There are many inventory transactions to record in the life of a stock keeping unit (SKU), such as receipt, storage in a bin, transfer to the shop floor, and so on. Every time these transactions are entered into the computer system, one must manually enter a transaction code, the part number being moved, and typically the location code to which it is being shifted. Each of these data items represents an opportunity for an incorrect entry, which cumulatively results in a significant reduction in the accuracy of inventory records.
Bar coding is a good, time-tested approach for improving the accuracy of inventory transactions. In brief, the warehouse staff creates a bar coded part number for each item as it enters the warehouse and attaches the bar code to the item. It also creates pre-set bar code labels for each warehouse location and posts them at each location. Anyone moving stock then scans the part number bar code, the bar code for the location to which it is being shifted, and manually enters a quantity and transaction code to complete the transaction. This information is typically entered on a portable scanner that can either be placed in a cradle to upload information to the central computer system, or used in real-time with a built-in radio to transmit and receive transaction information.
Though this approach can significantly reduce transaction errors, there are a few problems to be aware of. First, if someone creates the wrong bar code label for an item when it first enters the warehouse, then all transactions later using that bar code will also be incorrect – a clear case of technology increasing the rate of transaction errors, rather than the reverse. However, one can mitigate this problem by setting the bar code printer to print not only the bar code, but also the product description and part number in English just below the bar code, so one can verify the accuracy of the bar code. Another problem is the cost of this equipment. Though a scanner can easily cost $2,000, and the rugged environment can lead to a relatively short equipment life before replacement, the reduced transaction cost can easily result in a headcount reduction in the warehouse that rapidly pays for the investment. A third problem is the time interval between a scan into a portable scanner and when the stored information is uploaded into the central computer system. If a cycle counter were to run an inventory report after a materials handler had removed an item from stock but before the move had been recorded, she would find an error during her count, and enter a correcting transaction – resulting in another error when the original scan was finally uploaded. The best solution is to use real-time radio frequency scanning to upload transactions immediately. Finally, the warehouse staff must be carefully trained in the use of this equipment to ensure that scans are made correctly and properly uploaded. One should schedule not only training for new employees, but also refresher training for the existing staff, as well as formal training in any incremental improvements made to the system over time.