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How to Set Up A Barcode Inventory System For Your Business

by | Apr 9, 2024

If you run an online product-based business with a lot of inventory to manage, track and move, then barcoding is highly beneficial for you. The understanding of barcoding products for better inventory management can empower your online business to take the next big step towards growth and competitive advantage. You need a painless, affordable, error-free, and faster system to manage your inventory count, status, and information. Barcoding spares you from manually entering extensive product information every time you move, sell, or buy inventory. Barcode technology saves input time and employee costs.

However, you need to know the right processes, techniques, and tools that are required to set up and implement an industry-grade barcode inventory system for your online business. This article details the importance of barcode inventory, and the process you need to set up a highly efficient barcode inventory system for your online business. Barcoding inventory for your online business by following the accurate procedure will let you accurately track inventory count and movement status even when you have stocks stored at multiple locations.

How Does a Barcode Inventory System Work?

Barcodes are an integral part of supply chains, inventory management, and warehousing. Initially, barcodes were used to help retailers and grocery businesses track and process their goods. Today, they are used even by healthcare practitioners for ensuring the right medication is given to the right patient (barcode patient IDs). Barcodes are also popularly used for receiving and sending payments by scanning the QR (Quick Response) codes at malls, shops, or kiosks, etc. During the COVID pandemic, QR codes became a prominent method for contactless payment .

You go to a supermarket, pick items from the shelves, put them into your basket, and go to the billing counter. The billing staff uses a scanner to scan the barcodes labeled or printed on the products, and automatically all information about the product-the price, quantity, weight, etc. comes on the computer screen. Not only it reduces the checkout time, but it also leaves no chance of a billing error. The above is a very basic example of how a barcode system paces the stock movement and helps in managing inventory control.

A barcode inventory system works by tracking products in stores, warehouses, and during transit by attaching electronically generated barcode labels that contain unique and specific information about products. The barcode contains a unique identification number that distinguishes products from each other. When labeled products are scanned, the information on the barcodes can be seen on the computer system. Barcoding helps in updating the inventory when a new item is added, or an old one is moved out. With the integration of technologies such as RFID, GPS, sensors, etc., it assists online businesses in tracking the location of the stocks in the warehouse when orders are received and while shipping.

What is a 1D Barcode and a 2D Barcode?

A one dimensional barcode (1D barcode) is the type of inventory barcode that we typically think of with black horizontal lines and spaces between the lines in the shape of a rectangle. Scanning the barcode produces a number, which can be looked up in an inventory management database. These systems are essential for inventory accuracy.

A two dimensional barcode (2D barcode) typically contains additions dots and patterns (such as a QR code), which allow for storage of more complex information, such as a website or image. These type of barcodes can typically be scanned with a smart phone.

You need these four things to set up a barcode inventory system for your online store:

Barcode Software (Integrated Inventory Management System)

Standalone Barcode inventory software or integrated inventory management system with an inbuilt barcoding module are software applications that allow you to generate barcodes, take prints with a connected printer, and store/manage all information about products. Barcode software also integrates with scanners to receive and update information during barcode scanning.

Barcode Labels

Barcode labels are the physical prints of electronically generated barcodes. Labels are printed on a special sheet or roll.

Barcodes are codes represented usually by black bars printed on white background. The most popular types of barcodes are UPC (Universal Product Code), EAN-13 (European Article Number), Code-128, QR Code (Quick Response Code), Data Matrix, etc.

Barcode Printer

An inkjet or laser printer with features to print barcodes of all sizes.

Barcode Scanner

A hardware device that can scan, read and transmit the information from barcodes to the inventory management system, barcode software, or computer. The devices fall into the category of automatic data capture (ADC) technology, and their usage is continuously growing every year.

Steps to Set up Barcode Inventory System For Your Online Business:

You can follow the below steps to set up a robust and error-free barcode inventory system for your online store:

1. Naming and Coding the Products:

You have to assign codes to each product according to the naming convention practiced in your industry. Size, color, weight, type, durability, expiry dates, manufacturing date, manufacturing location, etc., needs to be put in the inventory management system or the barcode software. If you already have the product information in excel sheets, you can import it. Based on the comprehensiveness of your product info, you need to decide whether you need a one-dimensional barcode (storage capacity 14-28 alphanumeric characters) or a two-dimensional one (up to 7089 alphanumeric characters). Use standard abbreviations to save characters. For example, small can be coded as ‘s’ and medium as ‘m’.

2. Barcode Generation

Once you have put all the information in the barcode system, the software can automatically generate barcodes that can be downloaded for printing. Barcodes are unique to products. So, ensure you choose the appropriate type of barcode (UPC, EAN, GS1, etc.) according to the product type and size.

3. Barcode Printing

You now need a label printer to print the barcode labels. You can choose to buy your own label printer (one-time investment) or get the prints from third-party barcode label printers (time-consuming and comes with security risks). We suggest having your own printer for faster access and better security. Depending upon your product type, purpose, and security purpose, you can print labels of different sizes. After printing the barcode, check for scannability before pasting on the products.

4. Labelling Products:

Select the right place (visible and free from constant friction that might damage the barcode) and stick the barcodes with a proper adhesive on the products. The standard recommended place for sticking barcodes is the lower right quadrant on the back of the products. If you follow this practice, it becomes easier to find the label and expedite the scanning process.

5. Barcode Scanning:

You need a barcode scanner to read the information stored on barcodes and communicate it to the software. When the sell order is received, and you need to dispatch the item, you can check your barcode inventory software to locate the product. You can then scan the barcode on the product, and the barcode system will automatically update the status of the product as ‘sold’ and will also update inventory information. Utilizing an inventory barcode scanner will help save a tremendous about of time and effort in your inventory tracking, as you can minimize the amount of manual entry needed.


Modern online businesses are continually improving the ways in which product data is collected, printed, and transmitted. Barcode inventory system technology is faster, cheaper, and more efficient than manually entering product information. Barcoding has revolutionized supply chains and inventory management processes in online businesses, small business retail operations, manufacturing, asset management, warehousing, etc. Barcoding technology is continuously getting more sophisticated with time. With automated barcoding scanners with laser beam sensors, you may not even need a person to scan the products manually. Inventory on conveyor systems is automatically scanned and unloaded with installed barcode scanners. With a rightly implemented software, you can provide better customer service, faster deliveries and unleash an error-free inventory management feat.