Are pen-and-paper or Excel spreadsheets no longer cutting it for your inventory management needs? Are you looking to take your processes to the next level? Implementing a barcode inventory system into your inventory tracking process may be just what you need.

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Barcode inventory systems are a combination of processes, inventory management software, and scanning and printing hardware. It helps you transition from a manual, periodic inventory system to a continuous one.

Barcode inventory systems are a type of perpetual inventory system, as you can keep your stock quantities updated regularly rather than counting them at designated times. Set your SKUs, update stock levels as soon as you receive products and automatically subtract stock when you sell or move items. But we’ll get into all of that more throughout this article.

What This Guide Covers

• What Is a Barcode?
• SKU vs. UPC
• Advantages and Drawbacks
• How To Start
• Software and Hardware
• Key Considerations
• Conclusion

What Is a Barcode?

Barcodes are visual representations of data. They use a combination of lines, blank space, dot patterns and shapes to store different information. To read and translate barcodes into digestible data, you need an optical scanner connected to software. The scanner deciphers the image and pulls up data.

Depending on the barcode type, the information can be anything from hard data to websites, videos, images and audio. There are two main types of barcodes: 1D and 2D.

1D Barcodes

1D, or one-dimensional, barcodes are the more common of the two types. This barcode type is typically found on most consumer products, whether as part of the label (on a can of food) or on a separate tag (clothing items). Nearly everything you buy has a 1D barcode.

These barcodes are vertical black lines on a white background, often accompanied by a unique number sequence. In addition to white space between the vertical black lines, they generally have a blank white border to reduce the chance of a scanner picking up alternate information that could confuse the software.

Example of a 1D barcode. Source

1D barcode types include:

• EAN-8
• EAN-13
• Code 128 and EAN-128
• UPC-A
• UPC-E
• Code 39
• Code 93
• Industrial 2 of 5
• Interleaved 2 of 5
• DataBar
• MSI Code

While there are additional 1D barcode types (e.g., Code 11, primarily used for telecommunication, or Codabar, primarily used for blood bank forms), these are the main types used for retail and internal inventory management.

1D barcodes are vital to businesses with high SKU quantities. They streamline inventory management by eliminating manual tracking and improving count accuracy.

2D Barcodes

Where 1D barcodes use vertical (or sometimes horizontal) lines and numbers, two-dimensional barcodes use a combination of dot patterns, squares and other shapes to represent data. Due to the complexity of these visual data representations, 2D barcodes can store much more data than 1D barcodes, including websites, images, audio and more.

QR Codes are a great example of 2D barcodes that most people are familiar with, especially post-pandemic.

Take restaurants, for example — as businesses began to open post-lockdown, they sought to implement social-distancing and health-conscious practices. One of which was for restaurants to provide QR codes instead of physical menus, so patrons could scan them and access the menu on their personal devices.

Example of QR Code. Source

2D barcode types include:

• QR Code
• MaxiCode
• Aztec Code
• PDF417
• Data Matrix

Due to their complex, robust nature, 2D barcodes are often used for purposes other than retail, inventory and warehouse management, such as shipping and travel.

There’s also GS1 Composite Code, a hybrid that utilizes a 1D linear component and a 2D composite component.

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SKU vs. UPC

You may hear UPC and SKU used interchangeably, but there are some key differences. In fact, many barcodes contain a UPC and SKU.

SKUs, or stock-keeping units, are unique codes that individual retailers and warehouses use to track and manage inventory. These codes are generally 8–12 alphanumeric characters long, and they store information for products, including price, dimensions, color variations and other defining characteristics.

UPC, on the other hand, stands for universal product code and consists of two components: a scannable barcode and a 12-digit number. The Global Standards Organizations issues UPCs. These codes store manufacturer and product information. As the name implies, they’re universal and persist across companies.

Barcoding inventory software and hardware let you create unique SKUs for your business and translate UPCs.

Advantages and Drawbacks

Implementing barcoding inventory management can do wonders for your business, especially as you grow. There are a couple of major benefits this type of inventory tracking offers:

Barcoding systems and software help you reduce human-made errors, save time and money, and access more data on the fly. Manual inventory counting can lead to lost inventory, incorrect counts or shortages.

Let’s take a closer look at the advantages and drawbacks of these systems.

Advantages

Barcoding software provides various benefits to your inventory management processes. Generating data, automating tasks and improving efficiency are just a few of these solutions’ benefits and more than enough to begin making your case to investors.

While the benefits mentioned below aren’t exhaustive, they’re the groundwork for getting your staff and investors on board and, more importantly, for your (non)monetary ROI.

