Inventory Management 3- UPC, SKU & Terms

This presentation delves into the critical components of inventory management, focusing on the role and importance of UPC (Universal Product Code) and SKU (Stock Keeping Unit). It will provide an overview of these two essential identification systems, explaining how they streamline product tracking, optimize inventory levels, and enhance operational efficiency. Attendees will learn the key differences between UPC and SKU, their applications in various industries, and the benefits they offer in reducing errors, improving stock control, and supporting seamless business operations. Through case studies and real-world examples, the presentation will illustrate best practices for implementing these codes to maximize inventory accuracy and productivity.

1. INVENTORY MANAGEMENT
Session 3
Barcodes
UPC –Universal Product Code
SKU –Stock Keeping Unit
Terms & Terminologies
Case Study

2. BARCODE
*Abarcodeisanimagethatconsistsofaseriesofparallelblackandwhitebarsthatcanbereadbyabarcode
scanner.
*Barcodesareappliedtoproductstoquicklyidentifythem.Amongtheirmanyuses,barcodesaretypicallyusedin
retail,wholesalestores/supermarketsasapartofthepurchasingprocessandinwarehousestotrackandmanage
inventoryandoninvoicestohelpwithaccounting.
*Abarcodesymboltypicallyconsistsof5parts–aquietzone,astartcharacter,datacharacters,astopcharacter&
anotherquietzone.

3. HowdoesaBarcodeworks?
Abarcodeisawaytoencodeinformationintoavisualpattern(thoseblacklinesandwhitespaces)thata
machine(abarcodescanner)canread.
Abarcodescannerwillreadthispatternofblackandwhitebarsandtranslatethemintoalineoftextthatyour
retailPointofSalesystemcanunderstand.
TypesofBarcodes
A)1-Dimensional(1D)/LinearBarcodes
1D/Linearbarcodesareaseriesofblackand
whitebarsthatcanstoreinformationlikea
product’stype,sizeandcolor.Youcanfind1D
barcodesonthetopofuniversalproductcodes
(UPCs)ofaproduct’spackaging.

4. B)2-Dimensional(2D)Barcodes
2Dbarcodesaremorecomplexthan1Dbarcodes.
Theycanincludemoreinformationthanjusttext,likeprice,inventorylevelsandevenaproductimage.
Thereareplentyofbarcodescannersthatsupport2Dbarcodes.Whilenotallbarcodescannerscanread2D
barcodes,LightspeedRetailPOSiscompatiblewithseveralwirelessbarcodescannersthatsupport2Dbarcodes.
LightspeedRetail POS:

5. TheBenefitsofusingBarcodes
Whilebarcodeswereoriginallydevelopedtospeedupthesalesandtransactionprocess,theycomewithseveral
otherbenefits.
*Improvedaccuracy
Usingabarcodetoprocessaproduct’sdataismuchmoreaccuratethanhavingasalesassociatemanuallyenter
thatdata,whichispronetohumanerror.
*Real-timedata
Becauseofthespeedatwhichtheinformationisprocessed,dataaboutinventorylevelsorsalesisavailable
immediately.
*Reducedtrainingrequirements
Thankstoabarcodescanner’seaseofuse(justpointandclick),employeesdon’tneedmuchtrainingonhowto
useone.
*Betterinventorymanagement
Withimprovedaccuracyandreal-timedata,retailersbenefitfromfastercyclecountsandmoreaccurate
inventoryturnoverestimations.
*Lowcostofimplementation
Generatingbarcodesisquickandsimple,plus,thepotentialsavingsthankstoimprovedtransactionspeed,as
wellastheimprovedaccuracyofinventoryandsalesdata,retailerscananticipatesavingspost-implementation.

6. Barcode Scanner
Abarcodescanner,usuallyRFID(RadioFrequencyIdentification
Device)isadevicethatcapturesanddecodestheinformation
containedbyabarcode.Traditionalbarcodescannersconsistofthe
followingfourcomponents:
Lightsource:Thishelpsthescanner,readandaccuratelydecode
theinformationcontainedinabarcode.
Lens:Thisscansthebarcode.
Photoconductor:Thistranslatesopticalimpulsesintoelectricalones.
Decoder:Thisanalyzesthebarcode’sdataandsendsittothescanner’soutputport.
Aftercapturingtheinformation,barcodescannerslinktoahostcomputerortabletandtransmitthat
informationinreal-time,withoutadditionalhumanintervention.Thishelpsretailersautomatedata
collectionprocessesandreducehumanerrorslikeinventorytrackingandprocessingpointofsale
transactions.

