Inventory Tag

Updated on February 23, 2024
Article byAswathi Jayachandran
Edited byRashmi Kulkarni
Reviewed byDheeraj Vaidya, CFA, FRM

What Is An Inventory Tag?

An Inventory Tag is a label attached to a product to facilitate its tracking and identification. Inventory identification numbers help differentiate products with distinct characteristics. Whether these numbers will be assigned to a product depends on its tracking requirements. Hence, not every product a company produces carries a tag.

Inventory Tag

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It helps with easy categorization, tracking, and counting. The tags are attached to save time by enabling the easy identification of products of the same type. At times, a lot number defines their characteristics, and a revision or version number distinguishes one product from another. The inventory tag system boosts efficiency and ensures task completion on time.

Key Takeaways

  • An inventory tag is a label that helps companies track products or goods and replenish them promptly as and when required. Various products from different categories can be identified and monitored across the supply chain.
  • Tags using technology, such as barcodes, quick response codes, etc., improve data storage, retrieval, and security. Companies choose specific tags based on their business requirements.
  • These tags usually consist of numbers, alphabets, or alphanumeric codes. Batch numbers, lot numbers, revision numbers, etc., are the various kinds of tags used to identify and classify inventory.
  • Inventory tags support automated tracking, enhance operational visibility, and streamline workflows. Businesses with omnichannel operations require sound tagging systems and extensive analytics, both made possible by technology.

How Do Inventory Tags Work?

Inventory tags are labels attached to an object or package. These are not the same as shipping labels. The primary objective of this inventory management tool is to monitor the flow of goods as they move through the supply chain. Companies can choose which inventory tag system works best for them, depending on their scope and budget.

The tags represent a number that represents a manufacturing or customization number. It could be a batch number, a lot number, or a revision number based on the inventory handled. The products’ inventory identification numbers are marked on the system using the tag number.

These tags can be used for manual inventory counts or automated numbering by connecting to a network of scanners and their respective Inventory Management Systems (IMS). In other words, the tags are scanned through a scanner to retrieve the linked data and update digital records whenever needed. It also enables workflow optimization, making overall inventory management efficient and cost-effective.

A company purchases hundreds of raw materials or manufactures multiple products as part of everyday operations. Tools and equipment are moved from one department to another and between various locations to complete daily tasks. There is a possibility of loss, theft, or misplacement when a company deals with numerous materials, equipment, and inventory in the course of daily operations. Administrators maintain asset and inventory tracking systems to control, monitor, and minimize such risks. It increases accountability across functions and facilitates order fulfillment.

This system also simplifies maintenance. Labeling items with barcodes, which are distinctive identification markers or stickers, is the most effective method to keep track of inventory. An inventory tag system captures all inventory-related details and relies less on manual memory, thereby ensuring high accuracy. Using inventory identifiers is the ideal method for implementing and managing all the products and items a business needs and acquires.

With Industry 4.0, comprehensive inventory management systems have gained great importance in ensuring an effective supply chain, particularly with the growing variety of products. Additionally, omnichannel operations have taken center stage due to modern business models and e-commerce setups. These changes also underscore the importance of analytics in inventory management. As real-time product movement and visibility are crucial, inventory tagging has become an indispensable part of supply chain operations today.


In this section, let us see the types of tags used in the industry today.

  • Bar Codes: Data can be represented visually and made machine-readable using a barcode. Barcodes encode data by changing the width, length, and spacing of parallel lines. They support quick and effective operations by speeding up the supply chain through manual error reduction, swift automation across each step, and centralized application.
  • QR Codes: A Quick Response (QR) code can store far more data than its predecessor, a one-dimensional barcode. It can be scanned by smartphones. QR codes boost data security, too, because they are typically encrypted. They also offer considerable cost advantages compared to other forms of inventory tagging systems.
  • RFID Inventory Tags: RFID inventory tags or labels, or Radio Frequency Identification tags, have a distinctive identifier and use radio waves to communicate with the tags. The software application serves as a database to monitor and manage the data gathered. It is a highly sophisticated technology in terms of automation, security, reliability, and scalability.

Depending on their industry and specific needs, companies may choose to use other tags, such as Metal Foil Labels, Rigid Metalphoto Tags, Premium Polyester Inventory Labels, Destructible Vinyl Inventory Labels, and Tamper-Evident Barcode Labels.


