Friday, December 23, 2011

What You Need to Know about Universal Product Codes

imageThis article was written by Jim Fulton, SCORE Orange County Management Counselor

SCORE gets frequent questions about the Universal Product Code (UPC), expressed as a barcode, now found on virtually every package in commerce.  In Europe, these codes are known as EAN’s. However, the UPC and EAN are the same and do not duplicate each other.  If you are going to distribute your products beyond the local boutique or your own website, you will need to obtain a set of codes.  There are two closely related items to discuss, the UPC code and a manufacturers part numbers.

Part numbering is strictly a convenience for the manufacturer and indirectly the distributor and retail outlet (primarily for their inventory control).  Historically, a part number started on the right with a variation number or letter, preceded by a number designating a specific part.  As things got more complex, it became common to have another number on the left indicating a product or assembly number, and so on.

The UPC code is strictly of use in the distribution channel.  It starts on the left.  The left most code describes the country (indirectly the continent) of the part manufacturer or supplier.  The next code group to the right defines the particular manufacturer (or source) of the material.  Then comes a long code group that the manufacturer or supplier can use any way he pleases.

To aid distribution, every variant in the packaging of a product is given a separate UPC code.  If you sell a package of four items, it gets a UPC number.  If you sell a box of ten packages of four items, it gets a UPC number.  If you sell a case of 100 packages of four items, it gets a UPC number.  The case may include ten boxes, but the case and box have different UPC numbers.  If color plays an important role in your product, packages containing different color products get their own UPC.

It is useful to prepare a table of all of your products down to the level of major part or assembly numbers (including color or other parameter that is important).  The number of pigeon holes in this table indicates the number of UPC codes you need to acquire.  Once you get all of your product offerings identified, you will convert the table(s) to a serial list with an individual UPC number for each item in the list.  Leave empty spots in the serial list wherever they occur naturally.  These can be used later for revised parts/packages etc.

You now have a list of unique UPC codes that can be tied to your separate pricing information and any separate more detailed parts lists related to a specific UPC or group of UPC codes.  When a distributor handles your product, it will create a computer program assigning their sale price to the UPC of your product and track the quantity and location of your product through their system with a separate inventory control program.

You need to purchase a block of UPC codes from an authorized vendor/registrar.  I usually suggest a start up purchases a block of 100 codes that start from the left with identifiers for your country and company with the numbers farther to the right initially unassigned.  You then assign these numbers on the right to specific products or assemblies as you release them into the market place.  If the above tabulation suggests you need more UPC codes, acquire the appropriate number, they are cheaper by the dozen, or 10,000.

I suggest you Google universal product code on the internet and read up on the whole subject.  A good place to start might be How the UPC Works,