SKU vs UPC: Exploring the Basics of Product Identification

In today’s rapidly expanding and increasingly globalized world, product identification is of utmost importance. They are paramount for businesses to thrive. In fact, there are a few different approaches that have simplified product identification. Namely, SKU or Stock-Keeping Unit and UPC or Universal Product Code. While they are both used to track inventory, they have their nuances and serve different purposes.

The South-East Asian market has been experiencing rapid growth in the area of e-commerce, with the industry experiencing a staggering growth rate of 11.76% annually. Given this market’s size, everyone wants a piece of the pie. And one of the few ways to do this is to ensure efficient inventory management. 

This article will explore the meanings and differences between SKU and UPC and their advantages, uses, and best practices. We will also look at how SKU and UPC contribute to the enhancement of inventory management, ultimately ensuring customer satisfaction and driving sales.

What is a stock-keeping unit (SKU)?

In simple terms, a Stock Keeping Unit, commonly referred to as SKU, is a unique alphanumeric code assigned to each product variant within a company’s inventory. It is used to effectively track and manage inventory. An SKU generally comprises numbers and letters, both chosen in a way that helps each product stand out from the others. This code contains information about the product, including its color, size, style, and other relevant attributes that differentiate it from other variants. 

To demonstrate, for a clothing retailer, each size and color combination of a specific shirt design may have its own SKU to differentiate them. By utilizing SKUs, businesses can easily identify, categorize, and locate specific products within their inventory, streamlining the process of tracking stock levels and managing reorders, replenishment, and order fulfillment.

What is a universal product code (UPC)?

A Universal Product Code, or UPC, is a standardized barcode widely used to identify products and track sales at the point of purchase. The UPC consists of a series of black and white bars that can be scanned using a barcode reader to identify and track products across several steps of the supply chain. 

Each UPC consists of two components: the manufacturer’s identification number and the specific product code. The manufacturer’s identification number, also known as the “prefix,” represents the company or brand producing the product. The product code, on the other hand, refers to a unique sequence assigned to a particular product variant. When combined, these elements create a distinct UPC for each product, allowing retailers to automate inventory management, track sales, and expedite the checkout process.

SKU vs. UPC: What’s the Difference?

While both SKUs and UPCs serve a similar purpose, they are not the same thing. 

• Structure of the code: alphanumeric vs. numeric codes

One of the key differences between SKU vs UPC lies in the structure of their codes. SKU codes are typically alphanumeric, meaning they consist of a combination of letters and numbers. This allows for greater flexibility in assigning codes that convey specific product information. Alphanumeric SKUs enable businesses to create codes that facilitate easier identification and categorization of products within their inventory.

On the other hand, UPCs are strictly numeric. A UPC consists of a fixed number of digits, usually 12 or 13, which uniquely identify the product and its manufacturer. The numeric nature of UPCs simplifies their generation and usage, making them more standardized and universally recognizable across different systems and platforms.

• Creator of the code: Businesses vs the GS1 

The UPC vs SKU code is created by different entities within the supply chain. In the case of SKUs, they are typically created by individual businesses or retailers. Each business has the autonomy to develop its own SKU system and determine the structure and format of its codes based on its specific requirements. This allows businesses to tailor their SKU codes to align with their internal processes, inventory management systems, and product categorization strategies.

On the other hand, UPCs are generated and maintained by the UCC or the Uniform Code Council, now known as GS1 or Global Standards 1. GS1 is a global organization that sets standards for various identification systems, including barcodes and product codes. UPCs are allocated to manufacturers who apply for them, ensuring that each product is assigned a unique identifier that is universally recognized and accepted.

• Occurrence of change: Flexible vs Permanent

Since SKUs are primarily for internal use within a business, they can be modified or updated as required to accommodate changes. These changes usually reflect an evolution in product variants, inventory management systems, or business strategies. So, if a business introduces a new product line or decides to reorganize its inventory structure, it can easily update or reassign SKUs accordingly.