7. PurposeofaUPC?
*UPCsmakeiteasytoidentifyaproductbyitsname,
itemtype,sizeandcolorwhenit’sscannedatthe
checkout.
*Theywereinitiallycreatedtomakegrocerystore
checkoutsfaster,butnowadaysthey’realsocommonly
usedtohelptrackinventoryinretailstoresand
warehouses.
UPC
UPC-UniversalProductCode:Atypeofcodeprintedonretailproductpackagingtohelpinidentifyinga
particularitem.
Consistsoftwoparts:
1.Amachinereadablebarcode(seriesofuniqueblackbars)
2.Anunique12digitnumberbeneaththebarcode.

8. PartsofaUPC
*TogetaUPCtouseonproducts,acompanyneedstoapplythroughGS1(theGlobalStandardsOrganization),
whichmanagesandassignsUPCs.
*Afterpayingtheapplicationfee,GS1assignsasix-digitManufacturerIdentificationNumber;thatbecomes
thefirstsixdigitsoftheUPCforallofthecompany’sproductsandidentifiestheitem’smanufacturer.
Identification Number
(Item Number)

9. *ThesubsequentfivedigitsoftheUPCaretheItemNumber,whichidentifiestheproductitself.Eachcompany
shouldhaveapersonresponsibleforissuingitemnumbers,ensuringthatthesamenumberisn’tusedmore
thanonceandthatnumbersassociatedwithdiscontinuedproductsarenolongerused.
*Mostconsumerproductshaveseveralvariationsbasedontheirsize,color,etc.Eachvariationneedsitsown
itemnumber.Forexample,aboxofmedium-sizedt-shirtswillhaveadifferentitemnumberthanaboxofthe
samet-shirtinsizesmall.
*Thelastdigitofa12-digitUPCistheCheckDigit.It’sfoundbyaddingandmultiplying(MODuluscalculation)
severaloftheUPCcode’snumberstoconfirmtothebarcodescannerthattheUPCisavalidone.Ifthecheck
digitcodeisn’tcorrect,theresultisthattheUPCcodewon’tscanproperly.

10. TheAdvantagesofaUPC
*Thereareseveraladvantages,bothforbusinessesandconsumers,forusingUPCs.
*SinceUPCshelpbarcodescannersidentifyaproductanditscost,UPCshelpimprovecheckoutspeed.
*Theyeffectivelyremovetheneedtomanuallyinputaproduct’sinformation.
*UPCsalsoimproveinventorytrackingandmanagement.Theyhelpmerchantsknowwhentheyneedtostock
moreofaparticularproducteitherontheirshelvesorinstockmoreintheirwarehouse.
*Ifeverthere’sanissuewithaproduct,UPCsalsohelpmerchantsfindthecustomersthatpurchasedthat
product,contactthemandissuearecall.
UPCsvsSKUs
*BothSKUsandUPCsareadvantageousforretailers:SKUsfortheircustomizabilityandUPCsfortheir
universality.ManybusinessesuseamixofUPCsandSKUs.

12. •AStock-KeepingUnit(SKU)isascannablebar
code,mostoftenseenprintedonproduct
labelsinaretailstore/warehouse.
*It’sthesimplestandsmallestphysicalunitof
aproducthandledbyanorganisation.
*Thelabelallowsvendorstoautomatically
trackthemovementofinventory.
*TheSKUiscomposedofanalphanumeric
combinationofeight-or-socharacters.
SKU

13. Importance of SKU
* Identifies a specific product.
* Tracks inventory to know how many of a specific product is available.
* Helps reconcile stock levels of products.
* Identifies shrinkage in inventory.
* Determines which products are the most profitable (through analysis).
* Helps identify Reorder Point for products.
* Helps customers save time by enabling them to find products quickly.

14. Example of Constructing an SKU
Let’s assume that we are in charge of assigning an SKU for a specific product: a blue T shirt that is medium-
sized.
We can construct an SKU for the product as follows:BLU-TEE-MED-CF26
Where:
* A dash is used to separate specific information about the product,
* BLU refers to the color of the product (Blue),
* TEE refers to the type of the product (T shirt),
* MED refers to the size of the product (Medium),
* CF26 refers to the model number given by the manufacturer.

