Barcode Inventory System: A Small Business Guide

barcode inventory system with tablet scanning

One of the most important elements of efficient business operations is keeping track of your inventory. With a robust inventory system, you can access real-time data in one click, track stock levels, track product trends, and more.

A barcode inventory system is an easy way to manage all of this information. With simple codes and scanners, you can track every single item in your inventory and follow it throughout the logistics process, from intake to sale. You will know how many units there are, where they’re located, and everything that’s happening with every item at all times.


What Is a Barcode Inventory System?

Barcode inventory systems are common for commerce businesses and can be adapted by any enterprise that needs to track and manage items.

A barcode inventory system consists of a scanner and a database. The scanner reads the barcodes on your inventory, and the data is stored in the database. You can add information about each item—its name, where it was purchased from, how much it costs—for thorough record-keeping.

Barcode inventory systems are robust, efficient tools to keep track of what is in stock at any given time. They are especially crucial for businesses that sell items at retail, such as grocery stores, clothing stores, and toy shops.

You can also use a barcode inventory system to keep track of the shifting value of your items, which is helpful for businesses that sell expensive products, such as jewelry stores and electronics shops.

With a barcode inventory system, you can also track how much revenue each item has brought in over time.


Why Is a Barcode Inventory System Important?

A barcode inventory system is a way to manage all physical goods that you purchase and sell. Each item in your inventory is assigned a unique code or barcode that contains important details. The barcode is scanned at each step of the logistics process for instant tracking.

Speed up the Shipping and Receiving Process

A barcode inventory system can speed up the shipping and receiving process because you can quickly and accurately track the items in stock.

Once an order is placed, you can instantly locate the purchased items for packing and shipping. You can avoid human error, such as incorrectly shipped goods or low stock levels for your most popular items.

This inventory system will also minimize the time it takes for your team to sort the goods you receive from your suppliers. As each item is scanned into your system, you can quickly determine if your order is complete or if there are missing or damaged items.

You will save a lot of time and money by eliminating manual processes and maintaining real-time data on your entire inventory.

Ensure an Accurate Count of Inventory

A barcode inventory system is also a simple and effective way to ensure an accurate count of your inventory at all times. Once you apply a barcode to an item, it is immediately integrated into your system until it is sold.

The inventory database is updated in real-time with each scan in or scan out, so you can maintain accurate records of your stock levels. With this data, you can maintain optimum stock at all times, depending on the popularity of certain items and their seasonality.

You can also use your inventory system to track emerging trends in your niche, which products are selling well and which aren’t, and adjust your operations accordingly. You can launch an aggressive marketing campaign for slow-moving items or offer discounts and bundles so you can offload stock. You can also increase your purchase orders for fast-moving items so you can always give your customers what they want.

Robust inventory systems are crucial to avoid overstocking or understocking, which lead to wasted time, money, and items gathering dust on warehouse shelves.

Reduced Costs

When you have a barcode inventory system in place, you can reduce operating costs in various ways.

First, you can rest assured that your inventory data is accurate. If you’ve ever had to go through your warehouse and check your records against what’s on the shelves, you know how time-consuming that task is. With a barcode inventory system, you don’t need to do any manual tracking.

Second, you can access real-time inventory data with one click. You know when your supplier last replenished an item, how many items have been sold in the last month, the pricing changes you’ve applied, and more.

With this data, you can make better, data-based decisions about your business: what products need more attention from your sales team or marketing department, what items you need to order more or less of, the ideal stock levels for each item to meet customer expectations, and many more.

How Can a Small Business Set Up a Barcode Inventory System?

Setting up a barcode inventory system for your small business is a crucial step you must take as early as possible. By doing so, you can track all of your inventory, maintain optimum stock levels, and easily scale your operations in the future.

If you don’t have an inventory system yet, it is time to do so. Here’s how you can do it:

Step 1: Identify the Barcode Standards for Your Industry

Barcode standards are guidelines that govern how barcodes should be printed and read. There are several different types of barcode standards, each with its own requirements. Some of these standards are industry-specific, while others are global.

The first step in setting up a barcode inventory system for your small business is identifying which standards apply to your industry. Once you know these specific requirements, you can begin designing and implementing your barcode inventory system.

For maximal interoperability and minimal costs, use widely used and standardized barcode formats rather than custom or rarely-used extensions of standards that may not be very well supported by hardware and software. Here are the industry-specific barcodes you should consider:


Codabar barcodes are used in logistics and healthcare. They are often used for inventory tracking, where the code is printed on product packaging.

These codes are also used to track medical records or other essential healthcare documents, such as prescriptions or other patient information.

Code 39

These barcodes are used in the automotive and defense industries. They are most often used to label small parts and tools.

