Improving cash flow

By using bar codes for product tracking and the Internet for purchasing and payments, you'll get a better cash flow along with inventory accuracy.

By -- Modern Materials Handling, 5/1/2000

In my March column, I explained the importance of balancing material flow, information flow, and work flow. But as a friend pointed out, "The most beautifully balanced system in the world isn't worth anything if I don't get paid." He went on to say, "So now tell me how to use technology to improve cash flow."

Here's an answer: Two seemingly very different technologies, bar codes and the Internet, can work together to help increase cash flow by streamlining material flow and workflow because of improved information flow.

We all know that when the wrong item is shipped, the person blamed is probably the order picker. But the truth is that it could have been an order entry clerk or even the customer who transposed a number or misidentified what was ordered. In fact, many so called picking errors are caused by misidentifying the item when it was received into the warehouse or stored.

When a customer gets the wrong thing, he or she will withhold payment (slowing cash flow). We also know that when the wrong thing ships, our inventory is inaccurate. Inaccurate inventories cause people to keep more stock on hand and that takes up capital (cash flow again).

So how do the Internet and bar codes avoid all this? If things are ordered electronically by the customer, we have eliminated not only the time it took an employee to enter the order and the lag time, but we also eliminate the possibility of an error.

Technology now allows a buyer to use the Internet with existing computer systems to place the order electronically without having sophisticated electronic data interchange (EDI) capabilities. This simple approach also works for the company receiving the order.

If the customer knows what he or she is buying and what it will cost, why not arrange for payment electronically when the order is placed? Isn't that what you do when you buy something from Land's End, Travelocity, or E-Trade? Sure, you use a credit card (payment card) or a debit card.

Well, why not do the same thing when placing an order? I know there is the matter of "float," but those details can be worked out. By arranging for electronic payment at the time of order placement, we have eliminated the customary invoice and check matching expenses. Remember, reducing non-value added cost improves cash flow.

But what about the bar code? Picking errors may actually result from things that were received or stored in error. So we want to use a bar code to identify exactly what was received and stored. Then we want to identify exactly what was shipped. We want 100% inventory accuracy and you can get it with real-time product identification.

Finally, the customer can identify the shipment with a bar code on the shipping label or packing list. This means that they can process the receipt more quickly and improve their cash flow and release payment faster.This again will improve cash flow.

You know you could do some of this today. Think about all the maintenance, repair, and operations (MRO) items that your company buys. If your purchasing people have purchasing cards that they can use with suppliers that have web sites with catalogs, you could save a lot in procurement costs right now!