A Cost Benefit Analysis of Barcoding

Besides the cost of the solution, including the printers and labels, scanners, and software, the cost justification for an Auto ID system can be a tricky. Prevailing wisdom says that a barcode system pays for itself in less than two years, but this figure is dependent upon a company’s commitment to enterprise-wide implementation and adoption of the new barcoding technology. And to be honest, this “two year” argument alone is often not enough to get buy in from your company’s decision makers.

Barcoding only increases your profit margin when supported by improved processes. When considering barcode implementation, every possible process improvement should be evaluated. There are some obvious improvements that can be achieved by implementing AIDC systems, such as placing barcodes on retail goods to keep employees from manually entering each SKU number – this increases both productivity and accuracy. There are also several new capabilities and controls that appear from the improved data management achieved by implementing a barcoding system, such as Enterprise Resource Planning (ERP), wireless networking options, and RFID smart labels (human-readable label embedded with a computer chip that acts like a portable data file for the product at hand).

So what type of metrics should you be using?

You know you need to measure return-on-investment for any solution you implement. What metrics are measured to determine success may be different for every company. On average, our customers report to us the following metrics within the first 12-24 months of implementing our solution:

  • Sales order handling: in one use case, order handling time was up 2x over past years.
  • Shipment accuracy rate: businesses report up to 20% more accurate shipments.
  • Customer lead time: we have heard of companies experiencing 50% better customer lead time.
  • Warehouse distribution efficiency: can average from 10% to 20% improvement
  • Inventory accuracy: companies are commonly reporting back that they are achieveing 99.9% accuracy across the board
  • Quality control: 75% reduction in damaged and defective goods
  • Employee productivity: look for a lift of 30% or higher in worker productivity
  • Cost of moving product: is down anywhere from 10% to 20%

The initial cost savings companies discover after implementing an Auto ID system include: labor cost reduction, improved customer service and supplier response times, inventory management, space management, and equipment costs.

In addition to the apparent savings, each of these areas also produces several hidden savings that must be considered during the cost analysis, though the answers may not surface until the implementation is complete. We call this the “iceberg effect”.

Opportunities will emerge as the use of AIDC and barcoding gains synthesis with operations

Once the data entry in production is automated, you can begin to ask more pointed questions.

  • Can production be sped up?
  • What is the best way to deliver customized solutions while aiming for process uniformity?
  • Once inventory is monitored in real time, can we achieve a more lean inventory and trim warehousing costs?

Dynamic Systems, Inc. helps you measure ROI and gain visibility so you can achieve operational excellence.

Through comprehensive reporting, our customers are able to quickly determine how well they are meeting their goals. We also provide the tools to determine which areas of your business you could focused on to maximize return.

If you have questions regarding Dynamic Systems, Inc. AIDC software or our Barcode solutions then contact a sales representative today!

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