SKU vs UPC: Difference Between SKUs and UPCs And Why We Need Them

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In the retail industry, keeping track of inventory and sales is critical to running a successful business. Efficient inventory management ensures that products are available when customers need them, and it allows e-commerce businesses to make informed decisions about restocking and forecasting. Two common methods of product identification used by retailers are SKU numbers and UPCs. Understanding what is SKU number is fundamental for retailers to effectively track and manage their inventory, ensuring products are always ready to meet customer demand.

Regardless of the method chosen, having a robust inventory management system that tracks SKUs or UPCs is crucial for any business. It allows for accurate stock control, efficient order fulfillment, and improved customer satisfaction. By effectively managing SKUs and UPCs, businesses can optimize their operations, streamline their supply chain, and ensure they have the right products in stock to meet customer demands.

In this article, we’ll explore the definitions, characteristics, advantages, and disadvantages of SKU and UPC, how they compare to each other, why we need them, and how to track them. Stay tuned!

What is SKU 

The abbreviation SKU stands for Stock Keeping Unit. Also, Sku is the smallest unit of product. The SKUs are alphanumeric codes combined with letters and numbers of any length.  This code is created by the retailer and may contain information such as the product’s brand, size, color, and style. SKUs are used to track inventory levels, sales, and restocking needs. They’re also used to identify and organize products in a store’s database.

How to generate a SKU number

Generating SKU numbers is an essential part of inventory management and product tracking for businesses across various industries. It helps streamline operations, enhance accuracy, and facilitate efficient inventory control. Here’s a step-by-step guide on how to generate SKU numbers effectively:

1. Define your SKU structure

Determine the elements that make up your SKU number based on your business requirements. Consider the level of detail needed while keeping the SKU length manageable.

2. Assign a numbering system

Decide on a numbering system that aligns with your inventory management needs. You can use sequential numbers, alphanumeric combinations, or a combination of both. Sequential numbers work well for simplicity, while alphanumeric SKUs offer more flexibility and information encoding capabilities.

3. Establish a naming convention

Create a naming convention to ensure consistency and easy interpretation of SKU numbers. For example, you can use abbreviations or standardized codes for product categories, colors, or sizes. Make sure the convention is well-documented and easily understood by your team members.

4. Incorporate uniqueness

Ensure each SKU is unique to avoid confusion and facilitate accurate tracking. Incorporate a mechanism to prevent duplicate SKUs, such as using a centralized database or an automated system that checks for existing numbers before assigning new ones.

5. Integrate product attributes

Include relevant product attributes within the SKU to provide meaningful information at a glance. This can help streamline order processing and inventory management. For instance, if you sell clothing, you may include attributes like size, color, and style within the SKU.

6. Utilize automation tools

Consider using inventory management software or other automated tools to streamline the SKU generation process. These tools can help automate the assignment of SKUs based on predefined rules, reducing manual effort and human error.

7. Regularly review and update

Periodically review your SKU system to ensure it meets evolving business needs. As your product offerings expand or change, you may need to modify the SKU structure or conventions. Regularly update your SKU database to reflect any changes accurately.

By following these steps, you can develop an effective SKU generation process tailored to your business needs. A well-designed SKU system can give you actionable insights into your inventory data, significantly improve inventory management, streamline operations, and enhance overall productivity.

Advantages of using SKUs:

  • Enables accurate tracking of inventory levels and sales
  • Allows for easy identification and organization of products in a store’s database
  • Provides a more detailed analysis of sales data
  • Retail accounting benefits greatly from the use of SKUs, as they provide detailed data for tracking sales, inventory, and profitability

Disadvantages of using SKUs:

  • Typically requires manual creation and input of codes
  • Can become complex and difficult to manage as inventory levels and product lines grow

What is UPC

UPC, short for Universal Product Code, is a barcode used to identify a product at the point of sale. The UPC is assigned to the product by the manufacturer and contains information such as the product’s brand, type, and size. The barcode is scanned at the point of sale to retrieve pricing and inventory information.

