Evolution of inventory management systems from punch cards to RFID technology

Modernization of Inventory Management Systems

The objective for this work in writing is to examine the influence of the modernization of inventory management systems on companies today through making a comparison of companies from the decades of the 50's, 60's, 70's and today.

Inventory tracking systems have evolved since the beginning of such systems and specifically the decade of the 1930s. In the early days of business merchants tracked inventory through writing down sales and by checking how many units of a product were gone at the end of the business day. Through these actions the merchants attempted to make an approximate estimate of future needs. Following the Industrial Revolution, the primary goals of business was achievement of efficiency and mass production.

First Automated Inventory Tracking System

In the 1930s a team at Harvard University is touted as having designed the first of all modern systems for checking inventory. This system made use of punch cards that corresponded with catalog items and involved a computer reading the punch cards and the information being transmitted to the storeroom in what was an automated system. This system was further capable of the generation of billing records and inventory management however, the system was very costly however, there is still a version of this system used in some stores today in which cards with product information are placed in the store and the customers select the cards and bring them to the checkout and generally is a system used for large or expensive items and even for medicines.

III. A Better System -- the 1950s

It was well acknowledged among merchants that a better system was required and this resulted in the creation of the modern bar-coding system forerunner in the latter part of the 1940s and beginning of the 1950s decades. This bar-coding system made use of "…a ultraviolet light-sensitive ink and a reader to make items for sale" (Crosby, 2007 p.1) This system however, was too "cumbersome and lacked the computing power needed to make it work." (Crosby, 2007 p.1)

VI. Radio Frequency Identification (RFID)

In the last several years radio frequency identification or RFID technology has been implemented into store, factory and warehouse inventory operations. RFID makes use of a microchip for the transmission of product information and does so through use of a scanner or other device that collects data. The advantage of RFID over UPC technology is that the RFID scanner can read RFID information from several yards distance and this enables the reading of items that are stacked high in warehouse storage. Furthermore, RFID allows for encoding of more data.

V. Vendor Managed Inventory Systems

Vendor managed inventory control is held as popular for use and is stated to be a process in which the vendor keeps its own store shelves stocked ensuring that products are "properly displayed and available" and as well places them in close contact with both "retailer and its sales data." (Crosby, 2007 p.1) Vendor feedback is critical for research and development as well as marketing initiatives. (Crosby, 2007 p.1)

VI. Contribution of Inventory Management Modernization to Contemporary Businesses

The contribution of inventory management modernization to contemporary businesses is clearly inclusive of the gained ability to optimize profit and minimize loss through technological applications that support those ends. From anti-theft technological applications to inventory logistical tracking, today's applications ensure that the business loses the least due to theft and optimizes its sales through logistical integrity and accurateness controls.

It is reported in the work entitled "How Anti-Shoplifting Devices Work" that reports that retail stores lost $26 billion last year alone due to shoplifting and that leaves business owners and store managers with the dilemma of what they must do to address the problem of loss due to theft. Often store prices are raised which lowers the store's level of competition against competitors who list at lower prices on the same products. Three methods for loss prevention include those of:

(1) Watching everyone that comes in the store "like a hawk and make sure they don't steal anything;

(2) Makes items hard to remove from the sales floor through "bolting them down, attaching cables, putting things in display cases and behind the counter; and (3) Use a system that attaches special tags onto everything so that an alarm goes off whenever a shoplifter tries to walk out with an item." (HowStuffWorks, 2007)

Contemporary businesses have also benefits from technological advances of modernization in terms of shipping and receiving of goods in the area of inventory management which allows companies to produce enough goods to meet the demand while at the same time enabling them to avoid over projection of the goods needed avoiding warehousing of unsold items.

The work of Vuksic and Curko (1998) entitled "The Role of Simulation Modeling in Re-Engineering the Retail Business Processes" states that business process improvement "is an important goal of every enterprise." In fact, Vuksic and Curko report that the advent of market conditions that are different and considered 'new' are of the nature that have provided:

"…a special stimulus to modeling business processes over the past 10 years: product expansion, competitive sales conditions, development of global, world distribution networks, better informed customers, and orientation of the businesses toward their customers and satisfying their individual needs. The retail business processes are directly focused on customers and have to continually respond to changes in the business environment." (Vusik and Curko, 1998)

The result according to Vusik and Curko is that business processes have been "re-engineered" with accompany "simulation modeling…frequently utilized…to investigate alternative business processes. " (1998) Vusik and Curko additionally note that the retain information system goal is "the constant collecting analyzing and reporting of past, current and future improvements which are influencing the retail business." (1998)

Inventory processes and specifically the "stocking of goods" is said to be tied "tightly to the firm's inventory policy. Inventory is defined as "the combined merchandise located in a shop, on the shelves, on display and on hand in the shop, on the shelves, on display and on hand in the warehouse, representing a harmonization of the shop's assortment with the consumer's needs." (Vusik and Curko, 1998) Inventory exists only for the purpose of what is its' "basic justification in guaranteeing continuity of sales and purchases of larger quantities, thereby resulting in reduced purchasing costs per unit." (Vusik and Curko, 1998)

Indeed modern information technology is said to greatly impact inventory policy as well as "more frequently an imperative for a retail operation's survival." (Vusik and Curko, 1998) Involved in the preparation of inventory are all of the following stated jobs:

"…all the jobs which make the merchandise saleable, customer-ready: unpacking, cleaning, making adjustments, completing, sorting, repackaging, etc. (Br-i?-Stip-evi? And Hruskar, 1995). Special attention needs to be paid to labeling the merchandise, which means marking the merchandise appropriately (price, quality, instructions for use, bar code, etc.)." (Vusik and Curko, 1998)

Goods must be displayed if they are to increase sales and bring customers into the store. Also there is a need for stimulation of buying by customer and the creation of friendly relations with customers. (Vusik and Curko, 1998, paraphrased) Key in this initiative is the labeling of products and goods and this is and has for many decades been assisted by technological applications and advances. In fact, the very face of business has undergone great metamorphosis with the technology that has been applied to the labeling of merchandise. Labeling whether for the purpose of fighting shoplifting crimes or for the more efficient tracking of merchandise from point of production to point of sales has become the very nerve center of today's business operations and processes. RFID technology will soon enable customers to breeze throughout the checkout process as RFID scanners quickly total the customer's purchases and enable quick payments to occur leaving the time spent waiting in line to the forgotten past.

Summary and Conclusion

This work in writing has examined the history of modernization of the business process of inventory management across several decades and until the present. During the course of this research the information gained has resulted in the writer of this work being of the opinion that inventory management technology has driven and served to bring about expansion in the potential and probable applications that are used not only within business processes such as inventory management but across all process of business involving the expansive array of available technological applications in business.