Learn the difference between SKUs and UPCs, how each code works, and when your business needs one, the other, or both for product identification.
In the modern retail and ecommerce ecosystem, the ability to accurately track, manage, and move products is at the root of all essential business operations. From in-store point-of-sale systems to warehouse fulfillment centers, unique identifiers such as SKUs and UPCs take a significant portion of the effort out of storing, tracking, and selling each and every product.
Both codes play a key role in inventory management, but they serve very different purposes. A stock keeping unit (SKU) is for internal use, while a universal product code (UPC) applies across all retailers and platforms.
In this article, we’ll break down the key differences between SKUs and UPCs, explore where and how each is used, and help you decide when you need one, the other, or both to strengthen your product identification strategy.
Barcode Basics for Beginners
Barcodes are the visual layer that makes product identifiers machine-readable. These familiar black-and-white lines or patterns hold key data about a product — such as its SKU or UPC — and allow systems to quickly match a product with the correct listing, price, or inventory status.
When scanned with a handheld barcode scanner or integrated POS system, a barcode sends information to a database that confirms details like product name, stock levels, or warehouse location. This process is central to daily operations across retail stores, ecommerce sites, and product fulfillment centers.
Barcodes are typically based on a global trade item number (GTIN). For example, a universal product code (UPC) is a type of GTIN used in North America. Other formats, like European Article Numbers (EANs), are more common abroad but work similarly.
Modern inventory management systems rely on barcode scanning to support everything from stock audits to real-time order updates. Whether you're shipping products from a warehouse or ringing up sales in-store, barcodes connect your physical products to both your internal records and external sales channels.
What Is an SKU?
A stock keeping unit (SKU) is a unique alphanumeric code that businesses assign to their products for internal use. Unlike UPCs, which are standardized across retailers, each company creates SKUs to track inventory in a way that reflects its own product catalog and operations.
SKUs are typically built to include details like product type, color, size, and even location. For example, a white t-shirt in size medium might begin the SKU code with TEE-WHT-MED. Subsequently, the triad could then be followed by a code to indicate subvariants, such as the numerals 07 to indicate a printed logo, and it could read like this: TEE-WHT-MED-07. There’s no real limit to how many subvariations a SKU code can include. This structure enables businesses to quickly distinguish between product variants, especially across large or complex inventories.
SKUs are foundational to systems like inventory management software, warehouse management tools, and point-of-sale systems. They support accurate inventory tracking, enable detailed sales data analysis, and help teams monitor inventory levels across multiple locations.
Because they’re fully customizable, businesses can design their own SKU system to reflect their specific internal operations and product assortments. A strong SKU structure minimizes confusion, simplifies fulfillment, and streamlines inventory management processes.
What Is a UPC?
A universal product code (UPC) is a standardized 12-digit number used to identify products in retail and ecommerce environments. Individual businesses create SKUs, but GS1, a global nonprofit that maintains barcode standards for the entire retail industry, issues UPCs.
Every UPC includes a company prefix, a product identifier, and a check digit to confirm the code’s accuracy. The code is printed below a scannable barcode that POS systems, fulfillment centers, and online marketplaces can read. The same UPC code is used by other retailers, distributors, and platforms to identify the product consistently across locations.
Because UPCs are part of the GTIN system, they enable automated systems to track inventory, process purchase orders, and reduce the risk of duplication or mismatches across supply chains. Many companies transmit UPCs using electronic data interchange (EDI) to meet retail compliance requirements and accelerate product movement through the supply chain.
Key Differences Between SKUs and UPCs
Enterprise applications use both SKUs and UPCs to identify products, yet each plays a distinct role in business operations. SKUs help manage internal processes like warehousing, picking, and restocking, while UPCs enable consistent product identification across platforms, stores, and retailers.
Here’s how they compare at a glance:
Purpose:
SKUs support internal tracking, categorization, and inventory management processes.
UPCs enable external scanning, product identification, and data sharing.
Format:
SKUs are customizable and alphanumeric (e.g., TEE-WHT-MED-07).
UPCs are numeric-only and standardized (e.g., 012345678905).
Assigned By:
The company creates SKUs in-house.
GS1 issues UPCs, following global business standards.
Use Case:
SKUs streamline internal workflows across inventory management systems.
UPCs are required for retail, ecommerce, and third-party logistics.
Flexibility:
SKUs can reflect warehouse layout and product variants or even identify vendors.
UPCs remain fixed and identical across other retailers and platforms.
Using both codes together offers the best of both worlds: the internal visibility of SKUs and the external consistency of UPCs. This dual approach helps avoid duplication, supports more accurate sales data, and ensures that systems from POS to ERP can easily exchange and process product data.
When to Use SKUs, UPCs, or Both
Knowing when it's appropriate to use a SKU, a UPC, or both depends on your business model, sales channels, and fulfillment strategy. In many cases, companies use both codes together. A SKU is used for internal tracking, and the UPC for external compliance.
For example, a direct-to-consumer (DTC) apparel brand managing multiple colors and sizes in its own Shopify store might rely heavily on SKUs to track inventory and organize warehouse storage. But if that same brand sells on Amazon or the Target Marketplace, a UPC is required to meet platform listing standards and support retail compliance.
Use cases typically break down in this manner:
Your own storefront or online shop: A custom SKU system is essential for tracking product variants and sales performance
Third-party marketplaces: UPCs are required for listing and selling your products
3PLs or fulfillment centers: Both SKUs and UPCs can help align internal systems with external vendor requirements. Businesses often rely on EDI implementation to automate this kind of data exchange and reduce manual effort.
The same product across channels: Using both codes helps ensure product data stays consistent between your POS, inventory system, and external partners
Using a flexible inventory management system or web EDI platform makes it easier to synchronize SKUs and UPCs across platforms, automate reordering, and track inventory in real time.
Clear Product Identification for Better Business Operations
Whether you're running a small storefront or managing multiple retail and ecommerce channels, the ability to track and manage product data accurately keeps your business running smoothly. A reliable SKU system helps you organize internal inventory processes, while a standardized UPC ensures that external platforms and major retailers recognize and accept your products into their supply chain.
When you use both identifiers in tandem, your systems speak the same language, from the warehouse floor to trading partner storefronts. This supports consistent product identification and also strengthens your ability to align sales data, avoid fulfillment errors, and automate essential business tasks.
If you're still managing SKUs and UPCs manually or across disconnected systems, it may be time to upgrade. A modern platform like Orderful supports integration with enterprise resource planning (ERP) systems, electronic data interchange (EDI), and scalable product data tools, saving time, improving accuracy, and reducing operational bottlenecks.
With Orderful, you'll streamline your supply chain management efforts, align your inventory internally and across channels, and boost your overall operational efficiency. Contact an EDI expert today or schedule a demo to learn how Orderful can position your business for future growth.
FAQs About SKUs and UPCs
What does SKU stand for?
SKU stands for stock keeping unit. It’s a unique alphanumeric code businesses create internally to track product variants such as size, color, or warehouse location.
What does UPC stand for?
UPC stands for Universal Product Code. It’s a standardized 12-digit numeric code used to identify products across retailers and platforms, usually printed under a barcode.
Can I use the same SKU and UPC?
It’s not recommended. While SKUs and UPCs can both represent the same product, they serve different purposes and use different formats. They should remain distinct.
Who gives out UPC codes?
UPCs are issued by GS1, a nonprofit that manages barcode standards globally. Businesses apply for a GS1 Company Prefix to generate valid UPCs.
Do I need both a SKU and a UPC?
Yes, in most cases. SKUs help your business manage inventory internally, while UPCs are required for listing products on major marketplaces and selling through retailers.
