Product identification systems are essential for efficient retail and e-commerce operations, enabling businesses to manage stock levels and accurately track sales performance. Establishing a method of labeling and tracking every item is necessary for moving products from warehouse shelves to customer hands. Both internal and external identification tools are required for seamless integration with supply chain partners and point-of-sale systems. This article guides designing and implementing a robust system using both Stock Keeping Units (SKUs) and standardized product barcodes.
Differentiating SKUs from Barcodes
A fundamental difference exists between the two primary product identifiers concerning their purpose and audience. The Stock Keeping Unit (SKU) is an internal, alphanumeric code designed by a business for its own inventory management and logic. SKUs are created to be human-readable, allowing staff to quickly discern an item’s characteristics without consulting a database. This code is unique to the business that creates it and is not standardized for external use.
Conversely, the barcode (typically a Universal Product Code or UPC, or European Article Number or EAN) is an external, globally standardized numeric code meant for machine readability. This number is registered through an official body and is used primarily for scanning at the point of sale, logistics tracking, and compatibility across different retailers. While the SKU is optimized for internal reporting and stock checks, the barcode is optimized for rapid, accurate data entry into external systems.
Developing a Logical SKU System
Designing an effective SKU system requires careful planning to ensure the code is descriptive, concise, and scalable as the product line grows. The goal is to embed meaningful data points into the code itself, allowing the system to be hierarchical and easily interpreted by personnel. SKUs should be kept under 12 characters to maintain readability and avoid data entry errors. The structure begins by identifying the broadest categories and moves toward specific variations.
Product Category and Type
The initial characters of the SKU should be reserved for the product’s general category or type, immediately signaling the item’s line. Using two to four letters for this segment provides quick identification in reports and filtering functions. For example, an apparel business might use “TSH” for T-shirts or “HOD” for Hoodies at the beginning of the code. This segment creates the highest-level grouping for inventory organization.
Key Attributes (Size, Color, Material)
Following the category code, the next characters encode the specific attributes that define the product’s variations, which are necessary for picking and packing operations. These attributes include size, color, and sometimes material, using an abbreviated, consistent two- or three-character code for each. For example, a red, large T-shirt could use “REDLG” to represent the attributes, maintaining clarity across the product line. Establishing a fixed coding system for attributes, such as “SM” for small and “MED” for medium, prevents confusion and maintains system integrity.
Supplier or Manufacturer Code
For businesses sourcing similar products from multiple vendors, dedicating a section of the SKU to the supplier code aids in purchasing and quality control. This segment helps track which vendor provided a specific batch of inventory, which is useful for reordering or addressing defect issues. Assigning a short, unique code, such as “V1” or the first three letters of the manufacturer’s name, provides this level of traceability. This information is helpful when managing products with identical specifications but different sourcing costs.
Sequential Identifier
The final segment of the SKU is a simple, sequential number that ensures the overall code is unique within the inventory system. This identifier is usually a three- or four-digit number that begins at 001 for the first product variant created. If the previous segments are identical across two items, the sequential number acts as the tie-breaker to guarantee no two products share the same internal tracking code. This provides the uniqueness required for database management and prevents inventory records from being overwritten.
Obtaining Official Product Barcodes (UPC/EAN)
Unlike SKUs, official product barcodes require a standardized, globally recognized number acquired from a specific organization. The legitimate source for these numbers is GS1 (Global Standards 1), the non-profit administrator of the global standard identification system. Businesses must apply directly to GS1 to obtain a Company Prefix, a unique numerical sequence that identifies the company as the brand owner. The length of the prefix determines how many individual product numbers a company can generate.
The process involves paying an initial registration fee and an annual renewal fee, with costs varying based on the number of products the business intends to identify. Once the Company Prefix is secured, a unique UPC (12-digit) or EAN (13-digit) can be assigned to each specific product variation. This system ensures the product’s barcode is globally unique and accepted by major retailers and marketplaces. Businesses should avoid using barcodes acquired from third-party resellers, as these numbers often belong to another company’s prefix and can lead to compatibility issues when selling through official retail channels.
Assigning the UPC number involves combining the company prefix with a specific product number and a calculated check digit. The product number is the variable portion a company manages, ensuring that every product variation receives its own unique number. This globally recognized number allows the product to be tracked accurately across different supply chains and retail systems. The GS1 system provides assurance that the product identifier will not conflict with any other product in the world.
Generating and Implementing Barcode Images
Once the unique UPC or EAN number is assigned, the next step is converting the numeric data into a scannable graphic, the physical barcode image. Specialized barcode generation software inputs the 12 or 13 digits and renders the corresponding vertical bars and spaces. The image must be saved in a high-resolution vector format, such as EPS or SVG, to ensure the lines remain crisp and scannable when scaled for printing. Using a vector format prevents the image from becoming pixelated or distorted, which could render the barcode unusable.
Attention to specific printing requirements is necessary to guarantee accurate scanning at the point of sale. The barcode symbol must maintain a designated “quiet zone,” a mandatory minimum amount of blank space surrounding the bars. This white space allows the scanner to correctly identify where the barcode begins and ends. Contrast is paramount, requiring dark ink on a light background (typically black bars on white) to provide the difference needed for optical recognition.
The placement of the barcode on the product packaging should be on a flat, easily accessible surface, avoiding corners or seams that could distort the image. Before mass production, a test scan of the printed symbol is recommended using a verification device to confirm the image quality and scannability meet industry standards. Failing to verify the image quality can lead to delays and costs if thousands of products are labeled with unscannable barcodes.
Integrating SKUs and Barcodes for Inventory Control
The efficiency of product tracking comes from seamlessly linking the internal SKU with the external UPC/EAN within the inventory management system (IMS) or point-of-sale (POS) software. These two identifiers work together, providing both human-readable data and machine-readable efficiency. The SKU remains the primary identifier used for all internal functions, including stock reports, purchase orders, and warehouse slotting. It is the core data field that managers rely on to understand product characteristics and movement.
The barcode serves as the rapid, accurate data entry method linked to the SKU in the database. When an item is scanned at a warehouse receiving dock or a retail checkout counter, the system reads the UPC/EAN number and instantly retrieves all associated data, including the corresponding SKU, price, and description. This integration means that while the employee scans a standardized, external number, the inventory system updates the stock level based on the internal, descriptive SKU. This dual-system approach maximizes speed and minimizes human error in both operational and financial tracking.