First, assuming you are doing manual data collection of nothing but 12-digit part numbers, how long does it take to record each one?

+ 4-5 seconds to visually recognize and write each one down, then
+ 2-3 seconds to key enter the number.

So, that takes you, what, a day? Two days?

You're right if you think that the previous statement doesn't make any sense -- but maybe not for the reason you think. Consider that it takes you a total of 6-8 seconds to record and key enter the data -- but maybe two days before it gets into the computer where it can be used!

But, okay, let's look at this logically.

Collecting and Entering Data

If you're recording just the part number (and not a location number, quantity, or any other data), it would take you a minimum of 10 minutes to write down and later key enter the data for 100 parts. With bar code, for example, the same procedure might take less than 1 minute for the same 100 parts. That's a ten-fold increase in productivity just for collecting and entering data.

Time Savings in Correcting Data

If your data entry system is based on handwritten data from the shop floor, sooner or later (probably sooner) someone in key entry is going to have to figure out what that squiggle under "Quantity" means. That's time wasted in key entry and on the part of someone on the shop floor -- the supervisor or worker. Assuming, of course, that the person who wrote it down is there, and can remember what it meant.

Time Savings Between Collection and Entry

Really, how long does it take between the time data is collected on the floor (or wherever) and entered into the computer? Typically, handwritten sheets of production or activity data aren't collected until end-of-shift. Maybe by the end of the next day the data has been entered into the computer. Maybe the day after, So, there's a 2 to 3 day lag in the data collection and entry process.

AIDC technologies get data into the computer in real time or, even in batch mode, typically within four hours of when it's collected. So, in terms of the usefulness of the data, if we read a bar code rather than hand write and key enter data, we have a data collection time of 0.5 seconds versus 3 days. Not too shabby.

Cost Savings

If you've skipped over the increased accuracy and speed benefits, go back and read them. Because they explain a lot about the cost savings you can realize with AIDC technologies.

It's obvious that if you eliminate the need to key enter data, you can reduce your key entry staff expenses. If you eliminate the need to chase after an employee to figure out what s/he has written on the log sheet, you can reduce the cost of that wasted time. But what about other cost savings?

Production Time Savings

If you have your skilled production people recording data, that's time they're not working. They know it and often resent it. So, sometimes they just try to remember what happened and write it down at the end of the shift (did you read the section on errors?) or they spend up to 10% of their time "feeding the computer" rather than "feeding the bottom line."

One company that installed a bar code tracking on its production line had skilled employees clock in and out of work at their work stations. While this was a requirement for government contract cost accounting, having these workers bypass the timeclock gained the company 0.5 hours per employee per shift. In their case, that added up to 1,000 hours per day!

Inventory Savings

Do you really know what you have and where it is? Most warehouse managers can answer "yes" to the first question (after a brief pause) but choose not to answer the second. The truth is, most inventories are inadequate. How much time is wasted in your company with people looking for items, consolidating items, or just plain losing items?

One company, while instituting a bar code inventory program, discovered that they had thousands of dollars of replacement parts in inventory -- for equipment it no longer owned. Another company found thousands of dollars of specialty wire that had simply been lost in inventory records and misidentified during cycle counting. Another company, implementing a bar code tool tracking system, found enough "lost" tools to cover the cost of the entire bar code program.

And then there's the cost of cycle counting. Imagine not having to shut down operations for a week in order to do your quarterly inventory. It's possible with a well-devised system (see Cycle Counting section under "Indirect Benefits").

Savings on Money

If you're not running just in time (JIT), you have, by some definitions, excess inventory. That means you're not only wasting the money on the inventory itself, but on the cost of the money you're wasting. One major manufacturing company estimated that it could save $2 million a day -- on the cost of money alone -- by shrinking its raw materials inventory by 20%. They're not there yet, but those kind of numbers have to make you think.

Savings on Errors

And then there's the cost of correcting errors.

One company estimated that it cost $250 (in 1993) just for clerical and management time to correct a single shipping error. That did not include the cost for transportation (to ship and return the original order), the cost to ship the correct order (often at "Rush" surcharges), the cost to repick the order, the cost to restock the incorrect order -- or the cost when the error was in favor of the customer and they "forget" to tell you that you shipped too many of an item (unless it shows up on the invoice).

It also doesn't calculate the cost of lost "image," the time sales personnel spend on the phone straightening things out, or the cost of additional sales calls to smooth things over.

If you calculate all these costs based on your margin, you'll discover that you have to add thousands of dollars in sales just to cover the costs of a single shipping error.

What about Indirect Benefits? Click the link to find out.