In a little over two years, retailers in the United States and Canada have to
convert to an expanded bar code—a change that will force them to make system
adjustments as complicated and widespread as those required by the Year 2000
problem. Starting Jan. 1, 2005, the 12-digit bar codes that track all products
from socks to SUVs will gain an extra number, along with corresponding bars and
spaces. This slight modification will demand substantial investments in time and
money. These longer bar codes could immobilize checkout scanners and crash
computers, maybe even wreaking havoc on whole supply chains.
Retailers don't seem to be ready. "Most retailers are public companies that
tend to live quarterly and not look ahead, which means they are going to be hit
over the head with this and have to scramble at the last minute to avert
disaster," says Thomas Friedman, president of Massachusetts-based Retail Systems
Research Services, which publishes a newsletter on retail information
technology. Spokesmen from the largest retailers, Wal-Mart Stores and Target
Corporation, say they have started to tackle the technological challenges but
did not describe any steps taken. "The truth is, given the timeline, everybody's
still in the assessment phase, trying to figure out what to do," says Richard A.
Galanti, the chief financial officer of Costco Wholesale.
Bar codes have been part of packaging since 1974, when a pack of chewing gum
in an Ohio supermarket became the first item to be scanned. Roughly three
decades later, the 12-digit bar code known as the Universal Product Code is
being expanded because of two reasons: first, all 12-digit combinations are
being used up and second, the rest of the world uses 13-digit bar codes. "Right
now, foreign importers have to get a 12-digit U.P.C. to do business over here,
which they haven't been too happy about," says John Terwilliger, vice president
of global markets at the Universal Code Council, a New Jersey-based nonprofit
organization that assigns numbers in the United States and Canada. The council's
European equivalent, Brussels-based EAN International, assigns 13-digit bar
codes called European Article Numbers, to companies in 99 countries.
While foreign manufacturers have to worry about getting a new bar code and
making special labels for products sold in the United States and Canada,
American and Canadian exporters have it easy. They don't have to get new numbers
because foreign retailers can include 12-digit bar codes in their 13-digit
databases by simply putting zero as the first digit. This is the reason why
American and Canadian manufacturers will not have to worry about the 2005 switch
to a longer bar code. They will get to keep the same U.P.C.—it will be the
retailers who will have to process that 12-digit bar code as a 13-digit number
beginning with a zero in their product databases.
"The effect of the change in the U.P.C. code falls squarely on retailers,"
says Friedman. He estimates that adjusting to this longer code will cost at
least $2 million for a 100-store chain with 10 checkout lanes per store. The age
of the retailer's databases, software and hardware will also affect this figure.
Scanners and other hardware purchased more than three years ago will not be
capable of reading longer codes. Software more than five years old will also
have to be replaced. Some retailers will have to hire outside consultants to
help with the transition.
For an idea of how arduous the process is, Illinois-based Ace Hardware is a
good case in point. In 1999, the company upgraded its computer systems to
process longer bar codes. "It was such a struggle to get manufacturers to
relabel things for North America," says John Poss, the company's merchandising
coordinator, "and we wanted the same system in place globally, so we decided to
make the change." The company, which has 5,100 stores and sells around 65,000
products, enlisted the help of a consultant, New Jersey-based Cognizant
Technology Solutions, a division of Dun & Bradstreet.
The overhaul took nearly two years of planning and execution, even though
work was almost nonstop with Ace's in-house team laboring throughout the day and
a Cognizant office in India laboring throughout the night. Not only did
equipment have to be upgraded, but more than 500 software programs had to be
modified. Adjusting the databases proved to be the most difficult, demanding the
most time and effort. "Every database in every division touches bar code
information, and they all needed to be reworked," says Mr. Poss. "It's like Y2K,
where you had to go in and expand fields and find every reference to the date."
He declined to give the exact cost of this system overhaul but does advise
retailers to "get busy because you're facing an extreme challenge."
With this upgrade, Ace Hardware can even scan 14-digit bar codes now—which
may be necessary in the future. In fact, the Universal Code Council and EAN
International, which affiliated in 1996, are urging manufacturers and retailers
to take it further and overhaul their systems to accept 14-digit codes—which is
the length of a newly patented, less space-consuming bar code. The extra digits
will also allow products to carry additional data like their batch and lot
numbers. In fact, shipping containers already have 14-digit bar codes.
Reconciling these different bar code standards will let retailers integrate all
information into a single database instead of using multiple ones for shipping
and receiving and inventory and sales. The standards groups say this will
greatly simplify product identification at every stage of trade throughout the
world.
Fortunately, not all bar code changes are posing logistical challenges. In
other news, a recent bar code development is expected to ease the handling of
precious or perishable materials. At Sandia National Laboratories, a team has
developed a bar code that can be scanned and read even if 70% of it is covered
or missing. In addition, this sophisticated bar code can track elapsed time,
temperature or outside conditions. It holds such information secure through
encryption. The data it contains can be read by a conventional CCD
camera.
