Why Use Identcode: Benefits, ROI and Risks of Skipping Identification

Adopting Identcode practices is a strategic decision for supply chain operators. This friendly, beginner-focused article explains why Identcodes matter, the benefits they bring, a simple way to estimate return on investment (ROI), and the common risks companies face when they do not use consistent identification.

Top benefits of using Identcodes

• Improved accuracy: Scanning Identcodes replaces manual data entry and visual checks, drastically reducing picking and shipping errors and the cost of returns or corrective shipments.
• End-to-end traceability: Identcodes create an auditable chain from production through delivery, essential for recalls, warranty claims, and regulatory compliance.
• Faster processing: Automated scanning accelerates receiving, putaway, picking, and dispatch. Faster processes mean shorter turnaround times and better service levels.
• Better inventory control: With Identcodes linked to WMS records, you can locate items quickly, improve cycle counts, and reduce overstocks or stockouts.
• Clear accountability: Identcodes tie actions to specific units and events, helping investigate exceptions and hold the right parties accountable for mistakes.
• Operational scalability: As volumes grow, Identcodes prevent errors from scaling with volume and reduce the need for manual checks.

How Identcodes deliver ROI — a simple framework

Estimating ROI can be straightforward if you track a few metrics:

• Reduction in shipping errors: Multiply the current number of shipping errors by the average cost per error (re-shipments, returns handling, customer compensation). Estimate the percentage reduction Identcodes will deliver (often 50–90% for scanning-enabled processes).
• Labor savings: Calculate time saved per pick/pack/receive event when scanning replaces manual verification and multiply by labor hourly cost and daily volume.
• Inventory carrying reductions: Better accuracy may allow reductions in safety stock; estimate the cost savings from lower inventory holdings.

Add these quantified benefits and compare to implementation costs (labels, scanners, software changes, training). Many operations see payback within months when volumes and error costs are significant.

Compliance and risk mitigation

Some industries require traceability by law. Identcodes make audits easier and reduce the risk of penalties or forced recalls. In high-risk product categories—pharmaceuticals, food, chemicals—Identcodes can be indispensable for legal and reputational protection.

Customer and partner expectations

Large retailers and logistics partners increasingly demand industry-standard identifiers (e.g., SSCC) to allow seamless receiving and invoicing. Not using Identcodes can limit your ability to trade with certain customers or to participate in automated supply chain networks.

Risks of not using Identcodes or using them poorly

• Higher error rates: Manual checks are slower and less reliable, increasing returns, rework, and customer dissatisfaction.
• Poor visibility: Without Identcodes, it’s hard to trace the path of a product in case of a problem, slowing investigations and corrective actions.
• Operational inefficiency: Tasks like cycle counts and locating inventory take longer and disrupt productivity.
• Lost business: Partners may refuse electronic integrations and automatic receiving if you cannot provide standardized Identcodes, limiting growth opportunities.

Practical examples of value

• A grocery distributor reduced order discrepancies by scanning pallet Identcodes at receipt and dispatch. The fewer disputes with retailers lowered chargebacks and improved margins.
• An electronics OEM linked Identcodes to warranty records so service teams could immediately verify a customer’s unit history, reducing repair cycles and improving customer satisfaction.

Best practices to maximize benefit

• Adopt standards when possible: Use industry standard formats (e.g., SSCC) to ease partner integration.
• Integrate with core systems: Ensure Identcode scans update your WMS/TMS/ERP in real time for accurate records.
• Design for durability and placement: Use labels and placement rules that survive handling conditions.
• Train staff and define fallbacks: Provide clear scanning procedures and manual verification steps for exceptions.

Final thoughts

Identcodes are a relatively low-cost tool with outsized operational benefits. They reduce human error, enable faster processing, support compliance, and unlock better data for decisions. For businesses facing volume growth, complex product mixes, or regulatory obligations, adopting consistent Identcode practices is not just useful—it’s often essential to staying competitive and reliable in today’s supply chains.