UPC vs SKU: The Ultimate Retail Barcode Showdown

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UPC and SKU are fundamental coding systems widely employed for product and inventory management. Originating from the retail and internal business sectors, respectively, they cater to different needs but possess shared functionalities. This comparative guide explores their origins, key differences, and commonalities, serving as an essential manual for businesses navigating the intricacies of product identification.

What is a UPC?

UPC short for Universal Product Code is a 12-digit barcode commonly found on products sold in the United States and Canada. This barcode serves as a unique identifier that helps with product identification.

There are two types of UPC barcodes – UPC-A and UPC-E.

The UPC-A barcode is the conventional standard, comprising the full 12 digits.

In contrast, UPC-E represents the condensed iteration of the UPC-A format, containing 6 digits.

Read our comprehensive guide on what is a UPC code to learn everything you need to know about UPC barcoding technology.

Please visit our barcode learning centre to learn more about the barcoding technology used today.

What is a SKU?

SKU, short for Stock Keeping Unit, is a unique alphanumeric code assigned to each product variant in a business’s inventory. It is used internally for tracking and managing items, helping businesses to quickly identify, order, and stock products. The code often includes details such as size, colour, and style, making it a crucial tool for inventory management.

Below is an example of how the SKU system is used.

No	Variation	Abbreviation
1	Product Type	Grocery (GR), Clothes (CL), Toys (TY)
2	Product Category	Salt (SL), Sugar (SG), Trousers (TR), Shirts (SH), Cars (CA), Dolls (DL)
3	Sequential Number	001, 002, 003, etc. based on the order that the products arrive in the store

Using the above SKU system, the SKUs for the products can be generated as follows.

Salt: GR-SL-001
Sugar: GR-SG-002
Trousers: CL-TR-001
Shirts: CL-SH-002
Toy Cars: TY-CA-001
Dolls: TY-DL-002

SKU vs UPC - What's the Difference?

Here is a table that summarises the key differences between UPC code and SKU.

Differences	UPC	SKU
Customisation	Standardised 12-digit numbers purchased from GS1	Customisable alphanumeric codes tailored to individual business needs
Usage	External use across the retail supply chain	Internal
Information Encoded	Identifies the manufacturer and product type without specific variations	Can encode specific product details such as colour, size, and style
Industry Requirements	Standardised and often required by major retailers and e-commerce platforms	Not subject to industry standards; created at the discretion of each business

Let’s now take a more detailed look at the differences between SKU and UPC codes.

Customisation vs. Standardisation

SKU codes are customisable and created by individual businesses to suit their internal needs. They can include any combination of letters, numbers, and symbols.

UPC codes, on the other hand, are standardised 12-digit numbers that are globally recognised and must be purchased from GS1.

Internal vs. External Use

SKU is primarily for internal use within a business to manage inventory data and track sales.

UPC is used externally across the entire retail supply chain, including manufacturers, wholesalers, and retailers, for universal product identification.

Information Encoded

SKUs can encode a variety of product details, such as colour, size, and style, tailored to a business’s specific needs.

UPCs only identify the manufacturer and the type of product without additional details like colour or size.

Industry Requirements

SKUs are not subject to any industry standards and can be created at the discretion of each business.

UPCs are standardised and often required by major retailers and e-commerce platforms to list a product.

Flexibility in Modification

SKUs offer a level of flexibility, as they are created in-house and can be easily updated or altered. Although revamping an entire SKU naming system could be complex, maintaining consistency allows for straightforward additions, deletions, or modifications to your catalogue.

In contrast, UPCs are immutable once assigned to a product. They are permanent identifiers that cannot be altered with ease. Adding new UPCs can also be challenging, depending on your chosen initial company prefix capacity plan.

Practical Applications

UPC codes are essential for universal product identification across various retailers and are often required for products sold in mainstream retail stores or online platforms. They facilitate quick scanning at checkout and are crucial for cross-retailer inventory management systems.

SKUs, on the other hand, are used internally for more granular inventory management, including tracking product variations like size and colour. They are vital for fulfilling orders, restocking, and analysing sales data within a single business.

Similarities Between SKU and UPC

Purpose

Both SKU and UPC serve as identification tools for products. While they cater to different aspects of a business, their primary function is uniquely identifying and differentiating products within a system or marketplace.

Role in Inventory Management

SKU and UPC are integral to efficient inventory management. They assist businesses in tracking stock levels, monitoring sales, and ensuring that products are correctly categorised and easily locatable within inventory systems.