• Provide and Access More Data: Barcodes can store more information in a smaller space than a traditional label. You can include prices, stock quantity, descriptions and attributes, and receiving, shipping and expiration dates on every item in your inventory, to name just a few data points.
• Improve Decision-making: Instant data access is a game-changer when it comes to making business decisions and strategizing how to reach your goals. Simply scanning a barcode lets you pull up everything you need to know (you did set the data points, after all) for a particular item. You don’t have to sift through spreadsheets of data or, worse, paper records.
• Limit Training Time: Barcodes and scanners are commonplace. Some scanners run continuously while active, and others are button-operated — regardless, most people interact with barcodes at some point in their daily lives. With hardware familiarity, all that’s left is to train your employees on using the software.
• Reduce Human Error: Automate inventory tracking to minimize manual data entry needs. Automating tasks helps you avoid costly errors from illegibility, tired or inattentive employees, and lost or damaged paper records.
• Streamline Processes: Working with barcoding hardware and software lets you update your records instantly. Scan the barcode to review and edit old information or add new data, hit send, and voilà, you just updated the information in your system.
• Save Time: It helps you save time by drastically reducing your time on manual inventory counts. Manual inventory tracking is time-consuming, particularly for businesses with large stock quantities. You can scan a barcode to update inventory numbers instantly, letting you manage various products in the time it would take to count one manually.

Drawbacks

Barcoding inventory systems offer some great benefits, but they do have some drawbacks to consider as well.

While the benefits outweigh the drawbacks of these systems, it’s still important to be aware of them:

• Setup Time: They’ll save you time and effort in the long run, but they do initially take time to set up. You’ll need to create unique SKUs for each product and label them. It’s a lengthy process to begin with, especially with a large inventory, but it will pay off down the line.
• Staff Vigilance: The systems’ accuracy and effectiveness rely on your staff’s vigilance. If they don’t scan items as they’re received, shipped, sold, moved, etc., your counts in the software may be off. This can lead to some costly mistakes, such as over- or under-ordering products.
• Initial Costs: Although these systems can undoubtedly save you money in the long run, they come with high upfront costs. You need to purchase software and hardware to set this system in motion. Having one without the other won’t do you any good.
• Ongoing Maintenance: Accidents and malfunctions happen. Because this system relies on hardware to keep your inventory up to date, you’ll need to fix scanners and printers immediately if and when they stop working.

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How To Start

The process for developing and implementing your barcode inventory management system is fairly straightforward. Still, it’s good to have a clear plan before you dive into any new processes. Let’s take a look at how you can get started with barcode inventory. The steps include:

1. Select your software
2. Define your SKUs
3. Pick a barcode type
4. Create the barcodes
5. Apply the barcodes to your inventory

Select Your Software

While you can start defining your SKUs before selecting a solution, we recommend choosing your barcode inventory management software beforehand for one simple reason — you can define your SKUs directly in the system, rather than uploading them all after software implementation.

Software selection is never a simple task, but it’s more and more vital to a successful business strategy these days.

First, you’ll want to meet with all concerned parties to develop a detailed inventory management requirements list. Jot down the features you need vs. the ones that would be nice to have, your preferred deployment type and the support type you’re looking for from a vendor.

Once you’ve identified your requirements, you can begin shortlisting vendors. Check out our inventory management comparison report to find products that match your requirements.

After you’ve shortlisted some vendors, reach out to them. Ask questions and see if they offer a demo or trial version. A product must match your requirements on paper, but it really comes down to its usability. A system that looks perfect on paper but doesn’t meet those needs when you put it to use won’t do you any good.

Finally, don’t stress. We’re here with all the tools and services you need to streamline your software selection journey.

Define Your SKUs

Now that you’ve found and implemented a product, it’s time to start defining your SKUs within the system. No matter what your industry, you can start by including a few key details for your products, including:

• Price
• Minimum reorder thresholds
• Size and weight dimensions
• Physical descriptions (such as color variations, designs, etc.)

Alongside your SKUs, you’ll want to ensure you have your UPC data in the system. Some products may come with a built-in UPC catalog, while others simply let you scan in UPCs from your inventory. Either way, make sure you have the correct UPCs in your database.

Pick a Barcode Type

Once you’ve created your SKU and UPC database, you’ll need to decide what type of barcode you want to use. As we mentioned above, there are two main types: 1D and 2D. But there’s a range of options available for both types.

Take some time to consider your needs on this front. Depending on the information you want to store, you may need a simple 1D barcode or the complexity of a 2D barcode to log more information.

Create the Barcodes

Your system is up and running, you have a full database of SKUs and UPCs, and you’ve landed on either 1D or 2D barcodes — great! Now it’s time to start creating barcodes for everything. Just select the SKU you want and generate a barcode for it.

We’ll get into this a bit more later, but you’ll need a barcode printer connected to the system. If you have one, it’s as easy as generating the barcode and hitting print.

Apply the Barcodes to Your Inventory

Last but not least, start tagging your inventory with the newly-created barcodes. You’ve done the hard work up to this point. All that’s left is to make sure you add the appropriate barcode to each item and make sure it’s in a visible location, so you can easily scan it again later.

