Item Codification

If your company already has a large number of physical products, chances are you have already put in place a system of codification for them. If not, ERPNext allows you the leeway either to stick with descriptive item names or institute a system of structured item coding.

Codification proves helpful when you have a large product catalog or product names turn out to be long and cumbersome. For companies with a restricted set of products and brief, concise names, having the Item Code serve as the Item Name can also do, and it is easier to maintain.

But as your assortment increases, then codification increases in importance. Without it, managing inventory, searching in it and trying to avoid duplicity is easy to become buried in.

1. Benefits

Standardized Naming: Codification offers a uniformity of names making it easier to be understood and complied by the user with a single industry-wide system.
Less Duplicates: The codes minimize chances of recording duplicate products in the system since each code is unique and is only used to represent one item.
Distinct Identification: Codes give a clear definition so that there is no confusion in identifying two similar items.
Efficient Search and Retrieval: Items that have been codified are easily searchable and filterable in ERPNext thus increasing productivity and efficiency when dealing with large stocks.
Scalability: The greater variations in the products, the right names become descriptive and vague. Codification reduces an identifiers length to being manageable and guards the valuable characteristics.
Integration Ready: Codification can enable simpler interfaces to external systems such as e-commerce sites, ERP add-ons, and barcode/label printing systems which often use small identifiers.

2. Challenges

Effort of Memorization: They require users to memorize codes or resort to search facilities and this may take some time as users are used to naming things descriptively.
Training for New Users: New employees would take time to learn and familiarize themselves with the codification rules, particularly if the coding logic is intricate.
Ongoing Maintenance: When new items are incorporated, new codes have to be designed within the stipulated structure and this requires discipline and consistency.
Risk of Complexity: Very specific, or overly rigid rules codifying items could hinder making of items and pose confusion to the users instead of streamlining operations.
Balance Between Code and Name: Codes should be simple yet meaningful to the extent that they should not be too complicated to follow.

3. Example

When using codification in ERPNext, it is advisable to prepare a manual or cheat-sheet of the logic of your coding system rather than using sequential numbering. Each code should have a digit or a letter which should represent a specific attribute therefore making sense and understandable.

E.g. assuming that your company deals in wooden furniture, you may have your item codes as follows:

Item Codification Summary Sheet (Sample)

First Letter: "Material"

W = Wood
H = Hardware
G = Glass
U = Upholstery
P = Plastic

Second Letter: "Type"

For Wood:
- S = Sheet
- B = Bar
- L = L-section
- M = Molded
- R = Round
For Hardware:
- S = Screw
- N = Nut
- W = Washer
- B = Bracket

Third Character: "Size"

0 = Under 1 mm
1 = 1 mm – 5 mm
2 = 5 mm – 10 mm
3 = 10 mm – 10 cm

Sequential Characters: The final couple of characters in the code can be a sequence number to make items of the same category distinct.

For instance: WM304

W = Wood
M = Molded
3 = 10 mm – 10 cm
04 = Sequential Identifier

Reading the code no one can initially believe anything other than the item is a wooden molding that is 10 cm or less in thickness. Teams have an easier time searching, locating and managing items in ERPNext.

4. Standardization

Naming inconsistencies are a very common issue when more than one user is creating new items in ERPNext. One of them may add something as "Wooden Sheet 3mm", the other one may write "3mm Sheet of Wood". This leads to duplicates, confusion and reporting error.

Codification provides a uniform structure for item names and codes. It mandates the same consistency for all users, even when they remember the past naming convention. ERPNext users can:

Reduce duplication
Insure consistency across departments
Makes more consistent searches and reports,
Keep good and clean stock takes and buying records.

Standardization is made all the more relevant when the size of your organization grows and more employees are involved in data entry activities.

5. Rationalizing

Item codification is also key to rationalizing inventory. It is also possible to make use of codes in determining quickly whether an identical item is already in your system or not, prior to adding one.

As an example, when your product development department is in the process of developing a new product, coded frameworks help you ascertain with ease whether the same raw material, size or component is being purchased on behalf of another product. This gets rid of duplication and reduces excess inventory.

Advantages of rationalization through codification:

Reduced Stock Varieties: Eliminates the useless product varieties leading to leaner inventory.
Easier Housekeeping: Makes warehouse life and item tracking simple.
Optimized Procurement: Eliminates repeated ordering of the same materials in different names.
Improved Cost Control: Keeps working capital out of duplicate or duplicating stocks.

As small companies with extremely limited items will likely not require codification as essential, for expanding companies with increasing product ranges, spending time on a codification strategy in the early stages saves long-term efficiency and control.