Importance in Sales and Distribution

In the sales and distribution landscape, both SKU and UPC play crucial roles. They facilitate smooth transactions, from the point of sale to distribution channels, ensuring that products are correctly identified, priced, and delivered to the end consumer.

How to Create a Universal Product Code?

To create a UPC, You need to follow these simple steps:

Understand the UPC structure – UPC is a 12-digit number. It comprises a company prefix, an item reference number, and a check digit.
Register with GS1 – businesses must register with the Global Standard Organisation (GS1) to obtain a UPC.
Obtain company prefix – Upon registration, GS1 will provide a unique company prefix to the business. This prefix identifies the company that manufactures or sells the product.
Assign item reference number – After the company prefix, the next set of digits represents the specific product item. This number is assigned by the company.
Calculate the check digit – The final digit of a UPC is a check digit, ensuring the code’s accuracy. It’s calculated based on the preceding numbers and ensures the integrity of the entire code.

Refer to our barcode 101 guide to learn the science behind the barcode technology.

How to Create a Stock-Keeping Unit?

To create an SKU for your products, you need to follow these steps.

Determine product attributes – Identify the key attributes of your products. This could include size, colour, style, or any other relevant characteristic
Develop a naming convention – Create a consistent naming or coding system for these attributes. For instance, “SM” for small, “BL” for blue, or “CTN” for cotton.
Combine attributes for SKU – For a blue, small cotton shirt; the SKU might be “SM-BL-CTN.” Ensure that the combination provides a unique identifier for each product variant.
Maintain consistency – It’s crucial to keep the SKU system consistent. If you introduce new products or attributes, they should fit seamlessly into the existing SKU structure.
Update inventory management system – Once SKUs are created, integrate them into your inventory management software. This ensures efficient inventory tracking, restocking, and sales analysis.

When to Use a SKU?

Stock Keeping Units are primarily designed for internal operations within a business. Their applications include:

Internal Inventory Management: Efficiently track inventory and manage stock levels.
Sales Analysis: Understand sales trends and product performance. Brands like Nike analyse SKU data to determine which sneaker designs are the top sellers in specific regions.
Product Variations: Easily differentiate between product attributes such as size, colour, or style.
Customisation: Tailor SKUs to fit a company’s unique needs, especially when handling a diverse product range. Independent artisans on platforms like Etsy create unique SKUs for handcrafted items, ensuring each product variant is distinct.

When to Use a UPC?

Universal Product Codes are essential for products aiming for a broader market presence. Key scenarios for UPC usage are:

Retail Sales: Ensure compatibility with universal scanning systems in mainstream retail stores. Products like Coca-Cola bottles have UPCs that are scanned using a barcode scanner at supermarkets worldwide.
E-commerce Platforms: List products on major online shopping sites that often require standardised identification.
Distribution: Facilitate product distribution through various retailers, as many mandate UPCs for their inventory systems. Brands like LEGO use UPCs when distributing their toy sets to various retailers, from big-box stores like Walmart to smaller toy shops, ensuring consistent product identification across all outlets.
Global Recognition: Achieve a standardised product identification that’s recognised worldwide.

Conclusion

SKUs and UPCs are essential tools in inventory management.

SKUs cater to internal product differentiation, while UPCs offer standardised identification for wider market distribution. Grasping their distinct roles is vital for effective inventory management processes and optimal market presence.

Frequently Asked Questions

Can a Product Have Both an SKU and a UPC?

Yes, a product can have both an SKU and a UPC. The SKUs are used for internal inventory management purposes, while the UPC is utilised for broader external sales and distribution.

Is a UPC Mandatory for All Online Products?

Not for all. Major platforms and online marketplaces, such as Amazon, often mandate UPCs. However, certain platforms or individual online storefronts might operate using only SKUs.

How do Barcodes Relate to a SKU and UPCs?

Both the SKU and UPC codes can be represented in barcode formats. SKUs might have diverse barcode representations based on the business, whereas UPCs adhere to a standardised barcode design.

Is an SKU Suitable for Global Sales?

While SKUs are pivotal for internal management, global sales typically necessitate standardised identifiers like UPCs for wider market acknowledgment.

Upon Altering a Product's Attributes, is a New SKU or UPC Required?

Significant product attribute changes often lead to the generation of a new SKU. The UPC, however, remains unchanged unless the product itself is entirely new.

How do Businesses Handle Products with Multiple SKUs but a Singular UPC?

This is a common scenario for products with various attributes. Each attribute variation possesses its own SKU for internal management, but all variations share a single UPC for broader market distribution.