In contrast, UPCs are intended to be permanent and unchangeable. Once a UPC is assigned to a specific product variant, it remains the same throughout the product’s lifecycle. This rigidity ensures consistency in product identification across different retailers, distribution channels, and systems, enabling seamless tracking and traceability from manufacturing to the point of sale.

• Place of use: Internal vs external 

SKUs are primarily used for internal purposes within a business or organization. They are designed to facilitate efficient inventory management, order fulfillment, and internal tracking. Businesses use SKUs to keep an eye on stock levels, categorize products, track sales performance, and manage their supply chain operations effectively. 

UPCs, on the other hand, are meant for external use and are widely recognized across various retail platforms, both offline and online. UPCs enable smooth transactions at the point of sale, as they are scanned by barcode readers to retrieve product information and pricing. These standardized and universally accepted codes allow a seamless integration into the larger retail ecosystem.

Role of the UPC code and SKU in inventory management

Both UPCs and SKUs play significant roles in inventory management, albeit in different ways.

The UPC code primarily serves as a product identifier at the point of sale. When a product with a UPC is scanned, it instantly provides essential information such as the product name, price, and stock count. This real-time data enables in many different ways. Namey: 

• monitor inventory levels accurately
• trigger automatic reorder systems
• optimize stock replenishment

By leveraging UPC codes, businesses can prevent stockouts, ensure accurate pricing, and minimize manual errors during the checkout process.

On the other hand, SKUs have a broader scope within inventory management. SKUs enable businesses to track and manage their inventory efficiently from the moment products enter the warehouse to the point of sale. With SKUs, businesses can perform the following function:

• categorize products
• monitor stock levels
• perform demand forecasting

SKUs also help with accurate order fulfillment, providing a granular level of detail about each product variant. By utilizing SKUs, businesses can optimize inventory levels, minimize carrying costs, and ensure the right products are available at the right time.

Integrating SKUs and UPCs enables real-time visibility into product movement, sales patterns, and stock levels, allowing businesses to make informed decisions regarding stock replenishment, pricing strategies, and promotions. Furthermore, the combination of UPC codes and SKUs enables accurate tracking of sales performance across different sales channels, facilitating data-driven insights for improved business planning and growth. 

Together, SKUs and UPCs form a powerful duo in inventory management, enhancing accuracy, efficiency, and profitability for businesses of all sizes.

How to track UPC vs SKU numbers

Tracking SKUs and UPCs can be accomplished in a few different ways. They have been detailed below.

• Inventory management software

One of the most effective ways to track SKU and UPC numbers is by leveraging inventory management software. These software solutions provide comprehensive features for organizing and monitoring inventory. They enable businesses to create and assign unique SKU codes to each product variant, manage stock levels, track sales, and generate detailed reports. Inventory management software offers:

• real-time visibility into inventory data
• automates reordering processes
• identify trends or issues within the inventory

By utilizing such software, businesses can centralize their SKU and UPC tracking, improving efficiency and reducing the risk of manual errors.

• Spreadsheet

For businesses with smaller inventory volumes or limited resources, tracking SKU and UPC numbers using spreadsheets can be a practical option. Spreadsheets provide a simple and accessible method to record and manage product information. Each product can be assigned a unique SKU or UPC code, along with relevant details such as descriptions, pricing, and stock quantities. 

Spreadsheets allow for customization and flexibility, enabling businesses to adapt the tracking process to their specific needs. However, it’s important to note that spreadsheets require manual data entry and updates. These may be time-consuming and prone to human errors.

• Barcode scanner

Using a barcode scanner is an efficient and accurate method to track SKU and UPC numbers. Barcode scanners can quickly read barcodes associated with SKUs or UPCs, eliminating the need for manual data entry. 

When products arrive in the warehouse or are sold at the point of sale, the barcode scanner scans the barcode, instantly retrieving product information and updating inventory records. This method significantly reduces human errors and speeds up the tracking process. Moreover, they can be integrated with inventory management systems or linked to spreadsheets, providing seamless SKU and UPC tracking.

