Thinking About Implementing a Bar Coding System? Read This First

Is a Bar Coding System Right for My Distribution Business?

As you probably know by now, technology is 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.  Bar coding often provides a fantastic return on this advantage by:

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

Bar Coding Benefits

Bar coding has the potential to streamline operations throughout the warehouse:

Receiving: As clerks scan products just received the system will verify that the material matches the quantities of products that were ordered.  The bar code system then automatically updates on-hand quantities in the computer system.  Compare this to a manual system where clerks must use paper documents to verify that the material received was what was actually ordered and then manually enter that document in the computer system in order to update on-hand quantities.

Putaway: During the stock putaway process the receiver scans the bar code of both the item and the bin location where the material is being stored.  The system verifies the material is being placed in the proper location and then “remembers” where the material is for future reference.  In a conventional paper based system there is no verification that the receiving clerk has put stock away in the proper location.  If he or she makes a mistake your computer system has no idea where the missing material is located.  It might require several employees conducting a “treasure hunt” throughout the warehouse to find it.

Order Picking: By scanning the bar code on both the item and the bin the system ensures that the picker is filling the order with the right quantity of the right item.  Because the system “knows” where every piece of every item is stored orders are always picked according to your organization’s policy.  This might be FIFO (first in – first out) or analyzing where material is stored to pick orders with the least effort.  The task of manually entering picked quantities in the computer after the order is picked is also eliminated.

Shipment Verification: By scanning outbound shipments your computer system can verify that each box of an outgoing shipment is being loaded on the right truck.  This process greatly reduces the possibility of mis-shipments and the expense of sending out replacement shipments and dealing with dissatisfied customers.

Physical Inventory/Cycle Counting: Physically counting your inventory is a boring, tedious, time consuming task that 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.  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 key pad.
  • 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 from the count sheets into the computer system.

Bar Coding Costs

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; both in terms of time and money.  The costs involved in implementing bar-coded inventories include:

  • The cost of printing bar code labels for all of your bin locations
  • Printing bar code labels for products that are not received with the appropriate bar code label
  • Placing these labels in the appropriate bin locations
  • Buying the actual bar code readers and other necessary hardware
  • Buying or developing the software for your computer system that will accept and process the information from the bar code readers
  • Training your employees to use the new system

Bar Code System Selection Best Practices

Our advice:

  • Determine if your company could benefit by addressing the issues listed above
  • Visit similar distributors that have implemented bar coding solutions with your computer software package
  • Discuss the savings or process improvements this other company received by implementing their bar code solution
  • If you find that corresponding savings and process improvement in your organization can pay for the total cost of the new system within 12 – 18 months, it probably is a wise investment.

In recent years the price of bar coding equipment has dramatically decreased.  We now find that most distributors processing at least 300 line items a day on outgoing orders can easily justify the implementation of a bar coding solution.  Don’t forget, at one time distributors wondered if investing in a truck would be a wise investment.   You have to continue to improve to maintain your competitive edge!

*Did you know we’ve got a webinar about this topic? Get all of your questions answered about bar code systems in the distribution business, REGISTER TODAY!

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