Guidelines for Product ID, Labels and Shipments (GPID)
Supply Chain Foundation Guide (SCF)
Label Implementation Guide (LIG)
Pet Industry Supply Chain Foundation Guide (SCF)
2. Supply Chain Overview And Benefits
When a customer asks a vendor to apply a bar code label or lose their business, the benefits are easy to estimate. To be more accurate, some of the benefits are easy to estimate. Others take digging to identify and quantify.
Time and experience have shown that manual data collection and data entry systems (handwritten documents followed by keyboard data entry) are cost drivers for three reasons:
The consequences of these problems are significantly higher costs that ripple throughout an entire organization ĖĖ even entire industries.
2.1 Examples of Benefits to Individual Companies
An investment in bar code , or any other technology for that matter, can pay for itself in three ways:
Some benefits, like keeping a customerís business, can be easily measured. Others, like increasing sales due to improved customer service, are more difficult to predict with any certainty.
Any bar code application can be analyzed by its impact on sales, gross margins and overhead. Consider the following two examples.
The cost of inaccurate inventory records.
Theoretically, inventory records should always be perfectly accurate. If every transaction is recorded in "real time," the inventory will be accurate. Realistically, however, dayĖtoĖday mistakes throw the accuracy off. One solution is to take inventory more often in order to detect the cause of the inaccuracies.
Unfortunately, taking inventory with traditional methods is not a pleasant task and sometimes this fact discourages companies from counting inventory as often they should. This leads to inaccurate inventories: not knowing what is on hand or where it is stored. The consequences of inaccurate inventories can be felt throughout a business. For example:
For all the reasons stated above, bar code is frequently used to take annual physical inventories and conduct cycle counts because using bar code is easier, more accurate and faster than manual methods.
The Cost of Picking & Shipping Errors
When the wrong product or the wrong quantity of the right product is sent to a customer, it initiates several costs.
A company issues 200 invoices per day, 240 days a year. They process 10 credits / rebills a day (5%). Half of these were because they made a picking, packing or shipping error (5 per day). The other half are 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.
If the company is earning 5% pre-tax profit, this is the equivalent of a $1,800,000 customer! And even if you are only shipping 50 invoices a day, it's still like a $450,000 customer.
In fact, the actual cost may be double this amount 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. You notice them as inexplicable low gross margins or inventory adjustments.
Note: Shipping errors drive costs up at both the sender and the receiver side. The costs described above donít include the cost to the recipient and should be included in the overall cost of errors to an industry.
Bar code-assisted order picking and shipping verification systems pay for themselves by reducing these costly errors.
2.2 Summary of Company Benefits
Within organizations, bar code has proven its ability to help companies compete better. A few of the documented benefits are listed below:
Any one of these benefits is worth pursuing, but when EAN/UCC numbering, bar code and EC/EDI are implemented throughout an industry, individual members of that industry can achieve meaningful gains in all of them and help entire industries remain competitive!
2.3 Industry Benefits
Manufacturers, distributors and retailers conduct thousands of business transactions every day. Many of these transactions involve the communication of item numbers and quantities. Most transactions start out as handwritten documents, followed by a phone conversation or computer generated report which is ultimately E-Mailed, FAXed or mailed to a trading partner.
In many cases, products pass through the entire distribution channel without being changed at all, so translating to proprietary item numbers is an unnecessary and errorĖinducing step. A birdís eye view of the relationships between trading partners looks like this:
Birdís Eye View of Trading Partner Material and Information Flow
Instead of using proprietary item numbers requiring multiple translations, retailers, distributors and manufacturers can use standard numbering systems and bar code and/or EC/EDI to record sales, receive merchandise, place orders, count inventories, verify shipments, and record storage locations. As unnecessary costs associated with using proprietary numbering schemes are removed from the distribution pipeline, entire industries become more competitive.
With improved accuracy and timeliness of POS data, retailers can control their inventory better, increasing sales by stocking the proper merchandise and reducing unplanned markdowns. Using bar code to track work in progress helps manufacturers identify production bottlenecks and improve deliveries while reducing inventory carrying costs. Distributors using bar code and EAN.UCC numbers can improve inventory accuracy, on-time fill rates and reduce inventory carrying costs.
2.4 Final Thoughts on the Benefits of Bar Code
Tracing the actual benefits of using bar code instead of manual data collection systems is true detective work. It takes time but it can be very rewarding because it can improve sales, improve gross margins and reduce overhead.
Companies using the EAN.UCC standard numbering system and bar code are not pioneers. Fortunately, each of these communication technologies has already been tested and implemented successfully in many industries.