What is SKU?

Oct 26, 2021Inventory Management

SKU stands for stock keeping unit. It is an alphanumeric code that identifies a product and helps the owner to check his inventory for retail business purposes. A Stock Keeping Unit number can be created manually or by using inventory management or point of sale (POS) software. SKU numbers are printed on the product label along with the universal product code and other information about the product.

Importance of SKU for store owners

Let us first understand the importance of SKU for store owners.

Shopping experiences and store appearances: SKU numbers help you to organize your store in such a manner, which makes it easy for the staff and shoppers to find products easily. SKU number system allows you to categorize products in the form of a number as shown in the below example. You can easily check the products by their item type, department, collection or vendor depending upon the way you have organized.
Customer checkouts and services: A good Stock Keeping Unit system makes customer services and checkout tasks more smooth and error-free. Tracking products with the help of SKU numbers in a point of sale system ensures that the inventory and the pricing are always spot on without any careless mistakes. When your customers check out, purchases ring up with the correct prices and the manual handling is automatically reduced. The SKU numbers can be quickly looked up in the POS reports to check the stock status. This helps the staff to locate the missing products quickly to avoid loss of sale.
Inventory management and profits: Inventory management is extremely error-prone without SKU. The losses that are caused because of this are huge and barely recoverable. Therefore one should use the Stock Keeping Unit number system which prevents many of these losses. To understand this concept better, let us look at an example. Let us hypothetically imagine that company A has not organized its storeroom stock using SKU numbers. The result of this can be a lack of tracking or even situations of overstock. Therefore if company A is not tracking its stock, it might end up even ordering more stock than required. This can lead to a lot of losses and debt.
How to set up a Stock Keeping Unit number in simple three steps.
Now that you have understood why is SKU number so important. Let us also have a basic idea of how to set this number system in our framework.

Step number one: The first two or three digits/characteristics of an SKU number should represent a top-level identified. In other words, it should represent something that can be identified easily, for example, a feature that is most prominent in a product. This can also be a department or a store category. With this, a glance at the SKU number will help you to identify the product quickly and easily. Top-level merchandise groups and the location of any product in your store can be identified in just a few seconds. For highly advanced and big firms, this section can also be used to identify the store location.

Step number two: You can assign the middle section the code identifying the unique features.

Step number three: we can also use sequential numbers such as 001, 002, 003 and henceforth. This is done for a final series of Stock Keeping Unit numbers which make the set up is and also help you to identify older versus new items in the same product line. In some exceptional cases, tieing the final series of SKU numbers to the supplier product number can be helpful too.

SKU Example
To understand this concept of creating Stock Keeping Unit better let us focus on some of the examples given below:

Here is a simple numerical SKU number system that is used by a top-level identifier. It is a six-digit code.

Convenience store example:

Category-numerical category-SKU
Fruits – 01–010001
Snacks – 02–020002
Candy- 03–030003

In the example, The first two numbers represent the basic category of the goods. As long as you don’t have more than 99 departments, you can follow this order.

This was a very small and simple example just to make you understand the basic concept of SKU. In a multinational firm, multiple different variables are added to this series which makes it more complex.

It is also important to understand the different categories in which the Stock Keeping Unit number is identified.

Store or location identifier
Variation identifier
Department identifier
Subcategory identifier

What is UPC?

The full form of UPC is a universal product code. It is a barcode symbology which is widely used in many countries to track products in store. It consists of 12 digits and is uniquely assigned to every item. To be able to use the system, a company first has to become a part of it. GS1 US, The global standard Organisation, formerly known as the uniform code Council, manages the signing of UPC within the US.

Difference between SKU and UPC
Let us now understand the difference between SKU numbers and UPC.

UPCs are 12 digit codes that are assigned by GS-1 the global standard Organisation. They work with the manufacturer and the retailers. The main aim of the GS–1 is to assign and oversee the global use of UPCs. This code is placed by the manufacturers on the product itself. Stock Keeping Unit numbers, on the other hand, are ordered stock numbering system designed to identify the inventory easily. It is subjective and differs from one business to another. You can use the manufacturer’s UPCs instead of the SKU numbers to track products in your system. But this might not be that beneficial as you may miss out on a lot of benefits.

The Stock Keeping Unit numbers that you create are solemnly identified by you and your staff. It is meaningful to them. With these numbers, you can sort, report and your product data and statistics based on your needs. Randomly generating UPCs does not give you this unique identification. It does not contain any consistent identifiers that mean anything to you and your staff.

UPC is very helpful in other ways. You can use them to maintain kind manufactured suggested retail price (MSRP) It can also help you to check out the local or online competition.

In case if you get confused as to whether you are referring to a UPC or SKU, you can check the details on the package of the product. UPC symbol will be the barcode label on the back of the product while the Stock Keeping Unit will generally be printed on the store- specific pricing.

What is EAN?

The European article number is a barcode standard, a 12 or 13 digit product identification code. Each EAN uniquely defines a particular product, manufacturer or attribute. EAN is printed on the product label or packaging of a barcode. This code is required to improve the quality of research and the quality of the catalogue. It also saves a lot of time and avoids silly mistakes. EAN is used in a POS system that is used widely through the convenience store. It is compatible with UPC. and is a universal code throughout the world. It helps in distinguishing one product from another.

How to register and obtain UPC or EAN codes?

These codes are usually provided by the manufacturers. In case of a product lacks these codes, A seller has to acquire them from the GS-1. This organization is active in more than a hundred countries around the globe.

You can sell certain products without this code. But adding these codes to your system makes online selling easy. Most online retailers require this to manage their inventory. While UPC/ EAN codes are not a compulsory requirement, popular online marketing sites like Amazon, Flipkart ask their sellers to enter these codes while listing their products.

EAN/UPC Exemption
Some exceptional products do not have a UPC/EAN code. This does not mean that such products cannot be sold. In such cases where you do not possess these codes, you have to apply for:

Brand registry is compulsory in the case of selling on Flipkart and Amazon. It requires some legal documentation. Once the registration is done, there is no such thing called ‘renew the registration.
EAN/UPC exemption is the other alternative provided by Amazon. This process would at least take a month to be completed. The only limitation of being valid for one month once granted is accompanied by this. It needs to be reapplied every month.
SKU, EAN, and UPC are similar in some ways but are also different in others.

Importance of SKU codes in e-commerce?

Stock Keeping Unit code is one of the most important parts of e-commerce. In e-commerce, a business can sell its products on various online sites such as Amazon, Flipkart, Jabong, etc. and also sell in offline stores. To identify the product uniformly across all the sales channels, one needs to have some form of identification. SKU codes act as a central identifier.

When a firm is selling a similar product in different places and sites, it is important to identify that product as the same in other sites as well. This is done with the help of the Stock Keeping Unit code. It is also important to keep the inventory synchronized on all-digital e-commerce platforms so that the inventory is always updated and there is less chance of out of stock situations or overstock situations. To make sure that such situations are avoided, the SKU code is necessary for the system.

To avoid errors and speed up the operation, a business needs to follow the barcode SKU code and not rely on product images or photos while carrying out activities related to picking, packing or shipping. Therefore Stock Keeping Unit codes are not only necessary to avoid confusion but also to speed up and ensure proper shipment.


Easyops cloud inventory management solution supports both SKU and EAN UPC codes across various inventory control functions. You can use either SKU barcodes or EAN UPC barcodes as they are both supported in the platform.

We hope this article was helpful. Do let us know your opinion on SKU, EAN, and UPC in the comments section below!

Sync up with Easyops, register and try out your seven-day free trial now: https://app.easyops.in/#/sign_up