When sales drop and budgets get tight, small businesses begin desperately seeking ways to cut costs. The options, however, are not attractive. Cutting people is painful, while slashing marketing has devastating long-term effects. Surprisingly, there’s an answer to this problem right within a business owner’s four walls: inventory.
Inventory encompasses everything from products to raw materials and even office supplies. Best of all, it represents a wonderful opportunity to save money.
Let’s face it, inventory isn’t glamorous. It’s bought indiscriminately, and when business is booming, there’s no need to worry about it. Right now, however, inventory languishing in a warehouse, shelf, truck, or supply room serves as a painful reminder of the overly exuberant past.
Fortunately, by acting now to improve inventory management, business owners can positively affect the bottom line in more ways than one:
- understand demand, so the business can stock and sell more of what’s needed
- reduce inventory carrying cost by eliminating stock that’s not moving, freeing up much-needed cash
- improve customer service by immediately providing the items customers want
- eliminate rush shipping charges incurred while fulfilling orders for out-of-stock goods
- automate manual processes, freeing staff for higher-value tasks or supporting expansion without adding labor
- negotiate better prices from vendors
Best of all, these goals can be achieved without an expensive software investment or a scary and complex implementation experience. How? Proven, affordable solutions based on barcode technology.
In this multipart series, we’ll outline how barcodes work and highlight examples of business owners implementing a barcode-based inventory control system.
The power, yet simplicity, of a barcode
Barcode technology has been used for decades. It is affordable, simple and effective – just the thing for small businesses.
A barcode is simply a graphical representation of data (numbers and/or letters). The width of the black lines and white spacing is intentionally produced to represent the underlying data.
When “read” or scanned by a barcode scanner, this graphic is quickly and accurately translated without the mistakes associated with manual data entry. The data is immediately displayed in a software application on a PC or handheld device. (For more information, click here for a video overview of how barcodes work.)
Putting a barcode to work for inventory tracking
Barcodes by themselves do not track inventory; however, they are the catalyst that makes tracking inventory much easier and virtually foolproof. Let’s use an analogy to see how they can be used.
A barcode is like a person’s name – let’s use Teddy. Just like in real life, this name can be mispronounced or misspelled. Is that person an Edward or a Ted? Are they male or female? Further, there’s no way of knowing other useful information like their height, birthday or where they live. And if you don’t see that person for six months, can you remember their name or when and where you last met them?
Barcodes eliminate the need to rely on memory and provide the insight to make better business decisions. With a simple scan, you immediately know the item’s “name.” Then, the inventory software can indicate how many you have, where they are located, and any other information like cost, price or supplier.
High-quality inventory control software provides additional functionality. For example, it might provide reports that allow you to determine which inventory items are selling, and which are not. Or, reorder points can be established to trigger an order for specific items once they dwindle to a pre-determined level. With these tools and reports, businesses can dramatically reduce their inventory carrying costs while improving customer service, saving time and more.
Service company saves $40,000 with barcodes
In this first example, let’s see how a business owner invested less than $2,500 to move from Microsoft Excel to an inventory control system. The payoff? Savings of more than $40,000 a year.
A Maryland heating and air conditioning (HVAC) service and repair company employed 18 technicians. These technicians would travel to customers’ locations, diagnose heating and air conditioning problems, and repair the systems. Some replacement parts were stocked on the repair technicians’ trucks, while other parts were maintained in the company’s warehouse.
The company’s owner tried to track its hundreds of stocked items using a spreadsheet Unfortunately, parts were not easily recorded, errors occurred and the excel sheet was always out of date. The process became completely ineffective. As a result, service technicians wasted countless hours driving to a supply depot to purchase parts. Customer repairs were delayed, and technicians could handle fewer jobs per day.
The company installed Wasp Inventory Control software, complete with barcode scanners. When replacement parts were purchased to add to stock, each item’s barcode was scanned. To remove the item from stock when it was needed at a customer site, the items was scanned again. Quickly and easily, barcodes became the enabler for accurately tracking inventory.
Almost immediately, the company began saving 20 hours a week of previously wasted technician time because they were accurately able to know exactly what was in stock. This translated into more than $40,000 in annualized savings. According to the company’s owner, the initial technology investment paid for itself in just three weeks.
What’s more, the business owner has learned a great deal from the software’s reports. He can plan and stock more effectively. Plus, since he has gained insight into which items he uses most frequently, he now plans to negotiate with suppliers for bulk discounts.
During this economic downturn, using technology to improve your business will not only provide the cost savings and efficiencies necessary to survive, it will provide an ideal foundation for profit and prosperity when the economy rebounds.
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About the Author: As vice president of marketing for Wasp Barcode Technologies, Grant Wickes sets the strategic direction and oversees the tactical execution of the company’s marketing programs. Wickes’ marketing and sales experience spans more than two decades, the majority of which has been spent growing small technology companies. He loves to share the knowledge and learnings from customer visits and small business events to other entrepreneurial-spirited folks.