Barcode inventory management is an approach to managing inventory that involves the use of scannable barcodes to identify and track individual units of products. It involves assigning unique barcode labels to products, which can then be scanned using barcode scanners to capture important information such as product details, quantities, and locations.
Whether you’re a new or established retail business, barcode inventory management offers many benefits such as better data, streamlined workflows, and faster checkouts. Read on to learn more about barcode inventory management and how it can help you accurately track and have efficient control of your inventory.
What Are Barcodes?
Barcodes are visual representations of identifying data, typically a series of parallel lines or squares of different widths. In retail, these codes are used to uniquely identify products, packages, or items. Retailers can also use barcodes for inventory management, helping them efficiently track and manage inventory.
A barcode label that contains scannable symbols representing UPC codes. (Source: Wikipedia)
Types of Barcodes
There are different types of barcodes depending on the context. Here are some of the more commonly used types of barcodes in retail:
- UPC or Universal Product Codes: UPC barcodes are perhaps the most recognizable type of barcode in retail—they’re used globally, especially in North America. UPC barcodes consist of a series of black bars and white spaces as well as 12 numerical digits. UPCs identify products and track sales.
- SKU or Stock Keeping Unit: Internal SKUs are custom alphanumeric codes of variable lengths (typically eight digits) specific to each retailer and designed to suit your business’s unique operations. With an internal SKU system, you can use letters and numbers that correspond to a systematic organization of your inventory.
- ISBN or International Standard Book Number: ISBN barcodes are specific to the publishing industry. They identify individual books and are typically 13 digits long.
- EAN or European Article Number: Similar to UPC barcodes, EAN barcodes are also global, particularly in Europe and other regions outside of North America. They also consist of a series of bars and spaces, 13 digits long. EAN barcodes identify products and facilitate international trade.
- Code 128: Code 128 is a barcode that can encode the entire ASCII character set—upper and lowercase letters, numbers, and special symbols. It’s commonly used in logistics and shipping applications but also in retail for product labeling and inventory management.
- Code 39: Code 39 supports numbers, letters, and select special characters. Code 39 barcodes are often used for labeling products, inventory control, and tracking. This type of barcode is often used in industrial settings and electronics and automotive industries.
- GS1 DataBar: DataBar is a family of barcodes developed by GS1, the international standard for barcodes. They’re used in retail to identify smaller items like produce, pharmaceuticals, and coupons. DataBar barcodes can encode various types of data, including expiration dates and serial numbers.
- QR or Quick Response code: Though not technically a “bar” code, QR codes function in a similar way. QR codes use pixelated black-and-white squares, rather than parallel lines. You can scan QR codes with a mobile device to perform many tasks, including tracking inventory, visiting a website, placing an order, and making a payment.
- PDF417 or Portable Data File 417: PDF417 barcodes are a type of two-dimensional (2D) barcode that can store a significant amount of data compared to traditional one-dimensional (1D) barcodes. They can encode a lot of data in a compact format. In retail, PDF417 barcodes are used to verify identification, in product packaging, shipping labels, and digital coupons or vouchers. They can also encode detailed inventory data including product descriptions, quantities, locations, and stock levels.
SKU vs UPC
SKUs and UPCs are arguably two of the most common types of barcodes you see in a retail setting. They’re very similar: Both can only contain numerical digits, they both identify products with a unique code, and both help with inventory management.
However, there are differences between SKUs and UPCs:
SKU barcodes | UPC barcodes |
|---|---|
Any length, usually 8–12 characters | 12 characters |
Alphanumeric | Numbers only |
Set by retailer | Set by manufacturer |
Free | $250 for 10 codes |
Used internally | Used externally |
Why Use Barcodes: Benefits of Barcode Inventory
There are many reasons to use barcodes—they help make retailers’ lives easier when it comes to tracking and managing stock and overall business operations. Let’s take a closer look at some of the benefits of a barcode inventory system:
Improved Inventory Tracking
Barcodes provide accurate and reliable inventory data, allowing retailers to identify and address issues such as stockouts, overstocks, and shrinkage more effectively. This improved visibility into inventory helps retailers optimize stocking levels, reduce carrying costs, and maximize profitability. The inventory management system updates the inventory database in real time, instantly reflecting the addition or removal of items from stock.
Plus, as businesses grow, managing inventory manually becomes increasingly challenging and time-consuming. Barcodes provide a scalable solution that can accommodate growing product lines, increased sales volumes, and expanding operations without sacrificing accuracy or efficiency.
Reduced Errors
Manual data entry is prone to errors, which can lead to discrepancies in inventory records and costly mistakes. Barcodes eliminate these errors by providing a fast and reliable method of capturing product information. This accuracy ensures inventory levels are always up-to-date and reliable.
