The Supply Chain Implementation Series, Guide #1: Using Industry-Compliant Bar Codes

What This Could Mean For Your Company

When a group assembled to learn about bringing down costs in the distribution channel, the president of one company reminded the group that there are only three ways to increase company profits:

• You can increase your margin by reducing product cost or raising prices.
• You can increase sales volume by attracting new customers.
• You can reduce your overhead costs.

Of the three, he went on to say, “Customers are hard to attract and control, and pricing is always a problem.  But, a company can control its own costs.”  Then he added one very important point: what is good for a company is, of course, good for an entire distribution channel.  This is what supply chain partnership is all about.

One way to think about this is to view the movement of goods through the distribution channel as moving through a series of loops.  Every enterprise is in the series.  If we are to reduce costs to the individual companies, we will (as a point of logic, if nothing else) reduce cost to the entire channel.  This requires all the related companies to attack costs related to the activities that occur where the loops connect.  The technologies that attack costs in these areas are collectively called electronic commerce.  Actually, it is the “electronic side” of commerce where the U.P.C. number is used.  The “non-electronic side” of commerce is product handling where the U.P.C. bar code is used.  The goal should be to use the “electronic side” to drive down the product movement and storage side, while at the same time reducing clerical costs.  This is where things like EDI, Internet, and bar code lend efficiency.  Industry standards are required here because products move in and out of different companies, and each one has its own way of doing business.

If we examine one of the loops, we see what occurs at a single company.  These are the same functions that happen within every company.  Since these activities are related to the movement and storage of the product, bar code, the part of electronic commerce that links the product’s identity to the computer, becomes very important.  Here is where the standard comes inside the company.  It is also where the efficiency used to reduce cost for a single company benefits the entire channel and visa versa.

Your company can benefit from supply chain partnership, and so will your suppliers and customers.  The trend to conform to industry standards, like the U.P.C., will drive costs out of these functions:

• Quote

• Order

• Pick

• Ship

• Invoice / Pay

• Receive

• Store

• Deliver

• Point of Sale or Use

A great deal can be saved through streamlining the ordering and paying processes.  But some companies will benefit simply by eliminating errors.  What can go wrong?

It’s simple; your customers want to drive down costs and so do your suppliers.  You need to modernize your system.  If you do it as partners in the channel, you all will save and you will have deeper and stronger relationships.