Many consumers use the terms “SKU” and “UPC” interchangeably, but for small business owners and for employees who manage inventory, it’s important to know the difference. Briefly, SKU numbers are internal product inventory codes unique to a particular company, while UPC barcodes are external product tracking codes that are standardized for universal use by any company. SKU and UPC codes are different but have many of the same uses and best practices.

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Understanding and Using SKU Codes

SKU numbers (short for “stock keeping unit,” and pronounced “skew”) are alphanumeric codes used by companies to track units of products in inventory and products sold. SKU numbers can be assigned to physical products as well as intangible products that are billable, such as units of repair time or warranties. Because of this, SKUs can also be thought of as codes assigned to a company’s billable entities.

Each company assigns its own SKU numbers. SKU numbers are distinct from product model numbers, which are assigned by manufacturers. However, some companies sometimes include model number information in their SKUs for identifying purposes.

SKUs are frequently used by warehouses, marketplaces, fulfillment centers, catalogs and ecommerce sites. For example, Amazon assigns products it sells a special 10-character Amazon SKU number, known as an Amazon Standard Identification Number (ASIN). ASINs are distinct from manufacturer model numbers and from SKU numbers used by other sellers in Amazon’s supply chain.

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Characters in SKU numbers can represent information such as manufacturer, color, size, cost or warehouse location, for example. However, if you try to pack too much information into a SKU number, it can become long and confusing, creating a greater risk of data entry error or packing and shipping error. Keep SKUs to fewer than 12 characters. Instead of using long SKU numbers packed with product details, it’s often better to save the majority of details for product name and description.

On the other hand, a SKU number that’s too short can make it easy to confuse with a product quantity code. As a happy medium, Chief Operating Officer of Rakuten Super Logistics Michael Manzione recommends using eight alphanumeric characters for SKU numbers and keeping them short and simple enough that a fifth grader could read them.

Start SKU numbers with letters, which makes them easier to read. Don’t start with a zero or other characters that could be misinterpreted by human readers or by computers. Use both letters and numbers rather than using only letters or only numbers. For readability, you can print SKU labels with one form readable by the human eye as well as a code that can be scanned.

Create SKU numbers unique to your company. Avoid using manufacturer model, serial or SKU numbers as your own SKU numbers. This prevents your numbers from becoming out of sync in the event that you resell products from a manufacturer who changes codes or if you switch to a different manufacturing source.

As a recap, let’s look at the best practices for developing your own SKU codes:

  • Keep codes between eight and 12 characters
  • Use a combination of letters and numbers
  • For readability, start codes with a letter
  • Avoid using manufacturer SKUs

Understanding and Using UPC Codes

UPC barcodes (short for Universal Product Codes) were introduced in 1974 to help retailers track trade items. UPCs are numeric codes with 12 digits. When you go through a grocery checkout line, the barcode you see the clerk scan is a UPC code.

UPC codes are administered and managed by GS1 US, the American branch of an international organization GS1 (formerly called the Uniform Code Council). Once a UPC code gets assigned to a product, it remains constant for that product throughout the product’s shelf life. A product retains the same UPC code even if it is sold by multiple retailers.

Take a brand of blueberries for example, every carton of those blueberries, regardless of the specific grocery store that sells them, will have the same UPC code.

You only need a UPC code for items that are being sold through retail supply chains.

If you are selling products internationally, for some countries, you may need to use a special 13-digit version of a UPC called an International Article Number (IAN) or European Article Number (EAN). If you are not sure which type of code is appropriate for a particular country, check with your retailer.

SKU vs. UPC: Comparisons and Contrasts

SKU numbers are unique to individual retailers, whereas UPC barcodes are used universally and remain constant for a product no matter what retailer is selling it. For this reason, a product will retain one UPC code even if it is assigned different SKU numbers by different companies.

Another difference between SKU numbers and UPC barcodes is that SKU codes are alphanumeric, while UPC barcodes are numeric. UPC barcodes must be 12 digits, while SKU numbers are whatever length the company assigning them decides.

SKU numbers are created by the companies that use them internally, while UPC barcodes are administered by GS1. Companies can freely create their own SKU numbers, whereas UPC barcode numbers must be purchased and licensed.

Today, to make using SKUs and UPCs easier and more efficient, business software app providers are designing ways to integrate SKU and UPC scanning with digital inventory tracking, point of sale, order fulfillment and accounting software. For instance, QuickBooks Enterprise includes an Advanced Inventory module that integrates barcode information with QuickBooks, enabling companies to save time by simultaneously updating inventory and accounting data.

Whatever solution you use for reliable inventory management, be sure you know the basic differences between UPCs and SKUs, and follow the best practices for each.

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