Streamlined Operations
Barcode inventory management streamlines processes like stocktaking, order fulfillment, and reordering. It mitigates human errors from manual data entry and improves overall efficiency.
Barcode inventory management essentially automates data entry tasks. With a barcode scanner, you can quickly and accurately track inventory levels, update stock counts, and perform transactions, saving valuable time.
This increased visibility also allows retailers to make informed decisions about when to reorder products, ensuring they always have the right amount of inventory on hand to meet customer demand while minimizing excess stock and storage costs.
Plus, barcode inventory systems can integrate with other business systems, syncing data across different business functions, which further improves overall efficiency and decision-making.
Faster Checkout
By incorporating barcodes into your point-of-sale (POS) system, you can expedite the checkout process for your customers. Scanning barcodes speeds up transaction times, reduces waiting times at the checkout counter, and improves the overall shopping experience, leading to more customer satisfaction and loyalty.
Integration With Other Systems
Barcode systems can be integrated with other business systems such as accounting software, supplier databases, and tools. This integration enhances overall business functionality and data accuracy.
Many barcode inventory systems are compatible with other software such as accounting software, ecommerce platforms, and customer relationship management (CRM) systems. This integration enables seamless data sharing and synchronization across different business functions, improving overall productivity and decision-making.
Lightspeed, for example, has barcode inventory management technology that integrates with a wide range of business tools. You can use your iOS or Android device and scan barcodes to count products, track inventory, and fulfill orders. Learn more about Lightspeed for inventory management.
Drawbacks of Using a Barcode Inventory System
Though barcode inventory management brings many business benefits, there are some challenges and drawbacks to bear in mind:
Setup Costs & Onboarding
Barcode inventory management isn’t free—you’ll need to invest in hardware like barcode scanners and label printers and inventory management software. This can be a barrier for limited budgets.
Plus, implementing barcode systems requires onboarding and training for staff members. Training employees on new processes and technologies takes time and resources, potentially impacting productivity during the transition period.
Dependency on Technology
Barcode systems rely on technology like scanners and computers to function. Technical issues or system failures can disrupt operations and interrupt inventory management processes. It’s important to have backup plans to mitigate these scenarios.
Scanning Limitations
Barcode scanners require a clear line of sight to be able to scan barcode labels. Items that are irregularly shaped, oversized, or located in difficult-to-reach places may be challenging to scan, potentially leading to errors or inefficiencies.
The quality of barcode labels can also affect scanning accuracy. Poorly printed or damaged barcode labels may not scan correctly. Ensuring consistent quality for your labels is essential.
Upkeep & Maintenance
Barcode equipment, such as scanners and printers, require regular maintenance to ensure optimal performance. Routine tasks such as cleaning, calibration, and software updates are necessary to prevent malfunctions and maintain accuracy.
How Does a Barcode Inventory Management System Work?
Barcode systems all start with having a product classification and identification system in place. Then, you need to label your products with the barcodes and make sure they correspond to the data in your inventory software. With your system and labels in place, you can scan barcodes for item tracking, lookups, inventory counts, sales, and reordering.
Here are the details:
Product Identification
The process begins when a retailer assigns a unique barcode to each product. Barcodes can be generated using specialized software or obtained from manufacturers or suppliers that already assign UPCs or other barcode formats to their products. The barcode contains information such as the manufacturer, product type, and specific item details.
Labeling Products
Once barcodes are generated, they’re printed onto labels using a barcode printer. You can then put these labels on products or packaging in a location that is easily accessible for scanning.
There are a few types of barcodes:
1D barcodes, also known as linear barcodes, are composed of parallel lines and spaces of varying widths. These barcodes encode data in a linear sequence, typically representing numeric or alphanumeric characters. UPCs are common 1D barcodes used in retail.
2D barcodes, or matrix barcodes, encode data in two dimensions, allowing them to store more information than 1D barcodes. They consist of patterns of squares, dots, or other geometric shapes arranged in a grid. QR codes are popular 2D barcodes used in retail. They can store various types of data, including text, URLs, contact information, and product details. They’re often used for marketing, product labeling, and mobile payments in retail environments.
3D barcodes, also called stacked barcodes, encode data in three dimensions, allowing them to store even more information than 1D and 2D barcodes. They consist of multiple layers of information stacked on top of each other. PDF417 barcodes are a type of 3D barcode commonly used in retail and logistics. They can encode large amounts of data, including text, numbers, and binary data, making them suitable for applications requiring high data capacity, such as driver’s licenses, shipping labels, and product packaging.