15. *AUPCisauniversalproductcode;it’smeant
toidentifyaproductregardlessofwhereitwas
sold.
Forexample,ifyoubuyat-shirtonlineor
throughalocalretailerthatalsosellsthesame
product,thatt-shirtwillhavethesameUPC.
*ASKU,however,isaninternalproduct
inventorycodethat’suniquefromonecompany
totheother.
IfyouweretocomparetheSKUofthesame
productattwodifferentstores,you’dseethat
theyweredifferent.
*TheUPCsymbolisthebarcodelabelorbar
codingonthebackofaproduct.
*SKUistypicallyfoundonastore’suniqueshelf
pricing.
*Ifyouweretotrylookingupaproductonline,
usingtheproduct’sUPCwillhelpyoufindit
acrossnumerousretailers.
*WhereastheSKUwouldonlyfindtheproduct
underthebusinessusingthatspecificSKU.
*UPCscanbevaluableforsuppliersand
manufacturerstotracktheinventorytheysellto
differentretailmerchants.
*SKUsarevaluableformerchantstotrackand
managetheirinventoryinawaythat’suniqueto
theirbusiness.
UPC SKU
* Consistent across retailers * Unique for each retailer
* Numeric only * Alpha Numeric
* Always 12 digits * Varies in length

16. ShouldyouuseSKUsorUPCs?
Ingeneral,SKUsarebestfordirect-to-consumerretailers.SKUspreventcustomersfromshoppingwith
competitors—sothey’rebetterforbusinessifyou’repurchasingyourproductsfromawholesaler.
Ifyou’rethesoleretailerandownerofyourproducts(oryourinventoryisonlyforinternalusewithinyour
company),aUPCmaysimplybeunnecessarysinceyouaren’tsellingyouritemstootherbusinesses.Inthat
case,youcanavoidtheexpenseoflicensingUPCsforyourinventoryandsimplyuseaninternalSKU—though
youdoruntheriskofanunscrupulousthird-partysellerlicensingyourproductsundertheirowncompany
prefix.
SKUscanalsobehelpfulifyourcompanysellshundredsorthousandsofitemssinceshorter,alphanumericSKUs
makeiteasiertofindandtrackspecificproducts.
CASE STUDY
So, use SKU if:
* You sell products directly to the consumer,
* You are the sole retailer for your items,
* Your inventory is for internal use only and not for sale,
* You sell different type of products / tons of single type of product.

17. UPCs,ontheotherhand,arepracticallymandatoryforwholesalers.UPCsarebestforbarcodescanningand
producttrackingacrossmultiplebusinesses.Plus,Amazonandsomeothermarketplacesrequireyoutohavea
UPCtosellproductsontheirplatform.
Likewise,UPCsareyourbestbetifyou’resellingyourproductinternationally.UPCsarerecognizedworldwide,
soyou’llneedthemtosellinsomecountrieswhereregulatedproductcodesarerequired.
YoupurchaseandlicenseUPCsforanyproductyou’resellingwholesalethatoriginatesfromyourcompany.
Thisallowsconsumersandotherbusinessestoidentifyyourcompanyastheoriginofyourproducts,andit
ensuresthatnootherentitycanclaimownershipofyourproduct.RemovingtheUPCfromproductpackaging
canevenbeclassifiedastrademarkinfringement.
So, use UPC if:
* You sell products to other retailers,
* You sell products in online market places,
* Your sell products internationally,
* You want to protect your intellectual property.

18. TERMS & TERMINOLOGIES
Inventory Turn Over –a measure of how quickly a business sells its inventory during a given period of
time
Cycle Time –amount of time taken to complete a task from start to finish
Re-order Level –an inventory level at which a seller places an order with supplier to replenish the stock
Holding Cost –cost incurred in storage of goods
Carrying Cost –includes storage cost, taxes, insurance, employee cost and opportunity cost
Gross Margin Percent –difference between revenue and cost of goods sold and divided by revenue
Minimum Order Quantity –minimum quantity of products, a biz can purchase in one order from a
supplier
Maximum Order Quantity -maximum quantity of products, a biz can purchase in one order from a
supplier
Return on Investment –a metric used to calculate the profitability of an investment
Lead Time / Market Time –time taken between order and fulfilment