Building the Most Efficient
Distribution Facility, Bar None

February 1998
BY SUSAN KEEN

St. Louis Business Forms helps a bath and beauty supplier look its best with bar coding systems.

A manufacturer and distributor of bath and beauty supplies in the St. Louis area installed a bar coded inventory control system in its warehouse in the early 1990s. The system has saved the company time and money. Prior to bar coding raw materials, it wasn't uncommon for a production manager to spend 45 minutes walking around the company's 25,000-square-foot warehouse searching for materials. Now managers can locate items in seconds. The system also has streamlined shipping operations. If Wal-Mart places an order for shampoo and loofah sponges, the company can fill the order and ship it the next day.

"When we started down the bar coding path, we had zero computers in the warehouse," says Joel Lawrence, IS director for the distribution company. "The shipping function was just that. We manually wrote out orders and sent them off. Now it's all on-line. We have a fully automated warehouse." The benefits are substantial. The bath and beauty supplier has increased sales by 200 percent in the past five years, according to Lawrence, thanks in part to bar codes.

Lawrence's company installed its bar coded inventory control system with the assistance of St. Louis Business Forms Inc., a distributorship in Fenton, Mo. St. Louis Business Forms also set up two other bar coded systems at the bath and beauty supplier: Universal Product Code labels for packaging and compliance labels for shipments.

Bar coding clearly has benefited the distribution firm, and it's been equally advantageous for St. Louis Business Forms. The business printing distributorship entered the bar coding market six years ago as a $750,000 company. "I took bar coding under my wing and pursued it," says Kent Rustad, a sales rep with St. Louis Business Forms who sells bar coded systems to the bath and beauty supplier and other customers. "As it grew, our company grew." Today, the print distributorship's annual sales are $3.5 million, with about 45 percent of its sales in bar coding. It supplies customers bar code equipment, including printers and scanners; bar code production software; and consumables, including thermal transfer labels and ribbons.

Creating Internal Efficiencies
When the bath and beauty supplier decided to implement a bar coded inventory system, it housed raw materials and finished goods in a single warehouse. As the company grew, it opened a 30,000-square-foot warehouse in downtown St. Louis and a 25,000-square-foot warehouse in an industrial park. The distribution side of the company employs about 200 people, 60 of whom use the bar coded inventory system. With three locations and a large number of employees involved in inventory control, accurate and timely inventory tracking were imperative.

The bath and beauty supplier bar codes all raw materials upon arrival and finished goods as they leave the manufacturing plant for storage in the warehouse or shipment. Initially, St. Louis Business Forms installed a portable batch bar code system, using the customer's AS/400 computer. With a batch system, data is collected in portable terminals and transmitted later in blocks to a host computer. Rustad supplied four SATO label printers, two in the shipping area and two in production, for the client to produce 4 x 1-inch thermal transfer labels with Code 39 bar codes representing the item number of the materials or finished product. The bath and beauty supplier purchased 12 Unitech scanners and PSC laser guns to read the bar codes.

The batch system didn't allow for real-time inventory tracking, however. As the company grew, it needed access to up-to-the-minute information. So Rustad suggested the firm install a radio frequency system for data collection. RF technology transmits data collected by bar code scanning devices over radio frequencies immediately rather than through a wire network. To operate an RF system, the bath and beauty supplier required new equipment. Rustad took the Unitech and PSC equipment back on trade and installed eight Norand 1740 hand-held laser scanners and master radio transmitters and receivers (a radio frequency base station) in two of the company's warehouses. The customer's AS/400 computer controls the RF base stations.

When raw materials arrive at the bath and beauty supplier, warehouse employees enter a part number, location where the materials will be stored and quantity in the computer. They print bar coded labels encoded with this data and place them on the materials. The warehouses have more than 10,000 bin locations, each with a bar coded shelf label indicating the location. As materials are stored, employees scan the bar coded labels on the materials and on the shelves so the location and quantities of all materials are recorded. When materials are removed from the warehouse for use in production, employees scan the location label and record the quantity taken in the hand-held scanner to update inventory records. Similarly, when finished products leave the manufacturing area, they receive a bar coded label indicating their warehouse location or the shipping dock if they're to be shipped immediately.

The bar coded inventory control system has proved invaluable to the bath and beauty supplier, which moves more than 500 skids of materials daily and ships about 400 skids to merchandisers each day. "The thing that drove us initially was a need for internal efficiencies," says Lawrence. "After we saw internally how bar coding helped us, we were able to turn our efforts outward toward the large merchandisers."