How to generate UPCs

Generating UPCs  is a crucial aspect of product identification and tracking in the retail industry. Here’s a step-by-step guide on how to generate UPCs effectively:

1. Obtain a Company Prefix

Start by obtaining a Company Prefix from a certified organization such as GS1 (Global Standards 1). The Company Prefix is a unique identifier assigned to your business and forms the foundation for generating UPCs. It ensures that each UPC you create is globally unique and associated with your company.

2. Determine the product number

Once you have a Company Prefix, assign product numbers to your individual products. The product number is the part of the UPC that specifically identifies a particular item. It should be unique within your product line and not repeated for different products.

3. Calculate the check digit

The check digit is a single digit at the end of the UPC that helps ensure barcode scanning accuracy. It’s generated using a mathematical algorithm based on the preceding digits. Various online calculators and software tools are available to calculate the check digit automatically.

4. Format the UPC

Combine the Company Prefix, product number, and check digit to form a complete UPC. The UPC is typically represented as a 12-digit barcode, with each digit encoding specific information. Ensure that the digits are arranged correctly and in the proper order.

5. Assign UPCs to products

Once you have generated the UPCs, assign them to your products accordingly. Link each UPC to the corresponding product in your inventory management system or database. This association allows for accurate tracking, pricing, and inventory control.

6. Use barcode generator

Convert the UPC into a scannable barcode format using a barcode generator or online tools. The barcode can be printed on product packaging or labels for easy scanning at the point of sale.

7. Compliance and verification

Ensure that your UPCs comply with industry standards and regulations. Cross-verify the generated UPCs for accuracy and readability by scanning them using barcode scanners or verification tools. This step ensures that the UPCs can be successfully scanned by retailers and distributors.

8. Ongoing Management

Maintain a centralized UPC database or system to manage and track your UPCs effectively. This database should include information such as product details, pricing, and stock levels. Regularly update the database as new products are introduced or existing ones are discontinued.

9. Distribution and collaboration

Share your assigned UPCs with online marketplaces where your products are sold. For dropshippers, it’s necessary to collaborate with the suppliers to ensure that UPCs are accurately represented in their systems, as well as to ensure timely shipping and due order fulfillment.

You might be interested in reading about  dropshipping on Amazon or dropshipping on Shopify

If you follow these tips  and adhere to industry standards, you can generate UPCs that facilitate efficient inventory asset tracking, streamline sales processes, and enhance overall supply chain operations. 

Advantages of using UPCs:

  • Allows for easy tracking of sales and inventory levels
  • Eliminates the need for manual input of product information
  • Can be used by any retailer, making it a universal system

Disadvantages of using UPCs:

  • May not provide as detailed information as SKU
  • Can be less useful for smaller retailers with a limited product line

SKU vs  UPC

The main difference between SKU and UPC is the purpose for which they’re used. While SKU is utilized by retailers to track inventory and sales, UPC is meant for manufacturers to identify products at the point of sale. Besides, SKU codes are created by retailers, while UPC codes are assigned by the manufacturer.

When to use SKU and when to use UPC depends on the needs of the retailer or manufacturer. Retailers may choose to use SKU if they need more detailed information about their inventory and sales, while manufacturers may prefer UPC for its universality and ease of use.

In the retail industry, keeping track of inventory and sales is critical to running a successful business. Efficient inventory management ensures that products are available when customers need them, and it allows businesses to make informed decisions about restocking and forecasting. Two common methods of product identification used by retailers are SKU numbers and UPCs.

SKU numbers, or Stock Keeping Units, are unique identifiers assigned to each distinct product or item in a company’s inventory. SKUs help streamline operations, enhance accuracy, and facilitate efficient inventory control. They often incorporate information such as product category, brand, size, color, and other relevant attributes, allowing businesses to organize and categorize their stock effectively.

On the other hand, UPCs, or Universal Product Codes, are standardized barcodes used for scanning and inventory management. They provide a unique identifier for each product, enabling accurate pricing, stock control, and efficient point-of-sale operations. UPCs are widely recognized and accepted in the retail industry, making them essential for businesses that sell products both in physical stores and through e-commerce platforms.

in other words, the primary difference between SKU numbers and UPCs lies in their application. SKUs are mainly used for internal inventory management purposes, helping businesses keep track of stock levels, monitor product performance, and manage their supply chain effectively. UPCs, on the other hand, are more customer-facing, as they are scanned at the point of sale to retrieve product information, determine pricing, and deduct stock from inventory.

