Variant: If there’s a variant (e.g., a pattern or design), include a code (e.g., STR for striped)
SKU example, for a red medium-sized T-shirt could look like this: TS-M-RD.
3. Keep it Simple but Descriptive
The goal is to make SKUs informative enough to help you identify products quickly, without being overly complex. Use abbreviations and short codes that are easy to read and understand, but avoid making the SKU too long.
Example: Instead of a long SKU like TshirtMediumRedStriped2025, use TS-M-RD-STR, which is clear and concise.
4. Use a Logical Sequence
Ensure the sequence in your SKU makes sense and follows a logical order. A well-organized SKU will help you maintain consistency and avoid errors, especially as your product range expands.
Example: Follow the order of Product Type > Size > Color > Variant, such as SH-L-BL-PRT for a large blue printed shirt. Maintaining consistency helps with quick identification and sorting.
To help you get a better grasp, here are a few more practical SKU examples that demonstrate how you can create meaningful and easy-to-understand codes for your products.
SKU Code Examples
| Item | Product Code (Model) | Color Code | Size Code | SKU Code |
| Black T-shirt, Small | TSH | BLK | S | TSH-BLK-S |
| White T-shirt, Medium | TSH | WHT | M | TSH-WHT-M |
| Red T-shirt, Large | TSH | RED | L | TSH-RED-L |
- Product Code (Model): A short code representing the product type, such as “TSH” for T-shirt.
- Color Code: A simple abbreviation of the color, for example, BLK for black or WHT for white.
- Size Code: Typically a single letter representing size, like S for small, M for medium, and L for large.
Building on how you create SKUs customized to your products, it’s equally important to understand how SKUs differ from other identification systems like the Universal Product Code (UPC). This knowledge helps you choose the right system for tracking and managing your inventory effectively.
Difference Between SKU and Universal Product Code (UPC)
SKU (Stock Keeping Unit) and UPC (Universal Product Code) both serve to identify products but differ in purpose, scope, and usage. Knowing these differences helps you organize your inventory efficiently and meet external retail requirements effectively:
| Aspect | SKU (Stock Keeping Unit) | UPC (Universal Product Code) |
| Assigned by | Created internally by your business or retailer to suit your inventory system | Assigned externally by manufacturers or authorized bodies to ensure global uniqueness |
| Purpose | Used primarily for internal tracking, managing stock levels, and sales reporting | Used for external product identification, scanning at checkout, and supply chain tracking |
| Format | Flexible alphanumeric codes combining letters and numbers customized to your products | Standardized numeric barcode used universally for product identification |
| Uniqueness | Unique only within your organization, may vary between businesses for the same product | Globally unique for a specific product, consistent across all retailers and sellers |
| Usage | Helps warehouse staff, sales teams, and inventory managers quickly identify and track products | Scanned by point-of-sale systems and distributors for sales and logistics across the supply chain |
| Flexibility | Allows customization to include key product attributes (size, color, brand) for easier management | Fixed format ensuring product consistency, facilitating international trade and retail operations |
| Human Readability | Usually human-readable, making it easier for employees to interpret without scanning tools | Primarily designed for machine scanning, less informative to humans without a lookup system |
With these differences clear, let’s explore how using SKU can help your business achieve better accuracy, save time, and ultimately boost operational efficiency.
Also Read: Improving Stock Control Systems: Methods and Best Practices
Benefits of Using SKUs for Your Business
SKUs are not just a way to organize products; they offer several critical benefits that can manage your inventory management and help you grow your business more efficiently. Here’s why SKUs are a turning point:
1. Improved Inventory Control
One of the biggest benefits of using SKUs is that they provide better visibility into your inventory. With SKUs, you can track the exact quantity of each product in your warehouse, which allows you to:
- Quickly assess stock levels
- Identify low-stock items and reorder promptly
- Minimize overstocking and avoid unnecessary inventory costs
This level of control prevents stockouts and ensures that you can meet customer demand without running into storage issues.
2. Faster Order Fulfillment
When you use SKUs, picking and packing orders becomes a much faster and more accurate process. The SKU serves as a precise identifier, reducing errors that often occur when employees have to manually search for product information. By having clear SKU codes, businesses can:
- Speed up picking and packing times
- Improve the accuracy of shipments
- Decrease the chances of sending incorrect items to customers
This directly leads to faster and more efficient order fulfillment, which enhances customer satisfaction.
3. Better Reporting and Analytics
SKUs enable businesses to track sales performance across different products, categories, and variations. This data can be used to:
- Identify your best-selling products
- Analyze trends across seasons or periods
- Make informed decisions on inventory restocking
With precise reporting, you can optimize your product offerings and make smarter purchasing decisions, ensuring your stock aligns with customer demand.
4. Simplified Reordering Process
Having SKUs tied to your products means that when an item runs low, you can quickly reorder using the SKU code. This allows you to maintain smooth operations and avoid delays in getting products back in stock. By managing the reordering process, businesses can:
- Ensure products remain available for customers
- Negotiate better supplier terms based on accurate order histories
- Maintain continuous sales without stockout
This not only improves efficiency but also strengthens relationships with suppliers due to the precise and timely orders.
