More small businesses are recognizing the power of the humble barcode, the decades-old technology that even retail giant Amazon uses to great effect in pushing thousands of items out to customers each day, to help bring order, clarity and savings to their business model. Unfortunately, some companies don’t properly use barcodes and end up passing issues along their supply chain that have unintended consequences.
Most business owners understand the benefits of using barcodes for tracking their inventory: They reduce clerical and administrative errors (which in turn cut down on holding costs, issues with stockouts and customer service dilemmas), allow for real-time tracking, eliminate employee fraud and theft and help forecast future need and balance the company’s turnover ratio. The technology is remarkably simple to use, at minimum, you can use mobile devices with barcode scanning apps, though usually the decision is between a dedicated scanner or mobile computer, and integrate with existing systems as well.
While barcodes act as a literal shortcut when compared to the use of Excel spreadsheets and manually keying in product numbers, small businesses sometimes take this concept too far and attempt to use the same barcode for multiple products.
In a perfect world, this would be impossible, and it often is when working with large retailers such as Amazon or Walmart. The most widely used barcode symbology is the Universal Product Code (UPC), which is managed by nonprofit organization GS1 US. The most common way to join the organization is via a membership fee; companies will also buy resold UPCs from a third-party so as to avoid the yearly fees of GS1.
In exchange, your business receives a unique 12-digit ID number that can be amended for various products (i.e. different flavors of chips, different sizes of hats, etc.). As the Wall Street Journal explains:
Companies usually need different UPC codes for each product they sell, even if it is just a different size. So companies will add more numbers to their GS1-issued identification code to identify each of their products. Each UPC can be used to produce a specific barcode that can then be printed out and attached to products or, ideally, incorporated into the product design so that it is easily scanned at the register.
This system is necessary when you sell a product through a larger distributor that also carries products from other companies, it makes it easier to identify your specific product in a warehouse, as well as to track sales and forecast future needed supply. In fact, it’s not possible to send your products to Walmart with a barcode your company made up and applied yourself.
Related Article: The Ultimate Guide To Barcodes
There are other systems for barcodes, however. While UPC is more universally accepted, vendors can utilize a Stock-Keeping Unit number (SKU) to track a product internally (and for internal use, a barcode printer is a helpful tool for companies that want to design and apply their own barcode labels). There are a variety of systems for more specific purposes as well: the ISBN is a 10-digit number assigned by a publisher for an individual book title; the ASIN is a 10-digit number for Amazon products; the EAN is a 13-digit code used internationally; there is also occasionally the Manufacturer Part Number, a unique number created by manufacturers for their own records.
The problem comes from businesses that treat UPC codes like their own internal SKUs. For some, giving all of their products the same tracking code isn’t an issue, and they’ll instruct employees to manually track what items are selling better than others, or to manually ring up products that have varying prices. While this system isn’t recommended, it’s less efficient, less cost-effective and more frustrating, it’s within the rights of the business owner to conduct sales however they’d like.
If those companies, such as craft beer breweries, which in some states such as Georgia had to send their products to third-party distributors for sale until recently, ask other businesses to assume those tasks, they’ll be asking for trouble. One Southeastern beer distributor had several of the region’s biggest and most successful craft breweries (which sounds oxymoronic, but the craft beer industry has exploded in recent years and made that description possible) send them many different brew types, all with the same barcode.
This is an issue for the distributor and its employees, who are then asked to differentiate between various products that have the same barcode. The drawbacks to this system are:
Lack of accurate sales
If three different beers all share the same barcode, but only one (say, an IPA) is selling well while the other two languish, it’s difficult for the distributor to determine which beer they are running low on and which don’t need to be replenished. The distributor will be required to track inventory manually, which leads to the next issue.
Slow sale process
An important part of the sales process is getting customers out the door with their product without delay. If the cashier needs time to manually key in the product’s SKU, checkout is no longer as easy as scanning a barcode and collecting money.
Human error abounds
Asking employees to track sales by hand will invariably lead to mistakes, since there is usually a 1 percent error rate in manual data entry. This will mean some products will be sold for incorrect prices; some ledgers will be incorrect and lead to unnecessary re-orders or, worse, lacking supply when customers demand it.
These little things can add up to become business-breaking issues. Getting out ahead of issues ends up saving money in the long run, according to the $1-$10-$100 rule: It costs a dollar to verify accurate data at the point of entry, 10 times that much to correct data in batch form and 10 times that amount per record if nothing is done. The latter amount’s costs come from lower customer retention and inefficiencies. You may know it as “an ounce of prevention is worth a pound of cure.”
Barcodes are supposed to close the technological gaps that appeared at the point of sale and between different parts of the supply chain, but some companies appear to treat them like window dressing that is associated with good business rather than utilizing them for their intended purposes. A barcode is not just a logo, it’s a tool that helps differentiate one product among many hundreds, thousands and millions. Companies that fail to see this will also fail to scale at the proper rate, and may be left behind.
Does your company use barcodes to track inventory?