Meeting Customer Needs
To sell to large retailers such as Wal-Mart and Target, the bath and beauty supplier must bar code all products and shipments. The company offers nearly 1,000 products, all of which require a Universal Product Code for point-of-sale scanning. The UPC bar code, which identifies the product and the manufacturer, allows for automatic retail transactions and helps stores track their inventory.

Many of the bath and beauty supplier's high-volume items include a UPC code directly on the packaging, but smaller volume products often are marked with labels containing a UPC bar code. These 2 x 1-1/4-inch thermal transfer labels are produced on blank pressure sensitive stock supplied by St. Louis Business Forms. After Rustad's customer manufactures a product, employees print labels with the UPC bar code and a corresponding human readable number. St. Louis Business Forms supplied eight SATO 8400 thermal transfer printers and T.L. Ashford bar code production software to produce the labels.

The bath and beauty supplier also must meet compliance labeling requirements on shipments to merchandisers. Most large retailers have adopted compliance standards for bar coded labels on shipments to make their receiving, routing and inventory tracking more efficient. "All the big retailers send out a form with the format of the label and information they need," says Rustad. Distributors and clients must keep in contact with retailers about the standards. "Compliance labeling is not constant," says Rustad. "Retailers are continually changing their requirements."

When the customer first began compliance labeling, warehouse employees prepared shipments for retailers by keying the shipment number and other data into the computer, which in turn generated a 4 x 6-inch label for each box. Most of the bath and beauty supplier's shipments include 300 to 1,000 boxes. Depending on the retailer, the labels included Interleaved 2 of 5 or Code 128 bar codes encoded with the "ship from" and "ship to" addresses, the part number, quantity per case, item number and serial number. Next to the bar code, the labels also included the equivalent human readable information. In addition, Rustad supplied his customer two PSC hand-held verifiers to check the quality of bar codes.

Maintaining Effective Bar Code Systems
As compliance labeling gained popularity, the bath and beauty supplier became bogged down in bar code labeling. Finished products often underwent three bar coding processes: one to add the company's internal inventory label, one to add the UPC label and one to add the shipping compliance label. Rustad and Lawrence simplified the process by combining the internal 4 x 1-inch inventory label with the 4 x 6-inch shipping compliance label. The bath and beauty supplier now uses one 4 x 3-inch label for both purposes. "The key to a good bar code system is to work with the IS people and the actual users of the system," says Rustad. "It's imperative to get input from all sides so as to modify and simplify the system as time goes on."

Rustad and Lawrence integrated the company's internal inventory system and the compliance labeling system, so the data required by the company and its retailers is encoded in one bar code. The bar code appears on the bottom of the compliance label. The top of the label, containing the human readable data, is color-coded to simplify the bath and beauty supplier's inventory tracking. For example, hairbrushes are marked with light peach labels while loofah sponges receive red ones.

Despite streamlining, the bath and beauty supplier still uses large volumes of labels and ribbons. This is where Rustad profits. "The key to profits is not the equipment or the software," he says. "Those are a one-time sale. The key is the supplies." In 1997, Rustad sold the bath and beauty supplier 1.3 million thermal transfer labels and 820 ribbons. But his job doesn't end with the sale. Service is critical to effective bar coding systems.

The customer is on a forms management program, so Rustad checks and restocks consumables weekly. He also meets once a week with customer contacts, including the IS Director, the general manager, members of the purchasing department and key employees who use the bar coding equipment. During the meetings, he ensures that the bar coding systems are running smoothly and ascertains any needs. For instance, if Kmart advertises a sale on skin care products manufactured by Rustad's customer, then the company will probably increase shipments to the retailer, so Rustad delivers more labels.

Once a month, Rustad examines the bar coding equipment, including printers and scanners. He checks to see that all the printheads are functioning properly and cleans them. In addition, St. Louis Business Forms services any malfunctioning equipment at its offices. Sales reps are trained to handle minor repairs, and the distributorship also employs a technician. Part of the reason employees are versed in customers' equipment is because the distributorship uses much of the equipment it sells internally to produce bar coded products for clients in its service bureau. "You can't install systems and help customers unless you get your hands on [the equipment]," says Rustad. Suppliers also help Rustad and other sales reps learn about bar coding. And distributorship employees read publications about bar coding and the computer industry to keep abreast of advances in the industry.

