Wasp Barcode Inventory Management White Paper User Manual

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Taking Stock of Your Inventory

Automated Technologies Boost

Productivity, Cut Expenses

Taking Stock of Your Inventory

Introduction

Whether you're looking for a printer cartridge or medical vial stored in the supply closet; searching
for an installation part in a warehouse or seeking a box of the high-end sunglasses promoted in your
boutique's latest newspaper ad, inventory management is a critical component of any small or
midsize business. However, many business owners do not fully realize the costs associated with poor
inventory management, or the potential opportunity for improvement.

Inventory management, after all, requires a delicate balance. You must carry enough stock to satisfy
customer demands, yet overstocking can tie up valuable working capital, create inefficiencies and
lead to write-offs of yesterday’s fads. You don't want your maintenance staff sitting idly as they await
delivery of repair parts, nor do you want your warehouse to resemble General Motors. Today's
technology empowers you to focus on your business while simultaneously ensuring that you maintain
the right amount of inventory, office supplies and repair parts without over- or under-investing.

Taking Inventory

Inventory organization alone is critical. Add up the minutes, even hours, employees spend searching
for stock or supplies, and this effort becomes seriously expensive. If they cannot locate an item,
employees often will order replacement inventory, incurring rush-shipping charges, and the
additional expense of the redundant stock item. In the medical field alone, the average healthcare
organization wastes more than $1 million in supplies each year, noted Linda Leekley, RN, and
President of In the Know.

In the retail sector, inventory inaccuracies contributed

nearly 15% – or $5.59 billion – in losses.

- 2008 National Retail Security Survey Final Report

inventory inaccuracies due to administrative and paperwork errors contributed nearly 15% –
or $5.59 billion – in losses, according to the 2008 National Retail Security Survey Final Report.

As a rule of thumb, yearly inventory carrying cost is between 25% and 35% of the average value of
stocked inventory. Therefore, if your retail business stocks an average of $100,000 of inventory, your
annual carrying cost is $25,000 to $35,000. At a 15% loss rate, your organization has just incurred
an expense of $3,750 per year due to missing inventory.

Tabulate the tens of thousands of
dollars a business can all-too-easily tie
up in inventory, and it quickly becomes
apparent that inventory consumes
precious capital, becoming a huge
drain on cash flow. In the retail sector,

Unfortunately, the costs don't end there. If retailers and distributors don't pay careful attention to
their inventory, they also have to pay for storage for excess inventory, deal with obsolete inventory,

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handle write-offs, cope with tax issues and depreciation, combat cash-flow and loan problems, and
face unnecessary expenses.

Consider, too, the negative impact on your customers as delays unfold. Unmet expectations may
damage your company’s reputation and, at worst, frustrated customers may turn to other suppliers
to satisfy their requests. When you also take into account the tasks that go unaccomplished as
employees scramble to find the toner, valves or sunglasses, it soon becomes clear why accurate
inventory-tracking is so critical to your business' success.

Fortunately, even small and midsize businesses can tap into today's technology to ensure they are
cost-effectively managing their stock of products for resale, internal use, repair and temporary usage.

The State of Inventory Management in Business

Progressive businesses have used inventory warehouse management systems (WMS) for years –
driving costs out of their supply chain, improving efficiency in their warehouses, and flowing
increased profit to their bottom line. A study by Aberdeen Research indicated companies with a fully
automated WMS system showed efficiency improvements well over 10%, with pick rates and
shipping accuracy rates of 99%. Further, when labor is factored in, these best-in-class companies
enjoyed reduced labor costs year-over-year compared to their peers, who incurred annual labor
increases in excess of 5% each year.

How Small Businesses Commonly Track Inventory

2%

3%

4%

32%

Source: Wasp customer survey June 2010

inventory tracking system. Interestingly, 23% didn’t track inventory at all. Some tried to use
inventory functionality in their accounting system. Thirty percent resorted to manual methods using
pen and paper, and 32% turned to spreadsheets or general purpose database software.

6%

23%

30%

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In spite of these benefits,
many small businesses don’t
track inventory using an
automated system, often
perceiving such systems as
unaffordable or unnecessarily
complicated for basic
inventory management. In a
recent survey of small
businesses by Wasp Barcode,
more than 80% of their
customers had not used any
type of automated system
prior to implementing an

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