5. Enhanced Customer Experience
SKUs help improve the customer experience by reducing the chances of stockouts and ensuring accurate deliveries. Customers are more likely to trust a business that has quick, efficient, and accurate order fulfillment systems in place. SKUs contribute to:
- Faster response times to customer inquiries
- Accurate product availability updates
- A more organized online store with clear product listings
When customers receive their correct products quickly, they’re more likely to return for future purchases.
The benefits of SKUs are clear, but let’s look at how businesses are successfully using them in the real world. By examining some practical examples, we can better understand how strategic SKU management drives success across different industries.
Real-Life Examples of Businesses Using SKUs Effectively in the Philippines
In the Philippines, businesses across various sectors are utilizing SKU systems to enhance their operations and improve customer experience. From retail giants to e-commerce startups, here’s how local companies are effectively utilizing SKUs:
1. SM Supermalls
SM Supermalls, one of the largest retail operators in the Philippines, uses a robust SKU system to manage its vast range of products across numerous locations. By assigning unique SKUs to every product, SM ensures that inventory management is smooth, helping them monitor stock levels in real-time, reduce stockouts, and avoid overstocking.
This SKU system enables SM to quickly identify popular products, adjust their stock accordingly, and ensure that their shelves are always stocked with the items customers need, improving both customer satisfaction and operational efficiency.
2. Lazada Philippines
As one of the leading e-commerce platforms in the Philippines, Lazada’s efficient use of SKUs plays a crucial role in its logistics and customer service. With thousands of sellers, each offering a variety of products, Lazada assigns unique SKUs to each item, which helps both the platform and the sellers manage inventory more accurately.
By having a clear SKU system, Lazada can quickly identify items that need replenishment, track order fulfillment status, and provide customers with more accurate delivery timelines. It also helps prevent issues such as listing errors or delays in product availability.
3. Mercato Centrale
Mercato Centrale, a popular food market in Metro Manila, has adopted SKU management for its vast variety of food products sold by different vendors. This helps the market keep track of perishables, monitor inventory across stalls, and optimize orders to prevent waste and spoilage.
With each food item assigned a unique SKU, Mercato can also analyze sales patterns, enabling them to offer the right products at the right time, enhancing both vendor efficiency and customer satisfaction.
These examples show how businesses in the Philippines are benefiting from SKUs.
Also Read: Understanding Logistics Services: Types and Benefits
How Inspire Solutions Asia Helps Businesses Utilize SKUs for Better Management
Inspire Solutions Asia understands the significance of a well-organized SKU system and offers customized solutions that help businesses in the Philippines effectively manage inventory, track products, and smooth operations. Here’s how we support businesses in optimizing their SKU systems:
- Warehousing & Fulfillment Services: Our warehousing services ensure accurate inventory management with real-time tracking. By integrating a robust SKU system into our warehousing processes, we help businesses maintain clear visibility over their stock, reduce errors, and improve fulfillment accuracy. This ensures businesses always know their stock levels, reducing both overstocking and stockouts.
- Integrated Technology Platform (Fusion SaaS): With our proprietary Fusion platform, businesses can manage their SKUs efficiently across multiple sales channels. Our platform integrates with e-commerce systems like Shopify, Lazada, and Shopee, enabling easy SKU tracking from order placement to delivery. This eliminates the risk of data duplication and enhances the accuracy of order fulfillment, making it easier for businesses to provide customers with real-time updates and accurate inventory availability.
- Sourcing & Importation: Our sourcing and importation services simplify the process of acquiring goods from trusted suppliers, ensuring that the products arriving in the Philippines are efficiently tracked with SKUs. We manage freight, customs clearance, and compliance, ensuring that all imported goods are easily traceable from the moment they arrive at our warehouses.
- Last-Mile Delivery Services: With our last-mile delivery solutions, businesses can optimize SKU management up to the point of delivery. By integrating SKU data into our logistics operations, we help ensure that products are delivered on time, and that inventory is accurately updated in real-time, preventing stock discrepancies and ensuring customer satisfaction.
Inspire Solutions Asia offers businesses in the Philippines a complete, integrated solution to manage and optimize their SKU systems. From warehousing and fulfillment to sourcing and last-mile delivery, we provide the tools and expertise needed to enhance inventory accuracy and improve operational efficiency.
Contact us today to learn how our SKU management solutions can help manage your business operations.
Conclusion
Keeping a close eye on your inventory is essential for success, especially in growing market like the Philippines. SKUs help you track products clearly and accurately, making stock management easier. If you use SKUs smartly, you can maintain just the right amount of inventory, streamline your operations, and make more informed decisions that help your business grow and keep customers satisfied.
Our team at Inspire Solutions Asia is committed to providing the tools and support your business needs to succeed in SKU management, helping you manage processes and scale your operations effectively.
If you’re ready to enhance your SKU management and elevate your inventory systems, schedule a meeting with us today to explore how we can customize solutions to meet your business needs.