St. Louis Business Forms strives to be a comprehensive supplier of bar code systems and services. It seems to have achieved its goal. "They're a one-stop shop. We get our forms, labels, SATO printers and ribbons all through St. Louis Business Forms," says Lawrence. "I am able to bundle all my printing needs and go to one vendor. They make it easy."

Susan Keen is managing editor of FORM Magazine.

Entering the Market a Step-or Bar-at a Time
St. Louis Business Forms, Fenton, Mo., was a traditional forms distributorship when it entered the bar coding market in 1992. It eased into the technology by installing a portable stand-alone printer from Esselte Meto to produce bar coded labels in-house. After experimenting with that printer, it installed SATO printers with links to the distributorship's PCs. Then, the firm partnered with a software company and began selling bar coded labels. Now St. Louis Business Forms runs a service bureau to produce labels with variable imaging and bar coding for clients, or the company will install equipment at clients' sites. St. Louis Business Forms employs a technician who has experience in bar coding and computers to run the service bureau and help sales reps with bar coding systems service.

Kent Rustad, a sales rep with St. Louis Business Forms, encourages distributors to start with simple sales. "Start at the beginning with what you know," he says. "A lot of distributors know labels-adhesives, substrates and so on." Next, Rustad recommends learning about thermal transfer and direct thermal products. Then experiment with bar code production software. Also consider partnering with technology companies, he says. "A distributor's biggest advantages are the relationships he has with customers and his knowledge of consumables," says Rustad. "Build on those."

Company Capsule
Company: St. Louis Business Forms Inc.
Location: Fenton, Mo.
Founded: 1969 by William Raible, owner
President: Joseph Raible
Employees: 12 full time
Annual Sales: $2.9 million in 1996; projected more than $3.5 million in 1997
Year Company Entered Bar Coding Market: 1992
Percentage of Sales in Bar Coding: 40 to 45 percent, including sales of bar code equipment, such as printers and scanners; bar code production software; consumables, including thermal transfer labels and ribbons; and consulting services.

Techno Talk — Dissecting the Code
Bar codes are composed of patterns of alternating dark bars and white spaces that represent characters in a message. The message is contained in the relative widths of the bars and spaces. There are several types of bar codes, called symbologies. Deciding which symbology to use depends on the application and the industry. Here are explanations of four popular symbologies:

Code 39
Description: Code 39, the most popular industrial code, is a one-dimensional symbology. It is alphanumeric, bidirectional (can be scanned in either direction) and discrete (the space between characters is not part of the code). Code 39 contains 43 characters-the letters A through Z, numbers zero through nine, plus seven punctuation marks. It is a variable length symbology with nine elements per character. These elements are comprised of five bars and four spaces.

Applications: U.S. Department of Defense (LOGMARS), automotive industry (AIAG), health industry and textile industry.

Interleaved 2 of 5
Description: In the Interleaved 2 of 5 symbology, both the bars and spaces carry data. (When spaces are part of the code, the symbology is referred to as continuous rather than discrete). It's called 2 of 5 because each of the six digits encoded in the symbology has five elements (bars or spaces), two of which are wide. It is a bidirectional, variable length symbology that encodes numbers only. There must always be an even number of digits in the symbol. In an encoded series of numbers, odd-numbered digits are represented in the bars and even-numbered digits are represented in the spaces, creating an "interleaved" pattern.

Applications: Airline industry (baggage tickets) and distribution (shipping container marking).

UPC
Description: The Universal Product Code is the symbology with which most people are familiar since it appears on items in supermarkets and retail stores. UPC is a fixed length, numeric, continuous symbology. There are five versions (UPC-A through UPC-E), but UPC-A is the most common. UPC-A, used for grocery items, non-prescription drugs and health and beauty products, has a field length of up to 12 digits, each comprised of two bars and two spaces. These digits are split by center bars into left and right data fields. The left data field includes six characters: a 1-digit number system character (identifying the UPC version-"O" for Version A) and a 5-digit manufacturer's code (assigned to product manufacturers by the Uniform Product Code Council). The right data field encodes five characters, which represent a manufacturer-assigned item number or stock keeping unit (SKU). The remaining character is a required check character used to check the accuracy of the bar code read.

Application: Retail industry.

Code 128
Description: Introduced in 1981, Code 128 is gaining popularity and replacing Interleaved 2 of 5 and Code 39 in many warehouse and distribution applications. Code 128, a continuous, bidirectional symbology, can encode the entire ASCII 128-character set as well as four additional non-data characters. Every character is composed of two digits and begins with a bar and ends with a space.

Applications: Warehousing and distribution.