Warehouse Data Management and Inventory Accuracy Factor
The challenges facing those who are tasked with managing a warehouse are not only multi-dimensional, they can be downright overwhelming. From coordinating the myriad of data to controlling inventory overstock obstacles, there are no shortages of roadblocks in the warehouse management game. This is where data management comes into play, and it is a necessity even for small warehouse operations.
There are a handful of data management solutions to choose from, including ERP systems such as Microsoft Dynamics NAV. What these systems have in common is they act as a repository for warehouse data. Many warehouse managers are over-confident knowing that once a system is integrated, there is complete control over the operation – yet many time, these data management solutions actually reveal inefficiencies in the way a warehouse is run.
Suddenly, warehouse managers are made aware of:
- Working capital “tied up” by inventory overstock
- Incorrect inventory records leading to expedited purchases
- Margins that are much lower than anticipated
- Office overhead increases
- Poor customer service
Ensuring Your Data is Accurate
All of the points just mentioned have everything to do with one common problem: Inaccurate data. When looked at succinctly, the pattern is totally logical; if the system’s warehouse data had been correct, inventory wouldn’t have to be overstocked for worry that orders couldn’t be fulfilled nor would additional staff be necessary to track down the missing stock.
Because information within a data management system must be accurate in order for a company to gain see real value from their data collection efforts, it is imperative that inventory managers and warehouse personnel ensure warehouse data is correct. But how exactly is this accomplished? Indeed, even when the use of a warehouse management system (WMS) is implemented, there are still a bevy of physical transactions that are recorded “on paper;” these include, as examples, handwritten receipt confirmations, inventory counts and order fulfillment picks.
There comes a point when a process such as this is not only too time-consuming, it is highly susceptible to errors… and these errors come at a cost. But there’s an answer, and it lies in barcode scanning software for NAV.
The Reasons for Considering Barcode Scanning Software
In terms of cost and universal acceptance, barcode scanning is the best choice for warehouse goods tracking. Put simply, these software systems allow transactions in a warehouse to be processed much faster and with considerably less errors, with such transactions encompassing everything from inventory counts to put-aways, receipts, picks, shipments and more.
Before we provide an example, let’s go over, in a general sense, how barcode scanning software systems take the stress out of a warehouse setting:
- Barcode scanning efficiency results in more frequent inventory and cycle counts, and faster cycle counts can improve data accuracy which also improves productivity and fill rates.
- Order fulfillment is more accurate, ultimately improving shipping times and customer satisfaction.
- With merely a reduction in necessary labor time, barcode systems can pay for themselves after the first annual count.
How is this put into action, exactly? Imagine a small distributor with several hundred SKUs (stock-keeping units) that doesn’t utilize barcode scanning software or equipment. In this scenario, performing inventory counts would be an overwhelming prospect, with overtime staff that may need to come in on weekends to perform the manual counts. What’s worse, staff will spend up to a full week entering and reconciling the data; we’ve been witness to situations wherein some 144 person-hours were required to count 900 bins.
Now, consider the same scenario but with the advantage of barcode scanning software – with employees now equipped with handheld scanners, a solution consisting of 2D barcode labels for product and inventory bins can lead to the same warehouse being counted and reconciled in only 12 hours – over a 90% reduction in time.
Is it Worth It… and What’s the Cost?
Of course, like almost anything else in life, it all comes down to cost; the good news is that most “out-of-the-box” barcode scanning software is priced to yield high payback and short return on investment (ROI). The flip side to this coin is that piecing together a system to match your unique requirements may cost more. There are experienced outside consultants who can help you determine ROI when taking into consideration factors such as:
- Linear barcodes vs. 2D barcodes
- Mobile devices vs. fixed terminals
- Potential hardware and software providers
When analyzing whether investment in barcode scanning software is “worth it,” an organization should understand a few things. First, barcode technology has been proven to deliver instant effects of a positive nature on a company’s bottom line – from minimized picking and data entry errors to accurate inventory levels and carrying costs, a barcode system can help realize substantial gains from a relatively small investment.
What’s more, payback results with regard to barcode scanning software can be as short as one inventory count. We’ve put together the following tables to demonstrate what kind of an impact a simple barcode system can have on your operations:
|Savings from Reduced Data Entry Errors|
|Data Entry Transactions Per Day||100||500|
|Keystrokes Per Transaction||30||30|
|Keystrokes Per Day||3,000||15,000|
|% Critical Keystrokes||10%||10%|
|Critical Keystrokes Per Day||300||1,500|
|Errors Per Day||1||5|
|Cost to Correct Errors||$25||$25|
|Cost Per Day to Correct Errors||$25||$125|
|Work Days Per Year||250||250|
|Annual Cost Savings||$6,250||$31,250|
By identifying and reducing data entry errors at the most critical points, you can eliminate costly data entry errors.
|Savings from Reduced Picking Errors|
|Lines Picked Per Day||500||1,000|
|Errors Per Day||5||10|
|Error Reduction Rate||50%||50%|
|Error Reduction Per Day||2.5||5|
|Cost to Correct Error||$25||$25|
|Daily Cost to Correct Errors||$62.50||$125|
|Work Days Per Year||250||250|
|Annual Cost Savings||$15,625||$31,250|
“Cost to Correct Error” is a blended average, considering both internal and external error identification costs. If recognized quickly, the cost could be as low as $5, whereas a mistake found later in the sales/delivery process could cost up to $75.
|Savings from Reduced Inventory|
|Assumed Reduction Rate||5%||7.5%|
|Annual Value of Reduction||$250,000||$375,000|
|Assumed Carrying Cost %||15%||15%|
|Annual Cost Savings||$37,500||$56,250|
Inventory barcode systems provide real-time, accurate inventory information, that can be used to run at leaner inventory levels.
The Bottom Line
Considering what we mentioned above about whether barcode scanning software is “worth it” to a company, the bottom line is this: It’s really not a matter of “if” you should implement it, but rather a question of “when.” Determine where and how it can possibly make a difference in your day-to-day operations, because choosing a system that accurately reflects your business practices/processes will virtually guarantee that you see the most return from your “productivity investment.”