UPC vs. SKU: What’s the Difference and Why Does it Matter?

If you’re running a business or managing inventory, you’ve likely come across the terms UPC and SKU. They might seem similar initially, but these two codes serve very different purposes. Understanding the difference between a UPC (Universal Product Code) and an SKU (Stock Keeping Unit) can help streamline your inventory management and improve your overall logistic strategy. 

In this article, we’ll break down the key differences between UPCs and SKUs, explain their use, and help you decide when to use each for your business. 

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What is a Universal Product Code (UPC)? 

Let’s start with UPCs, which are usually the most familiar. The UPC is a 12-digit barcode that’s used globally to identify products. Every product that’s sold in retail typically has its own unique UPC, which helps retailers, distributors, and manufacturers track and sell items. Here’s a quick overview of how UPCs work: 

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• Universal and Standardized: UPCs are regulated by GS1, a global organization that assigns these codes. That means each UPC is unique to the specific product and remains consistent no matter where it’s sold. 
• Machine-Readable: UPCs are designed for easy scanning, making checkout faster at retail locations and improving inventory tracking in warehouses. 
• Used Across Industries: UPCs are used by businesses around the world to manage product identification, making it easier to track products across the supply chain. 

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UPCs are like a product’s passport. No matter where it goes, the UPC remains the same, making sure that the product is easily recognized and scanned across different retailers and regions. 

What Is a Stock Keeping Unit (SKU)? 

Now, let’s talk about SKUs. An SKU is a unique identifier that businesses use internally to manage their inventory. Unlike UPCs, which are the same no matter where the product is sold, SKUs are created and managed by individual businesses. Here’s a closer look: 

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• Customizable: SKUs are completely customizable, meaning each business can create its system to suit its needs. For example, an SKU might include information like the product’s size, color, or location within a warehouse. 
• Used Internally: SKUs are not meant to be universal or scanned at the checkout. Instead, they’re used by businesses to track inventory, streamline ordering processes, and manage stock levels. 
• Easier to Track: Since SKUs can be tailored to a business’s specific needs, they make it easier to keep track of products in warehouses, especially when there are variations like different colors or sizes. 

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Think of SKUs like a product’s nickname. They’re unique to your business and help you keep things organized internally. 

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Key Differences Between UPC and SKU

Now that we’ve defined both UPCs and SKUs, let’s dive into the key differences that set them apart. 

Purpose 

• UPCs are used for external identification. They help retailers and customers recognize products across different stores and countries. 
• SKUs are used for internal inventory management. They help businesses keep track of their own stock levels and product variations. 

Creation

• UPCs are assigned by GS1, meaning you’ll need to register your products to receive a unique UPC. 
• SKUs are created by businesses themselves, giving you the freedom to design a coding system that works for your operations. 

Usage

• UPCs are typically scanned at checkout, making them essential for retail. 
• SKUs are mainly used in-house for tracking and organizing products in storage or during the picking process. 

Scope 

• UPCs are global - once assigned, a UPC doesn’t charge regardless of where a product is sold. 
• SKUs are local to your business. They won’t mean anything to other retailers, but they’re crucial for your internal inventory. 

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When Should You Use UPCs vs, SKUs? 

The good news is, that you don’t have to choose between UPCs and SKUs. You can (and should) use both! Each serves its purpose in the world of logistics and inventory management. 

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• Use UPCs for Sales: If your products are sold in retail or online, UPCs are a must-have. They make it easy for stores to track your products and make sure they’re correctly scanned at checkout. 
• Use SKUs for Internal Management: For managing you own stock, SKUs are essential. They help you organize your products in a way that makes sense for your business, making sure you can quickly find and restock items when necessary. 

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Together, UPCs and SKUs create a powerful system for identifying and managing products from he manufacturer to the customer. 

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Best Practices for Using UPCs and SKUs Together

Here are some tips for using UPCs and SKUs to help with your inventory management: 

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• Keep it Simple: While SKUs are customizable, it’s best to create a system that’s easy to understand. Use a format that includes key product information (like size, color, or category) without making it overly complicated. 
• Ensure Accuracy: Since UPCs are standardized, make sure that every product has the correct UPC and that it’s consistent across all sales channels. This will prevent any confusion when your products hit the shelves. 
• Integrate With Your Inventory System: Use inventory management software that allows you to track both UPCs and SKUs. This will give you a clear view of both internal and external product data, helping you manage stock more efficiently. 
• Review Regularly: As your product line grows, so will your SKUs. Periodically review your SKU system to make sure it’s still easy to manage and that it reflects any changes in your inventory. 

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