The Advantages of Barcoding and why Inventory Tracking differs from Inventory Management

The previous post of this series introduced inventory management systems(IMSs), and how to recognize when to invest in them. 

Barcoding systems are a key piece of the puzzle for IMSs. It is important to note the difference between inventory management and inventory tracking. Smaller companies or companies without much complexity in their supply chains may need an inventory tracking system but can possibly make do without an inventory management system. Companies will also need the latter as they grow, and that is when barcoding software comes in. 

Barcoding systems have become relatively inexpensive, but do involve hardware and software components to be effective:

1. Generating barcodes: once you choose the type of barcode (2D barcodes are the most predominant), these are printed and applied on every item. 

2. Scanners & data transmitted: Scanners read the barcodes, thereby providing information of finished goods and raw materials in transit across locations. Scanners connect to a mobile phone, or tablet transmitting scanned data in real time. 

3. Level of application: to be effective in solving for errors and better reconciliation, it is best to apply barcodes globally. That is: not just on shipped items, but also incoming finished goods and parts 

4. Accounting system integration: important that the barcoding systems and data integrate with your accounting systems so incoming and outgoing orders can be tracked, managed, reconciled and hence allowing financials to be updated in real time

5. Working the operation: it is ideal to outsource the inventory management and barcoding operations to 3PLs. Even with the best systems, there is still a dependence on people to print, apply and scan barcodes. Associated with that is the actual physical task of moving goods and transferring both the physical and digital onus to a network of 3PLs can free your company to focus on design innovation, sourcing, and marketing. 

6. Advantages: for consumer product companies, inventory is a big cost. There is a cost associated with being understocked and losing sales, overstocked and carrying the inventory holding cost $$s, and costs associated with losing inventory because of poor reconciliation and pilferage. Efficient barcoding systems greatly eliminate these challenges. Further, when this data is connected to data sets across other parts of the supply chain, the resulting analytics can provide exponential boosts to revenue and margins. More on this in the next post. 

In the next installment of this series, we will explore most critical actionable reports you need from your inventory management system.

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