• Additional Methods

In addition to the methods mentioned above, there are other ways to track SKU and UPC numbers. Some businesses may opt for specialized handheld devices or mobile apps that combine barcode scanning capabilities with inventory management features. These tools allow for on-the-go tracking and offer integration options with other systems. 

Furthermore, some businesses may outsource inventory management to third-party fulfillment warehouses or logistics providers with dedicated systems and expertise in SKU and UPC tracking.

Best Practices for UPC Codes

Following best practices can help ensure accurate and efficient product identification and tracking when working with UPC codes. Here are some recommended practices for managing UPCs:

• Obtain GS1 Membership: Joining GS1 and obtaining your own unique manufacturer identification number ensures compliance with global standards and guarantees the uniqueness of your UPC codes.
• Assign Unique UPCs: Allocate a distinct UPC code to each unique product variant to ensure accurate identification and tracking throughout the supply chain.
• Regularly Validate and Update Data: Periodically review and validate UPC data to ensure accuracy and prevent errors. Update product information such as pricing, attributes, and stock availability.
• Maintain a Centralized UPC Database: Maintain a centralized database or system to store and manage UPCs, enabling easy access and retrieval.
• Barcode Quality Assurance: Ensure barcode quality by adhering to printing standards and conducting regular barcode quality checks to minimize scanning issues and errors at the point of sale.
• Implement Efficient Barcode Scanning Processes: Integrate barcode scanning technology at various touchpoints, such as receiving, inventory management, and point of sale, to expedite processes and enhance accuracy.

Best practices for creating SKUs

Effective management of SKU numbers can significantly streamline inventory management and enhance operational efficiency. Here are some best practices for SKU numbers:

• Develop a Logical Structure: Design a consistent and logical structure for your SKU numbers that convey relevant product information such as attributes, categories, or variants. This helps with the easy identification and categorization of products.
• Unique and Non-Conflicting SKUs: Ensure each SKU is unique and does not conflict with other existing SKUs. This avoids confusion and prevents errors during inventory management and order fulfillment.
• Standardize SKU Naming Conventions: Establish standardized naming conventions for SKUs to maintain consistency and facilitate easy understanding across the organization. Clearly define what each part of the SKU represents to ensure clarity and uniformity.
• Regularly Review and Update SKUs: Periodically review and update SKUs as needed. This includes retiring obsolete SKUs, introducing new SKUs for product variants, and modifying SKUs to align with product attributes or categorization changes.
• Train Staff on SKU Usage: Educate employees on the correct usage and understanding of SKUs to ensure consistent implementation and accurate tracking. This includes training on SKU creation, retrieval, and interpretation.
• Integrate SKUs with Inventory Systems: Integrate SKU numbers with your inventory management system or software to enable seamless tracking, reporting, and optimization of stock levels.

Tips for choosing between SKUs and UPCs

When deciding between UPCs and SKUs, consider the following factors. Choose SKUs if you:

• Prefer internal control and flexibility in assigning product identifiers.
• Require detailed tracking for inventory management, stock levels, and order fulfillment.
• Want customizable alphanumeric codes to convey specific product attributes.
• Seek the ability to modify and update codes as business needs evolve.

Choose UPCs if you:

• Require a standardized global product identifier recognized by retailers and marketplaces.
• Primarily focus on external tracking, sales, and point-of-sale transactions.
• Need a fixed numeric code format suitable for barcode scanning.
• Want a permanent identifier assigned by the GS1 organization

Conclusion

To summarise, both SKUs and UPCs serve critical roles within the e-commerce ecosystem and have a significant hand in ensuring accurate inventory management. However, businesses may choose one over the other based on their needs and requirements.

While SKUs are flexible and fully customizable, UPCs are rigidly set in place by the GS1 owing to their universal appeal. Nevertheless, they both allow you to integrate with inventory management systems and offer a helpful overview of the status of the stocks allowing the business to prevent both stockouts and overstocking.

Using the tips mentioned above, you can decide what might suit your business more. No matter which one you choose between the two, a business is sure to benefit significantly in terms of inventory tracking, management, and replenishment.

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