SKUs and UPCs are critical to the balancing act of scaling your business’s inventory control and management practices in tandem with your shipping and fulfillment processes. You need a way to keep track of where your inventory is and how fast it’s leaving your doors. At the same time, you need a way for your third-party partners to sort, manage, and track your inventory when it enters and leaves their facilities. Understanding the differences between SKUs and UPCs is critical to meet demand in today’s economy.
Inventory Management for Fulfillment Centers
Tracking every piece of inventory in a fulfillment center is a herculean task on its own, but SKUs and UPCs make it possible. Each SKU and UPC contains critical information about a product that can be scanned by machines, making it possible to get a real-time view of your inventory management process. With SKUs and UPCs, a fulfillment center can know when products enter or exit a facility and can relay that information to their partners and suppliers, which can then make decisions to produce more of a product if needed.
What is a SKU?
Stock keeping units (SKUs) are 8- to 12-digit alphanumeric codes businesses create to convey critical information about their products. They may contain codes for an item’s color, size, price brand, gender, and more. SKUs are not universal and one business’s SKUs for a product won’t necessarily match another’s.
How are SKUs Used?
Businesses create SKUs for the products they sell to make it easier for customers and their employees to track and identify inventory. SKUs are printed above the barcode and are used to highlight information about the product that is most critical for customers. Businesses can use SKUs to track the products they are selling at a granular level and forecast future production and sales.
Benefits of SKUs
SKUs offer numerous benefits, including the following:
- Increased productivity
- Easier product identification for customers and employees
- Sales forecasting
- Ability to analyze sales trends and buyer behavior
- Better internal organization around inventory
How to Tell the Difference Between a SKU vs UPC
Can’t tell the difference between an SKU and a UPC? You’re not alone, but it’s easier to do than it looks. Keep the following points in mind:
- SKUs are alphanumeric codes
- SKUs always use letters
- SKUs usually have eight characters but might have more
- UPCs only use numbers
- UPCs never use letters
- UPCs are always 12 digits
SKU vs UPC: How to Use Them
SKUs are for internal use only, so there aren’t any set rules on what yours have to look like. Best practices for SKUs are also flexible, but there are a few that can streamline your creation and use of them.
Decide on a Format
SKUs typically code the most important characteristics of an item, such as its color, size, amount, or manufacturer. For instance, a store selling 100-packs of red pens by the Ballpoint Company might use the SKU: BALL-R-100. Think of the inventory you sell and what characteristics you will select from each product to create the most intuitive way to organize them.
Once you have a set of characteristics you want to highlight for each product, you’ll need to create standardized codes to represent them. This will make it easier to track your inventory via spreadsheet. The same codes should be used across products to describe the same characteristics.
Place Important Features First
A SKU should begin with the code for the most important feature of the product. The rest of the features should appear of condescending importance. An item’s manufacturer will typically be first in the case of resale goods.
Keep Them Simple
SKUs should be simple and easy to understand. They only need to describe a handful of characteristics to serve their purpose. Overlong SKUs can be hard to train people on and may lead to confusion.
Avoid Special Characters
Special characters can confuse workers and may be hard to manipulate in a database. Avoid using them for SKUs. If you feel like one can save space or need a way to distinguish one similar code from another, you can always exceed the eight-character limit recommendation for your SKUs.
Don’t Start with Zero
Avoid starting a SKU with a zero or your database software could ignore it, throwing off your inventory tracking. You can avoid this problem entirely by sticking to using letters to start your SKUs.
Create Your Own SKUs
It may be tempting to use part or all of a manufacturer’s SKU within your own, but this will only cause you headaches. SKUs are specific to each company, and another manufacturer has an entirely different coding system than your business does. It’s easier to create your own SKUs for every product you sell rather than trying to integrate SKUs by another manufacturer. Consider using a SKU generator if you need some ideas on how to build yours.
Best Practices for SKUs
SKUs should be 12 characters or less, and ideally only eight, as too much information can confuse customers. Place the most important information about your product at the front of the SKU, with the other characteristics following in descending order. Don’t use zero when naming your SKU or software such as Excel won’t be able to properly track the product and will simply return an error.
Additionally, as more companies become aware of the usefulness of SKUs, they are creating them faster than their logistics partners can keep up. SKU proliferation is also a problem for many third-party logistics providers, as they become difficult to track. Be sure to keep any potential order fulfillment partner you may have updated about your SKUs.
What is a UPC Number?
A UPC (Universal Product Code) number is a 12-digit numeric code for a specific product issued by GS1, which sets business communication standards globally. The first six digits of a UPC are the manufacturer’s ID number, the next five are the product’s ID number, and the last one, the check digit, is a product of calculations using the previous numbers and is used to verify the validity of the UPC.
How are UPCs Used?
UPCs are critical for inventory management and inventory control. They can provide instantaneous updates about when products leave your business and need to be replenished or can easily be scanned by hand during manual inventory checks. UPCs also streamline the buying process for the customer. When paired with a barcode, they allow a scanner to identify the product being scanned and its price, eliminating the need for someone to manually look up the price of each item.
Benefits of UPCs
UPCs have numerous benefits, including the following:
- Easier inventory control and inventory management
- Reduced friction in the buying process
- Less labor required to track inventory
- Faster sales
- More sophisticated supply chains
- Sales forecasting
How do Barcodes Work?
Barcodes are sets of vertical lines that identify the product and its price. Barcodes greatly simplify the shipping and fulfilling process, as they can simply be scanned for their information when products are bought or sold or when they enter or exit a warehouse. Once a barcode is scanned, a signal can be sent to a database indicating that the item needs to be replenished.
Best Practices for UPC Numbers and Barcodes
It’s important to follow best practices when implementing UPCs and barcodes to make them best work for your business. To make sure the bars scan properly, use high-resolution printing with a single-ink process and avoid using red or brown ink. The background of the barcode should use lighter colors, and may use red but should be free of any designs or patterns. The barcode should maintain consistent proportions for height and width as it changes size. Consult with the Guidelines for Barcode Symbol Placement offered by G1 to determine the best barcode placement for your product.
UPCs and SKUs are critical to tracking your inventory and making sense of what your consumers demand. Successful implementation of both requires an ongoing dialogue between you and your customers, allowing you to adjust the way you present your own products to better meet your buyers where they are. You’ll also make it easier for third-party logistics partners to fulfill your orders, as they can know when products enter and exit their facility and which ones are in the highest demand. By successfully implementing SKUs and UPCs across your products, you can improve your business and open further opportunities for scaling.