Why Bar Code?

As you probably know by now, technology is expensive. Very expensive! And you’ve probably had the frustrating experience of investing in some new electronic gadget and not receiving the benefit you anticipated or were promised. Many people disagree with me, but I strongly suggest that you cautiously and skeptically evaluate every new technological tool. Ask, "How will this tool affect our company’s bottom line?" If the new device won’t improve profitability within a reasonable period of time, don’t buy it.

This line of reasoning applies to bar coding. Bar coding can help your business by:

• Providing value-added services to customers.
• Improving inventory accuracy.
• Making your employees more productive.

All of these benefits sound great! But, in order for the investment to be worthwhile, the benefits you receive must exceed the price you paid to implement the solution, in terms of both time and money. In this article we’ll look at some of the benefits bar coding can provide, and discuss how to evaluate whether or not it is worth the cost.

Value-Added Services for Customers: Many customers (especially OEM manufacturers) now require that distributors apply bar code labels to material shipped to them. This requires that the distributor has a bar code compatible printer and the necessary computer software to produce the labels required by the customer. This service is expensive. Consider not only the equipment and software, but also the labor necessary to affix the labels. It is normally offered only to high-volume, high-profit accounts. But keep in mind that if the customer requires UPC (Universal Product Code) or some other industry-standard labels, the costs associated with producing the labels can be applied to other tasks as well. Tasks such as supplying labels to other customers or preparing your warehouse for automated physical inventory counts (see below). If a customer requires special labeling, be sure to consider the cost of this custom value-added service when you consider the account’s profitability and salespeople’s commissions.

Improving Physical Inventory/Cycle Counting Speed and Accuracy: Physically counting your inventory is a boring, tedious, time-consuming task the is susceptible to many errors:

• A product may be mistaken for a similar-looking item.

• A counter may record the quantity of one product in the space on a count sheet reserved for a different product.

• An operator, entering quantities of counted items, may make a keying error (i.e. enter 1,000 pieces instead of 100 pieces).

These errors are common and costly. For this reason, most distributors' first application of bar coding involves physical inventory.

To prepare the warehouse for bar code physical inventory, a bar code label which identifies a product is printed and affixed to each stocking bin location. These labels are assigned to locations because it often is not practical to place a label on every piece of every product stocked in inventory. During the actual physical inventory process, the counter takes a hand-held bar code reader (with an attached storage device and numeric keypad), scans the label, and then enters the counted quantity using the numeric keypad. After a section is counted, the bar code reader is placed in a computer input device (often called a "wedge" or a "holster") and the product counts are automatically downloaded into the computer system, updating the on-hand quantities in the database.

Bar coded assisted physical inventories have several advantages over traditional counting methods:

• Count "teams" are unnecessary as one person can scan the bar code label, count the product, and enter the count on the numeric keypad.

• Scanning and entering counts usually takes less time than writing down product numbers and counts and then manually entering the count information into the computer.

• Mistakes can’t be made because the wrong product number is written down.

• Mistakes can’t be made because the data entry operator enters the wrong quantity.

The costs involved in implementing bar coded inventories include:

• The cost of printing bar code labels for all of your stocked products.

• Placing these labels in the appropriate bin locations.

• Buying or renting hand-held bar code readers.

• Buying or developing the necessary software for the bar code readers to read your bin labels and accept count quantities.

• Buying or developing the software for your computer system that will accept and process the information from the bar code readers.

Many computer companies offer a bar code package which includes a bar code printer for the labels, hand-held scanners, and the necessary software for both the scanners and your computer system. The savings realized from just the reduced labor cost often make physical inventory bar code implementations a worthwhile investment. But a word of caution: Because bar codes are assigned to bins, all of your products must be located in their proper locations. Don’t attempt a bar code physical inventory unless your warehouse is in order!

Shipping and Receiving: Bar coding is usually a cost-effective investment for assisting in the physical count of your inventory. Why not adapt bar coding to your other inventory-related transactions and have a completely automated warehouse?

Imagine the time that would be saved if your receiving clerk could just scan products as they were received, rather than manually checking each item with paper and pencil. Or, picture the improvement in accuracy if your shipping clerk could verify that the right product was pulled to fill an order by scanning bar codes printed on both the pick ticket and bin. There are even radio frequency (RF) bar code units now available that will electronically transmit customer orders to warehouse personnel, avoiding the need for printed picking documents and resulting in paperless warehouses!

As tempting as these capabilities are, don’t jump into the implementation process without evaluating the associated costs (and concerns):

• The bar code computer software necessary to process bar coded shipping and receiving transactions is usually far more complex (and expensive) than the software used to count on-hand quantities. Make sure that all of the "bugs" have been worked out of your software and procedures before you use bar coding to process your daily transactions.

• Bar coding implementation is expensive. Be sure that the benefit that you will receive from automating each specific task is greater than the cost.

• Implementing bar codes simultaneously in all of your internal processes can place a great strain on the people in your organization. It takes time for them to get used to new policies and procedures. You’ve probably experienced the affect on customer service when a new system is "thrown" at employees.

It is far better to gradually implement bar coding. If you’re experiencing "challenges" with your current physical inventory process, start there. After that function has been successfully implemented, determine if bar coding can be a money-making benefit in other inventory-related areas.

Where do you get information about bar coding? Your computer vendor is probably your best source. You may also look at the distribution bar code sites on the World Wide Web. Just search on the words distribution bar code. Carefully evaluate the services that each company offers. But don’t make a decision without checking their references and seeing, with your own eyes, their hardware and software performing the bar coding tasks you’d like to implement.

©1998, Effective Inventory Management, Inc., 116 Spyglass Drive, Coppell TX 75019. All rights reserved. This article may be distributed within a company or school for the benefit of its employees/students, but it may not be reprinted in a publication for sale, reproduced in a website, or be used in conjunction with consulting services without the expressed written permission of Effective Inventory Management, Inc.