Bar Coding system in Inventory Costing

2. Topic: Bar Code Reading
Class : BS 3rd Semester
Discipline: Accounting and Finance
Institute : Govt. College of Commerce,
Qasimpur Colony Multan
Course: Cost Accounting (ACC207)
Instructor: Ghulam Haider

3. Need for Bar Coding
A large number of inventory transactions may be associated with a single
inventory item, such as a receipt, transfer to a storage location, pick from
stock, and so on.
The recording process of each of these transactions involves the entry of an
identification number, location number, and quantity - at least.
Each recording event presents the opportunity for an error to be recorded.
When aggregated across the entire inventory, the result can be quite a large
number of errors in the inventory records.

4. Overview of Bar Coding
An excellent solution to the inventory error problem is to record inventory
transactions with bar codes. The essential process flow when using bar codes
is to create an identifying bar code when an inventory item is received or
produced, and attach the label to the item.
There are also location bar codes affixed to each storage location. When a
warehouse person moves an inventory item, the part number and location
are scanned, and the quantity being moved is entered.
Ideally, this data entry is conducted using a portable data entry terminal that
can be carried through the warehouse, and which automatically uploads the
transaction information to the central computer system for immediate record
updating.

7. Issues in Bar Coding
Bar coding is highly recommended. However, there are some issues to be
aware of, which are:
Wrong bar code. The information used to create a bar code may be
incorrect, in which case all subsequent scans of that bar code will result in
the recordation of incorrect information. This issue can be mitigated by also
printing the information in plain text just below the bar code, which can
then be examined for mistakes.

8. Issues in Bar Coding (Continued)
 Equipment breakage. Portable data terminals are expensive, and can break. If
so, the replacement cost could be several thousand dollars.
 Missed or incorrect scans. The warehouse staff may not use the equipment
correctly (or at all), resulting in inventory record accuracy issues. This
problem can be mitigated with the use of ongoing training and periodic audits
of the inventory records.

9. Electronic Data Interchange
 Electronic Data Interchange (EDI) is the electronic interchange of business
information using a standardized format; a process which allows one company
to send information to another company electronically rather than with
paper. Business entities conducting business electronically are called trading
partners.