The barcode was first scanned in 1974, on a packet of Juicy Fruit gum. Since then, the technology used in scanning products in the retail marketplace has become commonplace. In today’s ecommerce space, a labeling system is critical. Merchants should implement it as soon as possible.

While many use the terms “SKU” and “UPC” interchangeably, they are actually very different. First off, an SKU (stock keeping unit) is strictly for internal use. A UPC (universal product code) is affixed to a product wherever it is sold in the retail market place. An SKU is the smallest unit of product or service. Since an SKU is unique to a company, a product would have different SKUs if sold by different companies — but they would have the same UPC.

While many use the terms “SKU” and “UPC” interchangeably, they are actually very different.

SKU Basics

Let’s start with SKUs. They are used by companies to account for product in inventory and units of billable entities sold. SKUs help companies to efficiently track the numbers of individual variants of product or services sold. They are not to be confused with the model number of a product, although model numbers and attributes are often included in all or part of an SKU.

An SKU should be unique to your company. You can print a label that displays the SKU in the human readable form and also as a barcode for the purposes of scanning.

Do not use a manufacturer’s SKU as yours. If you resell products sourced from a manufacturer, it may change the barcodes or you may source the product from a different manufacturer. If that happens, your SKU is out of sync and must be updated.

SKUs are typically used by warehouses or fulfillment centers, catalogues, ecommerce platforms, and marketplaces. There are many ways to identify your SKU. In my experience, companies often complicate their SKUs and make them too long.

You can certainly include attributes such as color, size, style, date purchased, manufacturer or location purchased, cost, condition, and warehouse location. I suggest eight alphanumeric characters for SKUs. Amazon allows you to include up to 40 characters in an SKU. But keep in mind that Amazon doesn’t receive, put away, or pick from your SKU. Amazon’s assigns an ASIN (Amazon standard identification number), which is a unique set of ten alphanumeric characters.

SKU Dos and Don’ts

Consider what purpose the SKU serves, and the audience. Your decision should be tailored to meet the audience’s needs. Here are some basic do and don’ts.

• Do keep it for internal use only.
• Do keep it simple enough to be understood by a fifth grader.
• Do keep it short, but not so short that it’s confused with a quantity.
• Do start with letter(s). It’s easier to discern and sort in spreadsheets and sort during receiving, put away, and picking.
• Do not reuse the SKU for a different product.
• Do not start with a zero or use characters or symbols that can be confusing or misread by humans or software.
• Do not use numbers or letters — use both.
• Do not use a manufacturer’s serial or part number for your SKU. These numbers are often too long and cryptic. Plus, if you switch suppliers or the manufacturer changes the number, it becomes meaningless to your organization.
• Do not load item numbers with meaning — i.e., do not try to use the item number to describe your product. This will only make your numbers longer, and more complicated. Save this information for the item description.

UPC Basics

You shouldn’t need a UPC unless your product is going to enter the retail space. If, however, you need a UPC, here are some basics.

The UPC code is affixed to a product wherever it is sold, remaining a constant throughout the product’s shelf life. Since an SKU is unique to the company, the same product would have different SKUs if sold by different companies, but they would have the same UPC. UPCs are 12 digits, numeric only.

UPCs must be purchased to ensure that the same two sets of numbers are not issued to more than one company. Many UPC providers sell them online and, for the most part, do so with integrity. But be cautious.

The authority for maintaining standards is GS1 (formerly the Uniform Product Code Council). That organization is the best source to assist meeting any compliance requirements. The EAN (European article number) serves the same purpose as the UPC and has thirteen digits. Check with your retailer to determine if the UPC can be used in the appropriate country or if it must be modified.

In short, remember that SKUs are for internal use. UPCs are for external or universal use.