UPC vs SKU codes: everything you need to know

Wondering what the difference is between a UPC barcode and SKU code? Let’s start with a short answer.

An SKU is an alphanumeric code for internal use and is unique to individual retailers or manufacturers. On the other hand, UPC codes are universal and can be used to identify a product no matter who is selling it later on, making it useful for external use. Some people have issues differentiating between SKU and UPC and erroneously use these terms interchangeably.

While both are codes used for product description and identification, the difference is more evident when you take a closer look. This article will help clear things up by answering the following questions:

• What are the differences between SKU and UPC?
• Can I use SKU as UPC?
• Do I need SKU if I have UPC?
• Is a barcode and an SKU the same?

What is a stock-keeping unit (SKU)?

An SKU, or stock keeping unit, is a unique code consisting of numbers and letters assigned internally to aid swift and accurate inventory or stock management. A typical SKU code identifies the characteristics of the product like:

• Brand
• Color
• Manufacturer
• Style
• Size

For example, a fashion-based e-commerce business may carry a Purple Zara halter neck dress in size 12, and the SKU assigned to it would be this: ZA-HN-PUR-12. Most companies create SKU codes for their products and services. For example, two companies selling products with the same general description would have very different SKU codes. This is because SKUs are used internally and each business decides which SKU works best for them.

Some places that use SKUs for stock-keeping and other internal operations include the following.

Retail stores

In addition to UPC barcodes, a retail store may also benefit from SKUS. For example, a retail seller may sell a particular pair of shoes in two different colors (gold and brown) in sizes 39 and 40. Thus, the seller will have 4 SKUs for each item. They can align them as:

• Gold, size 39: G39
• Gold, size 40: G40
• Brown, size 39: B39
• Brown, size 40: B40

Warehouses

If your product list includes a jacket that comes in various colors and sizes, a good SKU could help your warehouse team easily locate items for shipping. For example, an SKU code for these products could be Jacket (size 10, blue) — JAC-10-BL. And here’s one more — if you have a handbag that changes with seasons, your SKU could be: Handbag (Winter 2019 season, Orange) — S19-HBA-OR.

Product fulfillment centers

Preparing both SKUs and barcodes for your products makes it easier for product fulfillment centers to fulfill your orders by scanning and automating picking, packing, and shipment of your orders as soon as they arrive.

What is a universal product code (UPC)?

A Universal Products code (UPC) is a number-based code printed on a product’s packaging as a means of identification. It is made up of a machine-readable barcode with a 12-digit number unique to the product. The UPC barcodes were initially created to make grocery checkouts faster, and once it is affixed from their point of manufacture or sale, it remains constant throughout the product’s life. They are also helpful for inventory tracking.

The Global Standards Organization (GS1 US), a non-profit organization tasked with securing and maintaining global business standards, is the only way to obtain a registered UPC within the US. The retailer does not generate the UPC barcodes, but the manufacturing company prefixes them onto their products. However, barcode scanning can be used internally, if the business wishes to do so.

There are different parts of a UPC. Once a company has paid a fee to join, the following are the ways that lead to the 12-digit codes.

• The first six digits — The GS1 gives the manufacturer a 6-digit number as an identification number, and this becomes the company’s first six digits on their UPCs for all products. Think of it as a GS1 company prefix. It identifies the manufacturer of the product.
• The next five digits — This refers to the actual product and is called the item number. Within the manufacturing company, someone is responsible for issuing this number, ensuring it is only used once and that discontinued items are phased out. This number depends on the product variation like size, flavor, or color. Every variation gets its own five digits.
• The last digit —Referred to as the check digit, it is the final digit to confirm to the barcode scanner that the UPC is valid. A wrong last digit renders the UPC invalid and stops it from being scanned.

Do I need to use SKUs if I use UPC codes?

The short answer is yes, you do. While a UPC system has a broader range of use, an SKU is still essential for optimum inventory management as it gives you more detailed information about your products for internal item tracking. 

SKU vs. UPC: what makes them different from each other?

Aside from the peculiarities mentioned in their definitions, some other differences exist between SKU vs UPC. Here’s a quick rundown of the remaining differences between them as well a summary of what was covered earlier:

• SKUs are for internal use, while UPCs are for external or broad use by retailers.
• A unique SKU can be created by a business, while a UPC code is a GS1 prefix plus other company digits that remain constant throughout the product’s shelf-life
• The SKU code is an alphanumeric code that can be any length (usually 8 to 12 digits), while the UPC code is always 12 digits
• An SKU can be printed as it is or printed as a barcode, while a UPC is usually printed as a barcode
• An SKU is human-readable, while a UPC requires a barcode scanner

How do you track SKUs and UPCs?

Tracking and managing SKUs and UPCs is always easier when using manufacturing software that supports multiple types of tracking codes. It reduces human error and time otherwise spent on manual data entry, making inventory management more efficient. Alternatively, micro manufacturers use a blend of spreadsheets or even paper methods. If you’re just starting out with SKUs you can use this free SKU generator to start internally tracking your items.

SKU code vs. UPC: benefits and uses

Given that SKU codes are used for business-based inventory management, they can help you accurately track inventory to prevent stock-outs. Some of the benefits of using SKU codes are:

• They are free to create
• They are very customizable
• They are highly effective in managing inventory, especially using a POS (point-of-sale/point-of-service) system

UPC codes on the other hand are purchased and licensed by manufacturers, are used throughout North America, and come with a product on purchase. UPCs make selling products internationally easier by making them compatible with the supply chain. For this reason, online marketplaces on e-commerce platforms and major retailers require UPCs. Benefits of using UPCs include:

• They improve speed in identification and pricing
• They improve productivity and efficiency
• They make it possible to track inventory accurately

Using ERP software to manage SKUs and UPCs

If you are in the process of setting up or expanding your business, you will need to pay close attention to your stock-keeping units (SKUs) and universal product codes (UPCs). An effective way to manage these is by using enterprise resource planning (ERP) software.

ERP software can help you keep track of your SKUs and UPCs by incorporating them into your inventory management system. This way, you can easily see which products are in stock and which need to be replenished. In addition, ERP software can generate reports that give you insights into your inventory levels and trends that spreadsheets can’t.

While spreadsheets may work at the start, they are not efficient as they are prone to errors like:

• Inaccurate reporting
• Data loss
• Data consolidation

However, inventory management software like Katana helps control your stock by giving you a live overview of product data that doesn’t require as much manual data entry. By implementing Katana, you not only manage your item codes in one intuitive platform but you can also:

• Setup reorder points to monitor when you need to restock based on shifting demand 
• Track inventory movements in real time and sync data with your e-commerce shop
• Connect to accounting software to ensure accurate financial records based on costing features in Katana

In short, an SKU code can be presented in a barcode, but not all barcodes are SKU codes. Knowing how to distinguish SKUs and UPCs at a glance saves time and resources because it eases inventory management processes. UPCs and SKUs have their specific uses and when appropriately used, these codes can help businesses easily track, find, and identify inventory.