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Barcode System

Combination of bar code with computer hardware and application software creates potential for improving performance, productivity, and profitability. Reduce Errors, Increase Productivity, Increase Accuracy.

Manual data collection/data entry systems are:

• Slow and error prone
• Barcode: Significantly faster, (about 20 times)
• Barcode: More accurate, (about 20,000 times)
• Manual systems characterized by “Information Float”
• Batch oriented, so databases often out of date
• Barcode data entry can save hours/days of "Information Float" (time between event and entry into information system
• Expensive and error prone means companies discouraged from collecting important information
• Consequences: Significantly higher costs ripple throughout entire organization (even entire industries)
  

Accuracy

• A well-trained data entry operator makes a data entry error once every 300 keystrokes.
• Leads to waste of time and lost revenues
• Even in worst case, using barcode clearly reduces errors during data collection.

Investment in barcode can pay for itself in three ways:

• Increasing Sales
• Improving Gross Margins
• Reducing Overhead

  Some benefits are easily measured. (i.e. keeping customers). Others more difficult to predict with certainty (i.e. increasing sales due to improved customer service).

  Any barcode application can be analyzed by impact on sales, gross margins and overhead.

Problem: The high cost of inaccurate inventory records

Theoretically, inventory records should always be perfectly accurate. If every transaction recorded in "real time," inventory will be accurate. Realistically, however, day–to–day mistakes throw accuracy off.

One solution: take inventory more often to detect cause of inaccuracies. Traditional inventory-taking is not a pleasant task. Discourages companies from counting inventory as often they should. Leads to inaccurate inventories: not knowing what is on hand or where it is stored.

Consequences of inaccurate inventories

Lost sales

• If you tell a customer you don’t have something when you do, you may lose a sale.
• If you miss a delivery date, you may lose an order.
• Damaging your reputation with a customer due to late deliveries eventually causes lost sales.

Lower Margins

• Buy from a competitor to supply a product you thought you had but didn’t; your margins suffer.
• Tell a customer to keep a product shipped by mistake rather than pay to have it returned.
• Pay RUSH transportation costs to expedite an item you thought you had but didn’t.
• Pay higher prices to vendor to ship small quantity of product because you didn’t have something you thought you had.
  

Higher Overhead

Inaccurate inventories often lead to purchasing buffer inventories which causes lower inventory turns.

Lower material handling productivity. The productivity of material handlers can be reduced if inventory records are inaccurate because they waste time trying to find merchandise.

Solution: Using barcode is easier, more accurate and faster than manual methods.

Problem: The high cost of picking and shipping errors

When the wrong product, or the wrong quantity of the right product, is sent to a customer it initiates several costs.

Lost Sales

Lower sales impact productivity. Shipping errors irritate customers. They take it out on the sales force. Rather than selling, the sales force winds up apologizing and spending time and money trying to keep a customer.

Undetected over-shipments lead to inventory inaccuracies which can lead to lost sales.

Lower Margins

Undetected over-shipments by definition are shipments with no corresponding invoice. This shows up as reduced overall gross margins.

Higher Overhead

Customers frequently delay paying incorrect invoices – even if most of the invoice is correct.

Delayed payment reduces cash flow and increases borrowing costs.

Picking up the incorrect merchandise and re-shipping the proper merchandise increases transportation costs.

Material handling productivity is reduced if merchandise shipped in error needs to be re-stocked and if the correct merchandise needs to be picked again.

Issuing credits and rebills (debit memos) consumes administrative time and money. Some portion of one or more person’s salary goes to researching these errors and issuing the necessary paperwork.

Example

A company issues 200 invoices per day, 240 days a year. They process 10 credits / rebills a day (5%). 50% because they made a picking, packing or shipping error (5 per day). 50% customer errors or errors out of their direct control.

The total number of errors under their control per year is 1,200 (5 per day @ 240 days). At an average cost of $75.00 per error (administrative, material handling, transportation, etc.), the total cost of errors is $90,000 a year. Actual cost may be double since the detected errors are brought to your attention by customers when you make an error in your favor. Errors in their favor may never be reported. It is noteced as inexplicable low gross margins or inventory adjustments.

Shipping errors drive costs at both the sender and the receiver side. Costs above don’t include cost to recipient which should be included in overall cost of errors to an industry.

Solution: Barcode-assisted order picking and shipping verifications systems pay for themselves by reducing these costly errors.