7 Questions to Ask About Inventory Control and Barcoding

2014

7 Questions to Ask About Inventory Control and Barcoding

JUSTIN VELTHOEN

MSA SYSTEMS, INC. | 1340 S. DE ANZA BLVD. SUITE #103, SAN JOSE, CA 95129



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Introduction

So you have a lot of product that you need to have better control of, and more visibility to. Possibly, you are concerned with customers getting the right product on time, maybe you are having issues with mis-shipments, or you just realize that there is a large part of your balance sheet that you don't have much control over.

Inventory Control software is an excellent way to get a clearer picture of one of the largest numbers on your balance sheet. Some of the side effects are better labor control with a full warehouse management solution, more accurate inventory with inventory control system, a clearer picture of the things your business own with an asset management system, and a boost in accuracy and efficiency with barcoding.

Ideally, you will want to investigate your business needs and goals to decide what you are looking for, and find the product that is right for you. The following will give you some insight into a number of areas that you might not have thought of, but will be instrumental in helping you make the best decision for your business decision.

If you have any questions, we have a team of consultants with decades of experience to help. Call (408) 252-9000 at any time to setup a free consultation where we can review your needs, answer some questions, and even make some recommendations for your team.

What Should You Track?

One of the first things you should ask of your business is "What should we track?" The simple answer most people give is "everything!", but you have to keep in mind that the more you track, the more labor intensive it will be. There is a direct relationship or tradeoff between the levels of visibility to the level of effort. When you are deciding what to track, keep in mind the value of the information and the cost required.

Often we are requested to track more variables than are actually used. It is easy to want to track and have visibility to a lot of data, but if that data isn't being acted upon it can be overkill. From a short term standpoint, it is cheaper to setup a more detailed data

MSA SYSTEMS, INC. | 1340 S. DE ANZA BLVD. SUITE #103, SAN JOSE, CA 95129



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collection at the onset and doing it all at once. Looking at the big picture though, it actually takes more labor in training and errors to ramp up, and tracking more data than there is a business need for is wasted effort.

Every data point tracked should be directly linked to a business decision, or you are wasting both time and money

If you know the business decisions that you will be making based on inventory, then you can quickly determine which data points are required to make those decisions. Let's take a look at some of the possible things you might want to track.

Items

Sellable product: Of course you will want to track your Finished Goods. Anything that you ship or put on a Sales Order is probably something you are going to want to track. Sometimes that can even be something non-inventory like labor. You can track everything that comes in on a Purchase Order, but be careful. Many of those items may not be interesting to your balance sheet like paper you use in the printers or staples and pens. By tracking only what goes on sales orders, you have a pretty good start. By tracking these items, you can track the changes in cost when purchasing and be better able to determine your profit per sale.

Raw Materials: These are the products you bring in that you may be using to create finished goods from. For instance, if you made and sold cookies, flour and sugar could be your raw materials. You may want to track those so you know your cost for each build of a finished good so that you could price the finished good accordingly. You may also wish to sell that raw material as well.

Anything of Value You Want to Track MOVEMENT On: There are other industries that might not have sales orders, but wish to track inventory. These may require a creative way to bring in and out that inventory. For an orthodontics office we tracked their tools and supplies. The inventory didn't go to a sales order, so we mapped a special adjustment type to the Cost of Goods Sold account, which allowed them the visibility to their inventory they needed, the ability to set reorder points so they never ran out of product, and the ability to account for those items correctly in their ledger. If your

MSA SYSTEMS, INC. | 1340 S. DE ANZA BLVD. SUITE #103, SAN JOSE, CA 95129



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business wants to track inventory that never hits a sales order, this could be an excellent opportunity to see the flexibility of a software solution.

Item Detail

When you have decided which items you want to track, you want to dive a little deeper into what those items look like and decide what about those items is valuable and what you want to track for those items.

Item Numbering: It is very important to take some time to consider your numbering scheme. You can do intelligent numbering, where by looking at the item number you know some or all information about the product. This gets complex when you add products between others and the numbering scheme can't account for those. You can also do random numbering, which requires scanning at each step to be sure the product is correct, which can also be difficult.

This is a key field, so it is important that you do not include special characters like !@#$%^&*'"() etc. in the item number because many computer systems treat those characters differently. Instead, use hyphens or decimals to visually create separators and alpha-numeric characters.

Item Descriptions: The item description is a better place to add specific information about an item. This is a much more general field, and should only treated as general information that helps define the item on the sales order and invoice.

Lot tracking: Generally used in the food industry, and also in textiles and others where groups are created at the same time. lot tracking allows a business to track a specific group of items by a specific code. This can take the form of the date created, the purchase order number it was received under, or a number designated by the originator. Many larger retailers require traceability from the finished good back to the originator or from the originator through production to the end consumer. A system with lot codes and traceability reporting will satisfy those requirements. This does add a little complexity in your processes, but will allow you to get into some larger retailers that will also increase your revenue.

MSA SYSTEMS, INC. | 1340 S. DE ANZA BLVD. SUITE #103, SAN JOSE, CA 95129



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Serial Tracking: A serial number is similar to a lot, but more specific. Each item is allowed a unique code number that will identify each transaction associated with it. This is very common in electronics and any business that wants very specific purchase information for warranties. Because extra information needs to be entered each time a product is scanned, this is the most accurate and detailed view of your inventory, but also the least forgiving.

Dimensions: Dimensions adds incredible flexibility to reporting, a small amount of complexity in item setup, and almost no complexity to your physical processes. A great example of dimensions is for a T-Shirt company to have dimensions on their items for size and color. This would allow reports company-wide to answer questions of what sizes or colors sold best, at what times of year, to what customers, etc. I like setting product lines, profiles, colors to see how groups of products perform. Items can also include physical dimensions like width, height, depth, weight, and cube.

Always start out with the end in mind, so you only add work that will turn into valuable decisions down the road.

How Do You Want to Track It?

Physically, there are a number of ways to keep product. Based on your current storage configuration and the detail you need, you may do a couple of different practices. Let's take a look at a few physical configuration options.

Bin Locations

Larger warehouses will require greater detail and visibility to where the product is physically located. Others might just need a general area.

Locations can be actual shelf racking or floor locations, striped (locations painted on the ground) depending on the space that you have, and how you need to access your items. If you use a pallet at a time, a shelf might not be ideal. For smaller one time use items, you might want multiple spaces on a shelf to determine where a specific product resides. It is important that you setup your locations in such a way that it is easy to see a location on a paper and know immediately where that product is located.

MSA SYSTEMS, INC. | 1340 S. DE ANZA BLVD. SUITE #103, SAN JOSE, CA 95129



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