Can Barcoding Inventory Reduce Costs and Improve Efficiency?

What is the benefit of using a barcode label on a company’s inventory of finished goods? Can using barcodes help a company reduce its inventory carrying costs? More importantly, what are these carrying costs and how does using barcodes help a company win more business?

Barcode up, Fishbowl Inventory BlogA company’s inventory carrying costs are typically 3% of its inventory value on hand. These carrying costs include the costs of managing the warehouse, paying rent, financing inventory, inventory obsolescence, inventory damage, as well as the incoming and outgoing freight costs on raw materials and finished goods. These carrying costs are largely driven by two factors:

1. The company’s costs to hold inventory without sales.

2. The costs of losing sales because inventory counts are too low.

Granted, it’s extremely difficult to find that middle ground. However, using barcodes makes finding that aforementioned middle ground a much easier process. Therefore, can using barcode labels really make a difference? It can, and here’s why.

  • Update Inventory in Real Time: Using a barcode scanner to track incoming and outgoing shipments of finished goods means the company’s inventory system is always operating in real time. Updates are immediate, accurate, and a real reflection of current inventory counts. Now, does having more accurate inventory counts allow sales to close more business? Yes. Does this improved efficiency help to distinguish the company’s value proposition? Absolutely. A more accurate inventory system means a more accurate estimate on delivery times, a clearer definition of inventory costs, and, most importantly, a better overall price to market.
  • Maximize Economies of Scale: Barcoding inventory allows companies to use their economies of scale to lower their purchasing costs. A more accurate inventory means the company is able to amalgamate its volumes to secure cost reductions. However, it’s not merely about reducing the company’s purchasing costs, but also about reducing the company’s incoming freight costs by using its economies of scale. Now, can these savings be used to secure more business with customers? Definitely. Lower costs ultimately mean a more competitive product offering.
  • Minimize Inventory Financing: Inventory costs increase over time. An accurate inventory means a company buys exactly what’s needed to meet current customer demand. Using barcode scanners helps to reduce inventory financing by ensuring the company doesn’t purchase more than it currently needs. These reduced financing costs can then be passed on to customers in the form of better prices.
  • Reduce Inventory Damage and Obsolescence: Inventory damage occurs when warehouse space is compromised. Obsolescence can become an issue when companies purchase too much inventory. The effects of both of these cost drivers are immediately reduced when companies upgrade to using barcode labels. They have a more accurate picture of their sales forecasts, customers’ demand patterns, and raw material requirements.
  • Improve Operations Management: Upgrading a company’s inventory management through barcodes and barcode scanners implies the company is working through an enterprise mobility solution that improves its entire operations. The company’s sales team can then use rugged handheld computers and mobile devices to better manage and service customers. Now, does more accurate inventory mean that a company can close more sales? Does having a better view of inventory costs and pricing mean that a company’s sales team can be more proactive when making deals? The answer to both of these questions is a resounding yes, it can!

Despite the benefits of using barcoding technology, some companies rationalize their decision to stick with manual inventory processes. These are the companies that decide to run inventory on Excel spreadsheets, and do so simply because the cost of an upgrade seems hard to justify. However, when companies measure these aforementioned benefits, it becomes readily apparent that barcoding inventory helps to improve efficiencies, and it’s these efficiencies that help companies close more business.


About Jessica W

Jessica is a specialist in barcode label technology. When she is not writing for, you can find her cooking up a storm in her kitchen.
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One Response to Can Barcoding Inventory Reduce Costs and Improve Efficiency?

  1. Great article! I have found implementing a barcode system and the benefit of managing inventory in real-time has been the biggest boon to business. There’s nothing worse than telling a client that we have their item in stock and then finding out we don’t.

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