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November 23, 2017

Tracking Media Inventory: SKU, Alphabetize, or RFID?


C.K. writes:

“I own a consignment shop in which I sell a lot of my own estate-purchased inventory. I also sell some items online. In my shop, I display books, CDs and LPs alphabetically by genre. Each time I make a new estate buy I find myself shifting everything around to insert the new purchases into the alphabetical order. Is there an easier way to organize these items so that customers can browse what I have in my shop, yet I can still shelve them quickly and find items easily when I have to ship an online order?”

Dear CK:

I see your dilemma: the browsing needs of your customers are at odds with the warehousing needs of your online business.Customers like to browse by category, but if you shelve your books by category-only you’ll spend too much time searching for a particular book when you need to ship it.

Organizing your inventory by category and then alphabetizing within each category actually makes the situation worse, because so many books could fit into multiple categories. You may choose to put a book in the “philosophy” category one week, and a similar book in the “religion” category the following week, depending on your frame of mind at the time you are cataloging books.

In both the above cases, finding a particular book when you need to ship it is troublesome. Also, if you have more than one copy of of a particular book, how can you be sure that the book you are shipping matches the condition of the one you actually sold online?

Another issue is that even though you might give lots of thought to how you will organize your shelves, customers will often pick up a book, look it over, and then put it back in the wrong place. How do you find it then? This is why Public Libraries display signs that read “Do Not Re-shelve Books! Place Them on the Cart!”.

Shelving by category and shelving alphabetically are two common ways to keep inventory. Let me review a third, and then I’ll suggest a couple of possible solutions to your problem.

If your business is online only, the best solution for warehousing is a “SKU”  (stock keeping unit) system. In a SKU system, each inventoried item is assigned a number that indicates where it will be placed in your storage area. For example, if you are storing books, you might keep them on ten bookcases labelled A, B, C, D, etc. If each bookcase had five shelves labelled 1,2,3,4,5, then a book label might list the location as A1, C5, or G3. When you received new inventory, you would simply place it on the next available shelf and label the location accordingly (SKU labels can include any other information you might need as well).

So what’s a good organization approach that will allow your customers to comfortably browse your books while enabling you to easily stock your shelves and locate an item you need to ship?

The most practical solution is an RFID (Radio Frequency Identification) system. RFID systems are similar to barcode scanners, but operate on the basis of radio frequencies. Details and costs can be found at http://www.barcodesinc.com/cats/rfid.htm. Simply, into each book is placed a small chip, which costs about a nickel. The chip contains information about the book: its condition, location, price, etc. Once the chip is in the book, a  portable RF device (about the size of a hand-held scanner) is able to locate the book no matter where you have placed it in your store.

Consequently, with an RFID system you can organize your books however you want to, and you’ll still be able to quickly and easily find a book when you need to ship it.

How much does such a system cost? A basic mobile system can be had for around $6,000. Systems can become very costly, depending on how many items you are tracking. Lest this sound expensive, remember that if you’re selling a lot of books & media you’ll eventually reach a place where you will need to hire a part-time employee to stock, pull, and ship your sales. A part-timer working 15 hrs/week that is paid $8/hr will cost, in the course of a year, $6,240 plus employer’s share of taxes at 15%, which equals an annual cost of about $7,200 total.

So, a basic RFID system will pay for itself in about 10 months; after that, the only cost will be chips. Also, in most cases an RFID system can be expensed in the first year, reducing your tax bill. In year two, you’ll be able to reduce or avoid the part-time employee expense, increasing your profit.

Originally posted 2014-11-17 16:08:00.

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About Wayne Jordan

Wayne Jordan is a Virginia-licensed Auctioneer (#3481), as well as an AIA and CAGA Certified Personal Property Appraiser. Learn more at http://www.resaleretailing.com/wayne-jordan-auctioneer-appraiser/

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