Code 128

Code 128 barcodes are used in supply chain management to identify products and track their movement from one location to another.

The barcode numbers are printed on labels attached to a product and scanned at each step of its journey. All information about the product is transmitted electronically and stored in a database.

Data Matrix

Data Matrix are linear barcodes used in electronics, government, and retail. Their small size, high density, and ability to encode large amounts of data make them an ideal choice for small product codes, serial numbers, model numbers, and more.

Because they can be read by most barcode readers, they’re also popular in industrial settings where speed is key.

European Article Number (EAN)

These barcodes, often 13-digits long, are used on retail products sold outside of North America. They are also known as “International Article Number” for that reason.

International Standard Book Number (ISBN)

Also known as “Bookland EAN-13”, these barcodes are used in publishing, for labeling books, eBooks and other printed materials, such as magazines.

Universal Product Code (UPC)

These barcodes are extensively used on retail products sold in North America. Most often these are 12-digits long.

Step 2: Define the Functions of Your Barcode

Next, decide what information you want to store in your barcodes. Depending on industry guidelines and standards for that type of data, different types of barcodes will meet your needs better than others.

For example, retailers should not embed the wholesale price of an item in its Stock Keeping Unit (SKU) barcode. Instead, they should use a system that automatically applies the current retail price when the SKU is scanned at the point of purchase.

Some of the most important information you could store in your barcodes include:

  • The name of your item and description
  • Product variations
  • Product category
  • Item cost at the point of purchase
  • Vendor information
  • Warehouse or store location

Because two-dimensional barcodes are more complex than one-dimensional ones, they can encode longer strings of text. The 1,500 characters stored in a Data Matrix code far exceed the minimal 100 characters that could be accommodated by most other types of linear scan codes.

Keep in mind that scanning is quicker and more accurate when the barcode has fewer than 800 characters.

Step 3: Choose the Right Software and Hardware

Your barcode inventory software will make or break the overall functionality of your system. Although you can download free barcode scanner apps on your smartphone or tablet, they will not have the functionality of a high-end model.

If you use your point-of-sale (POS) system to generate sales receipts with barcodes, it should be easy to use software to track inventory information.

If you use more specialized types of barcodes that are incompatible with your POS or accounting software—or if they’re just hard for employees to read—you will not be able to access crucial inventory management data. You can only reap the benefits of such a system if all elements are compatible and can work together to track critical inventory data at each step of operations.

Barcode scanners can cost anywhere from $25 to over $1,000, depending on the type of scanner you choose and your scanning environment.

Consider purchasing a handheld scanner if you’re using barcodes to track inventory. These devices are affordable and can be used anywhere in your warehouse or store. They are much less expensive than other types of scanners, which require heavy investment in hardware and software.

When looking for handheld scanners, make sure they are compatible with your current POS system or accounting software so that you can easily integrate inventory data into your existing systems.

Another option would be a flatbed scanner. These are often found in grocery or retail establishments that scan large quantities of items at a time.

You can choose between the following:

Wireless Scanners

These scanners instantly transmit data to your inventory management system so that you can access accurate, real-time information about all your products.

Wireless handheld and flatbed scanners are also great for businesses with multiple branches or locations. You can use the device to scan items at one branch and instantly transmit the data to locations where other employees can process it.

Portable Batch

These types of scanners store information that can be downloaded at a later date. Most portable batch scanners are designed to be used with a computer or laptop. They are ideal for businesses that need to update and upload inventory data regularly.


Fixed scanners include devices that attach to point of sale (POS) terminals or flatbed scanners, such as those found at grocery checkout stations.

Step 4: Implement Your Barcode Inventory Procedure

Inventory procedures must be standardized to ensure data accuracy at all times. If you enter garbage into your database, the output will also contain garbage—a computer science maxim known as “garbage in, garbage out” (GIGO).

These best practices include:

Defining Barcode Size and Placement

When barcodes are of uniform size and placed in the same location on products, boxes, or pallets, they can be easily accessed and read by your scanning devices.

Establish Your Key Performance Indicators (KPI)

Inventory management isn’t just about knowing what you have but also the ideal stock levels you must maintain. Calculate your inventory turnover ratio—the number of times your entire stock turns over in a year divided by the average dollar value per unit sold—to determine ideal stock levels and pricing.

Train Your Employees

An efficient inventory system doesn’t just teach employees how to use barcode scanners; it also establishes why it is essential to maintain the integrity of such a system.


The Takeaway

A robust inventory management system, such as Nest Egg, is crucial for efficient operations and business success. Aside from tracking items and stock levels, a barcode inventory system will help you track supply and demand, manage your cash flow, and take customer satisfaction to the next level.

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