In short, while both SKU numbers and UPCs are crucial for inventory management, they serve different functions within a business. SKUs are ideal for businesses that require detailed internal tracking and organization of their stock. They offer flexibility in assigning unique identifiers based on specific product attributes. On the other hand, UPCs are essential for businesses that sell products to customers directly, as they enable efficient scanning and accurate pricing at checkout.

Ultimately, the choice between using SKUs or UPCs, or a combination of both, depends on the nature of the business and its inventory management needs. Some businesses may opt to use SKU numbers exclusively for internal purposes, while others may adopt UPCs for external sales and rely on SKUs for internal tracking.

Regardless of the method chosen, having a robust inventory management system that tracks SKUs or UPCs is crucial for any business. It allows for accurate stock control, efficient order fulfillment, and improved customer satisfaction. By effectively managing SKUs and UPCs, businesses can optimize their operations, streamline their supply chain, and ensure they have the right products in stock to meet customer demands.

However, it’s important to note that SKU and UPC can work together. For example, a retailer may use SKU to track inventory levels and sales internally, while also using UPC for point-of-sale transactions.

How to track SKUs and UPCs

Tracking SKU and UPC codes can be accomplished through several methods, depending on the specific needs of the business. Here are a few common ways to track SKU and UPC:

Inventory management software

 Many retailers use inventory management software that is designed to track SKU codes. This software can automate the process of tracking inventory levels, sales, and restocking needs. A wise choice is Synder Sync, an accounting app syncing the detailed data of your sales transactions from the sales platform(s) and payment gateway(s) you’re using with your accounting software. It tracks SKUs and automates the process of inventory tracking by retrieving the information about your sales, shipment and returns from your sales and payment channels and transfers it to your books. Thus, it gives you insights into your stock levels, best and least performing products, most refunded products, or products that are often purchased together.  You can learn more about how the software works by signing up for a 15-day free trial or booking office hours with Synder’s support specialist.

 UPC codes might also be tracked through some accounting software, but it may require additional configuration.

Spreadsheet

 For small businesses or those just starting out, a simple spreadsheet can be used to track SKU and UPC codes. The spreadsheet can be set up to include columns for the code, product name, quantity on hand, and other relevant information.

Barcode scanner

A barcode scanner can be used to quickly and accurately scan both SKU and UPC codes. This can save time and reduce errors when entering product information into a system.

Regardless of the method used to track SKU and UPC, it’s important to ensure that the information is accurate and up-to-date. Regular audits of inventory levels can help identify discrepancies and ensure that the data is reliable.

Wrapping up

SKUs and UPCs are both important tools used by retailers and manufacturers to track inventory levels and sales. SKUs provide businesses with a more detailed and customizable system for the management of inventory , allowing them to categorize and organize their stock based on specific attributes. On the other hand, UPCs offer a universal system that is widely recognized and easily scanned at the point of sale.

Understanding the differences between SKUs and UPCs enables businesses to make informed decisions about which system best suits their needs. Businesses choose to primarily use SKUs for internal stock management, leveraging their flexibility and granularity to track and monitor different product variations. Meanwhile, UPCs are valuable for external purposes, ensuring accurate pricing and efficient checkout processes for customers.

Automating the process of SKU and UPC tracking further enhances inventory management. Implementing automated systems and software can streamline the tracking and monitoring of stock, eliminating manual errors and providing businesses with more insightful data. This automation improves efficiency in order fulfillment, reduces the risk of stockouts or overstocks, and ultimately contributes to a more optimized bottom line.

By harnessing the power of SKU and UPC tracking systems, businesses can gain a deeper understanding of their inventory, effectively manage stock levels, and provide better service to their customers. Integrating these tracking systems into an omnichannel retail strategy ensures consistent and efficient customer experiences across all channels

You might also want to read an article about a good inventory turnover ratio.

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