Bar coding: An extra digit for logistics
The addition of a 14th digit to bar-code numbering systems promises to improve visibility and tighten control over global supply chains.
By Robert Spiegel -- Logistics Management, 6/1/2003
Are you ready for big changes in bar coding? Shippers like Coca-Cola and Wal-Mart have already switched their bar-code systems to the Global Trade Item Number (GTIN) standard, which is expected to bring significant improvements to their logistics operations.
What's the big deal about GTIN? A bar-coding system that complies with GTIN (pronounced "Gee-tin") can read and store four types of codes:
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the eight-digit Uniform Product Code (UPC), the standard in North America for 30 years;
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the European Article Numbering (EAN) system's EAN-8 (eight-digit) and EAN-13 (13-digit) codes;
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the Reduced Space Symbology (RSS), an emerging standard for compressing bar codes so they are small enough to fit on prescription bottles or a piece of fruit; and
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all of those codes plus an extra digit that would bring the total data string to a maximum of 14 digits. That additional number (actually, the first number in the string) identifies how products are packed. So if Coca-Cola, for example, added a 14th digit to its bar codes, the extra number would signify whether the Coke is in a case or on a pallet.
Shippers that are GTIN-compliant—and thus can read and use all of those standards—will potentially be in harmony with bar-code systems across the globe. For that reason, many large shippers have already made the change, but most small- and medium-sized companies have yet to do so. It could be to their advantage to act soon, though, since GTIN isn't the only change coming to bar coding. The Uniform Code Council Inc. (UCC) has also set the "Sunrise 2005" deadline of January 1, 2005, for unification of bar-code standards in Europe and North America. Companies that are GTIN-compliant, say some industry experts, will find it easier to adopt that revised standard.
Son of Y2K?
Most products sold in North America today carry an eight-digit UPC bar code. A few years ago, a researcher at the UCC, which administers the UPC code, concluded that the aging code would run out of numbers sometime in 2005. Since the UCC had to change the UPC code to address the need for a larger number supply, the organization saw a chance to make other changes it had long been considering.
For example, the UCC seized the opportunity to eliminate conflicts between the North American standard and those used elsewhere in the world by incorporating the EAN-8 and EAN-13 standards into the UPC. It also decided to add a 14th digit that would provide more detailed shipment information.
Although shippers are happy to have more data, some are concerned that their information systems may not be able to handle the new extended bar codes. In a scenario reminiscent of concerns over "Y2K"—the inability of computers to handle the arrival of the new millennium because they use just two digits to signify years—some have questioned whether databases based on eight-digit UPC codes will freeze at midnight on December 31, 2004.
"This isn't the same as Y2K," responds Paul Tong, a product marketing manager for change-management specialist Serena Software Inc. in San Mateo, Calif. "The year 2000 was going to happen no matter what. With GTIN, people are motivated to change around that date, but there isn't really a moment [when every company must change]."
This is indeed a different situation, agrees Sprague Ackley, staff technologist at Intermec Technologies Corp., a bar-coding vendor in Everett, Wash. "Y2K was filled with fear of the unknown. This is definitely not the unknown," he says. "Databases are not going to do strange things on January 1 of 2005. The systems will have to accept 14 digits, but the old symbologies are not going to become obsolete."
Still, shippers will want to verify in advance that their database-management systems can indeed handle those additional digits, suggests Mark Correa, director of imaging products at Symbol Technologies Inc., a manufacturer of bar-code hardware in Holtsville, N.Y. That's because newer bar-code database systems generally are friendly to the notion of adding digits but companies with older systems could experience serious glitches. "Unless it's a legacy system that was hand-coded, you're probably okay," says Tom Harwick, an analyst with Forrester Research of Cambridge, Mass. "You can cover most of the changes with a simple e-mail to your software vendor."
Companies with highly customized software may also be at risk, says David Thompson, project manager at West Lake Group, a consulting firm in Cleveland. "Some of the people running their own software or who have modified their packaged software may not have enough digits to accommodate 14 numbers," he warns.