Here are a few examples of how inventory tags can be used across industries to streamline inventory management.

Example #1

Suppose Safe Storages, a small warehousing company, rents out its space for companies to store their goods. As business grew and more clients were onboarded, the warehousing company decided to rent out its extra spaces. However, while space was no longer an issue, dealing with the products stored by various clients was.

Earlier, Safe Storages kept track of the items in storage using the age-old method of bookkeeping. However, as the company’s operations increased, data retrieval became time-consuming. As a result, they decided to implement an inventory tag system in which different items would be assigned different codes. This way, they standardized certain codes for various labels, such as FD for food items, CM for chemicals, and VL for volatile substances.

Similarly, EC stood for extra protective chambers, NC for normal conditions, and CTC for cold temperature control. They later assigned numerical codes to the items and fed details like location, nature, and other necessary information into a newly implemented inventory management system. Since then, operations at Safe Storages have improved, and customer service levels have also improved.

Example #2

A November 2023 article talks about a battery-free Radio Frequency Identification (RFID) inventory tracking system, which is highly suitable for the retail industry. PervasID, a technology company, specializes in developing inventory and asset tracking systems. Recently, the company launched TrackMaster, a tracking system that enhances real-time tracking and takes it to the next level through battery-free RFID reading.

Per the company’s announcement, TrackMaster can track the location of products in no time. This is beneficial for retail stores since a large variety of products are stored at multiple locations, making it significantly challenging to optimize inventory. Due to the system’s advanced algorithms, retailers can expect several benefits, including third-party application integration for better monitoring of the goods inside a store, prompt restocking, reduced theft and shrinkage, improved sales performance, etc.


In this section, let us discuss some inventory tag uses.

Uses Inventory Tag

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  • Increases productivity and efficiency: It enables faster and more efficient movement of goods. Hence, a company’s staff can retrieve them with ease. This is made possible by processes that enable information to be sourced from a single location within seconds using scanners or other devices, resulting in a seamless experience.
  • Boosts visibility: It provides end-to-end visibility by providing real-time information about a supply chain. It notifies sellers of dwindling stock levels and enables them to make the necessary arrangements. Inventory tagging also helps identify damages. It shows sellers which product varieties sell out fast, while the kind of goods that do not attract customer attention are highlighted in the process. Hence, companies can change their revenue-generation strategies by deriving sales insights.
  • Enables tracking and counting: Tags aid in quickly locating products through the supply chain at any given time. They help move goods easily by saving time, even for multiple cycles. This is particularly useful during inventory audits.
  • Improves maintenance and management: Tags enable easy maintenance by showing what items are damaged or being serviced in real-time. This helps suppliers plan accordingly and make important inventory decisions.
  • Simplifies reporting: Inventory codes are a crucial management element while handling a business’s assets in the form of inventory. Long before an audit or tax day, the data collected from the tags can be combined to produce detailed reports. A key advantage offered here is that the compliance function becomes agile yet prompt.

Frequently Asked Questions (FAQs)

1. How do companies design an inventory tag?

Companies define tagging requirements as the first step in the process. They finalize label requirements such as label size, barcode type, material to be used, etc. The identification or numbering system is determined. If the company plans to use barcodes, they input the necessary information, such as location, number, item or category, and distinctive characteristics, for the barcodes to function. If a different tagging system is being considered, companies will be required to take the necessary steps to implement it. Whichever method a company uses, it has to be tested to ensure performance.

2. What is the importance of an inventory tag?

These tagging systems are important because they allow companies to control stock movements and tackle supply chain issues effectively. Businesses can manage warehouses, increase efficiency, improve traceability, and evaluate their performance comprehensively using inventory tags and labels. This system rationalizes and accelerates inventory management processes. Theft, damage, and supply depletion can be tracked with its assistance.

3. Which are the latest an inventory tag in the market today?

Some of the latest inventory tags are Bluetooth tags for asset and inventory tracking, Near Field Communication (NFC) tags, Internet of Things-enabled (IoT-enabled) sensors for physical inventory counting, etc.

This article has been a guide to what is an Inventory Tag. Here, we explain the concept in detail along with its types, examples, and uses. You may also find some useful articles here –

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