Scanning
Next, barcodes are scanned using a scanner, a device that emits a light source, usually a laser, onto the barcode. The scanner then interprets the reflected light to decode the barcode into a readable format. Once scanned, the barcode data is retrieved and processed by the integrated retail inventory management or POS system.
Scanning happens multiple times. It happens when products arrive at a retail store or warehouse—they’re scanned into the inventory system using a barcode scanner. This process captures important information encoded in the barcode, such as the product name, SKU, and quantity.
It also happens at checkout when a customer purchases the item. This allows the POS system to deduct the sold items from the inventory count automatically, updating stock levels and generating sales reports in real time.
Scanning also happens during audits and counts. Barcode scanners can help reconcile physical inventory counts with the data in the inventory management system. Products are scanned several times depending on their fulfillment journey.
Inventory Management Software
The scanned data is transmitted to the inventory management software, where it’s recorded and stored in a centralized database. This software tracks inventory levels, updates stock counts in real time, and provides insights into product movement and sales trends.
Reordering & Restocking
As inventory levels decrease, inventory management software can automatically trigger reorder alerts based on predefined thresholds. This streamlines the restocking process, ensuring optimal inventory levels to meet customer demand without overstocking or stockouts.
Tips for Using a Barcode Inventory System in Your Business
Implementing a barcode inventory system can greatly benefit small retail businesses, but maximizing its effectiveness requires careful planning and adherence to best practices. Here are some tips for using a barcode inventory system effectively in your small retail business:
Standardize Barcode Labels
Ensure consistency in barcode label formatting and placement across all products in your inventory. This standardization makes scanning and data entry more efficient and reduces the likelihood of errors. Document your barcode naming conventions and make sure your team has easy access to them.
Train Employees
Your inventory system only works if people use it. Make sure to provide comprehensive training to your staff on how to use barcode scanners, printers, and inventory management software effectively. Educate them on proper scanning techniques, barcode label placement, and troubleshooting common issues.
Regularly Update Inventory
Conduct regular inventory counts to make sure the data in your inventory management system matches physical stock levels. Schedule periodic audits and reconcile any discrepancies between the system and actual inventory counts promptly.
It’s also a good idea to regularly back up your data to protect against data loss in the event of system failures or technical issues. Save backups to a secure location, either on-site or in the cloud.
Maintain Barcode Equipment
Routinely clean and calibrate barcode scanners and printers to ensure optimal performance. Replace worn-out or damaged equipment promptly to prevent disruptions to inventory management processes.
Set Reorder Points
Determine minimum stock levels for each product in your inventory and set reorder points based on sales velocity, lead times, and seasonal demand. This will help avoid costly stockouts while minimizing excess inventory.
Related:
- What Is a Stockout? Causes, Costs, Impact & Prevention
- Safety Stock Definition & Calculator for Retailers
- Demand Forecasting in Retail: Models & Why It Is Important
Stay in the Know
Track key performance metrics like inventory turnover, stockout rates, and order fulfillment times to evaluate the effectiveness of your barcode inventory system. Use this data to identify areas for improvement. It’s also a good idea to keep your tech and tools updated to be able to take advantage of new features and functionalities.
Seek feedback from your employees and customers about the usability and effectiveness of your barcode inventory system. Use this input to make adjustments and improvements to your business.
Related: Key Retail Metrics to Drive Sales
Frequently Asked Questions (FAQs)
These are some of the most common questions people ask about barcode inventory management.
Barcoding in inventory management refers to the use of barcode technology to track and manage inventory items. It involves assigning unique barcode labels to products, which can then be scanned using barcode scanners to capture important information such as product details, quantities, and locations. Barcoding is done during receiving, picking, packing, and shipping.
Using a barcode system for inventory management can lead to improved inventory tracking, reduced manual errors, streamlined operations, and faster checkouts.
The best barcodes for inventory management include UPC (Universal Product Code), EAN (European Article Number), Code 128, and DataBar. UPC and EAN barcodes are widely recognized and used in retail settings. Code 128 is ideal for high-density barcode needs in logistics and shipping.
Barcodes play a crucial role in warehouse management by facilitating efficient tracking, control, and movement of inventory within the warehouse. Barcodes can be used for receiving, picking and packing, inventory control, shipping and logistics, and integration with other warehouse management systems.
Bottom Line
By leveraging barcode technology, retailers can streamline operations, improve accuracy, and enhance the overall customer experience. But successful implementation requires careful planning, training, and maintenance—continuous improvement and adaptation are key. Embrace feedback, stay informed about advancements in the industry, and always prioritize the needs of your customers.