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Software and Hardware

Let’s take a moment to discuss barcode inventory software and hardware. Unfortunately, due to its nature, you can’t avoid purchasing hardware for this system to work. Creating barcodes in the software doesn’t do you any good if you can’t print the barcodes to attach to products and then scan them later on.

With that in mind, you may look for vendors offering package deals on software and hardware. You can buy them separately, even from different vendors sometimes. But this can be risky, as you must ensure the printer and scanner you buy are compatible with the platform. Buying them together gets rid of that headache and can often help you save some money.

Let’s take a look at some hardware considerations and key software features.

Hardware

There are two essential hardware components you’ll need to really optimize your supply chain management processes with a barcoding inventory system — scanners and printers.

Barcode scanners come in various shapes and sizes. Choosing one really comes down to your practical needs for the system. In a broad sense, you need to decide if you want stationary scanners, hand-held scanners, a mobile app with scanning capabilities or a combination.

• Stationary Scanner: These scanners can be great if you don’t need mobility while you’re scanning. Retail stores and supermarkets use stationary scanners to check out customers. More often than not, though, you’ll want some mobility for your inventory needs. Stationary scanners are better paired with POS software and processes than inventory tracking.
• Hand-held Scanner: These scanners come in handy when you need to move around your store or warehouse while accessing and editing information. Be aware, though, that some hand-held scanners aren’t as mobile as you may need them to be. Look for a wireless scanner to truly gain freedom of movement. Otherwise, you may find yourself lugging a laptop around your warehouse floor while you scan.
• Mobile App Scanner: The most portable scanner comes in the form of a mobile application for your smart devices. Many vendors offer native mobile apps, so you can use a smartphone to scan barcodes, update information, track inventory and do whatever else you need in the system from anywhere. Just make sure the application covers everything you need to do while scanning.

On top of scanners, you’ll also need a printer for your barcodes. Although some standard laser printers can print barcodes and labels, your best bet is a thermal printer. Thermal printers provide a higher image quality, which is vital when it comes to your scanners being able to recognize the barcode.

Software Features

Inventory barcode software products offer various features. Some you’ll need, some you won’t. With that in mind, make sure to list your requirements before you set out to find that perfect solution.

While your unique requirements will dictate the features you need, we’ve listed some core features for you to consider in your software selection process.

• Barcode Generator: Create unique barcodes for every item in your inventory, ensuring you keep information organized. You can access the information you need, when you need it, to track specific inventory products.
• Barcode Scanner: Barcode scanners come in various shapes and sizes, from mobile devices to stationary hardware. You’ll have to decide which type of scanner best suits your needs, but when you do, you can scan barcodes to interpret and store information in the software.
• Custom Labels: Create your own product labels, including design, information, barcodes, logos and more.
• Label Templates: Print built-in labels for common items or inventory that don’t require unique, detailed information.
• Receiving Labels: Generate receiving labels when shipping products. Whether sending inventory to warehouses or delivering items to customers, you can offer valuable information, such as fragile warnings, barcodes and more, before packages are unpacked.
• Shipping Labels: Provide critical information to transportation workers on handling and storing packages or where to deliver them.
• Inventory Management: Alongside product details, track inventory quantities, set minimum reorder thresholds, monitor product locations and more, to automatically update your system on all things inventory.
• Serial Number Tracker: Assign unique serial numbers to different inventory products in your catalog to simplify tracking.
• Mobile App: Turn your personal or company mobile devices into barcode scanners. Native mobile apps for barcode inventory software let you use smartphones and tablets to scan barcodes, update product information, track inventory and more from the palm of your hand.

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Key Considerations

Outside of your barcode inventory management system and hardware requirements, there are a few other key considerations to keep in mind: cost, RFID needs and integrations.

• Pricing: The price of barcode inventory software varies widely, depending on what you need. For example, standalone barcode inventory management software won’t run you nearly as much as one with integrated ERP tools, warehouse management modules or supply chain management suites.
• RFID: Barcoding and radio-frequency identification aren’t quite the same things. So you need to decide if RFID capabilities are also essential to your operations. Some barcode inventory solutions do offer RFID capabilities, but it’s best to check with vendors ahead of time rather than assuming.
• Integrations: Do you already have solutions in place that you don’t want to replace? For example, maybe you’re already using supply chain management software. You still need those capabilities, but you don’t want to overhaul your existing infrastructure. Check with vendors to see what platforms their solution integrates with.

You’ll certainly have some additional considerations based on your individual needs, but these are some universal points any organization can consider while looking to implement this inventory system.

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Conclusion

Look no further, if you handle large stock quantities and need to streamline your inventory processes.

Whether at a retail location or warehouse, implementing a barcode inventory system can make a huge difference in the accuracy and efficiency of your inventory tracking. There are ample ways to introduce this method into your processes between varying barcode, hardware and software types. The question shouldn’t be whether the system is beneficial but rather which tools and practices best suit you to reap the benefits.

Do you use a barcode inventory system at your organization? How has it benefited your inventory management processes? Let us know in the comments below!