There's less of a concern on the hardware side, since producers of bar-coding equipment say their products have long been ready for 14-digit data strings. "The hardware vendors have been selling equipment that can accommodate 12, 13, or 14 digits for years," says Ackley.
Even if there's no Y2K-like doomsday on the horizon, the question still lingers: What happens if a company is not ready for January 2005? "If they aren't prepared by that date, it could mean some customer-service problems if the scanner doesn't go to the extra digit," says Al Garton, director of general merchandise at the UCC. "Companies may have to sticker items, and it could cause time-to-market issues."
GTIN's Global Promise
Industry watchers predict that GTIN will deliver improved efficiencies for most shippers. "It will have a big impact on logistics. The system will assign numbers for loads that can be read globally," says Thompson. "Potentially, it will maximize the supply chain and let people know where everything is and provide better management of supply."
Because the 14th digit will differentiate between different types of outer packaging, shippers will gain better visibility into inbound shipments. "It will increase the amount of cross docking, where the truckload can go right back out, skipping the stocking stage," predicts Mike Dominy, a senior analyst at The Yankee Group in Boston. Shippers also are heartened by the possibility that GTIN could be incorporated into ongoing initiatives to use radio frequency technology (RFID) to transmit bar-code data, he notes.
GTIN advocates are especially enthusiastic about the potential for streamlining international trade. After 2005, shippers won't have to package and label goods headed for North America separately from those destined for the rest of the world. "If everybody is following the standard, you will have a more seamless process. When you have stuff coming from overseas, you'll also be able to do more cross docking because you won't have to relabel," Dominy explains.
The biggest beneficiaries, perhaps, will be companies involved in trade between North America and Europe. "[GTIN] will make it easier for European companies to do business with the U.S. and for U.S. companies do to business with Europe," observes Dave Krebs, group manager of the Automatic Identification and Data Collection Group at VDC, a market research firm in Natick, Mass.
That will be a welcome development, but shippers should keep in mind that GTIN addresses just one of many roadblocks that slow international trade, Dominy cautions. "When you talk about global trade, you have to talk about customs and trade management," he says. Adopting GTIN won't by itself enable seamless global trade, he adds.
The Prepared and the Unprepared
Logistics managers at Fortune 500 companies seem to be better prepared for the transition to GTIN than are their counterparts at small- and mid-sized companies. The heavyweight shippers, though, are already starting to drive GTIN's adoption by their suppliers. "Wal-Mart is pushing its vendors to become compliant, and Coca-Cola has made the move because of Wal-Mart. They're driving it down their supply chain," says Thompson.
The retail industry, in fact, is one of the strongest proponents of the GTIN standard. "From a volume point of view, pretty close to 80 percent of retailers have adopted the standard," says Dominy.
The healthcare industry has also joined the GTIN party, partly because GTIN will encompass the RSS standard. Now that it's possible to produce bar codes that are small enough to put on a prescription bottle, Ackley says, healthcare providers will be able to track medication from the manufacturer to the bedside—a strong incentive to adopt the new standards.
Not all industries are picking up the code, however. The automotive industry has its own bar-coding systems and has turned its collective back on standards issued by the UCC. "Automotive is a big nut to crack," says Ackley. "Automotive is deeply entrenched in its numbering system, and I don't see a change anytime soon."
Regardless of which industry they're in, many small companies are oblivious to the coming changes. "A lot of people still don't know what 'Sunrise 2005' means," says Krebs. "I talked with a retailer who should have known but didn't. I wouldn't be surprised if compliance was pushed out beyond Sunrise 2005."
Companies like the one Krebs describes need to start getting ready now, even though 2005 may seem like a long way off. "[I]f you look at the management of change, it takes a groundswell and you have to overcome the initial inertia," says Serena Software's Tong. "And it's only 20 months away."
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