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The following article is from The New York Times, August 12, 2002

Bigger Bar Code Inches Up on Retailers


In a little more than two years, retailers in the United States and Canada will face a deadline that promises technological challenges akin to the Year 2000 computer problem.

Starting Jan. 1, 2005, the 12-digit bar codes retailers use to identify everything from cars to candy bars will go to 13 digits. The additional number (and associated bars and spaces) is enough to make checkout scanners seize up and make computers crash, perhaps disrupting entire supply chains.

Bill Gillette for The New York Times

Ace Hardware is set for the 13-digit bar code. At an Ace store in Penrose, Colo., Rusty Spillers took a saddle through a checkout line.

But many retailers have yet to focus on a problem that will require significant investments in time and capital.

"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," said Thomas Friedman, president of Retail Systems Research Services, a company in Newton, Mass., that publishes a retail information technology newsletter.

Leading retailers say they have begun to address the issue. A spokesman for Wal-Mart Stores, the world's largest retailer, said the company had "embraced the concept" of an expanded bar code, but he did not respond to questions about actual measures taken to prepare computer databases and logistical systems. Similarly, a spokesman for the Target Corporation said his company was "intellectually ready" for the change but refused to comment on whether any of its stores or warehouses were technologically ready.

But Richard A. Galanti, the chief financial officer of Costco Wholesale, admitted, "The truth is, given the timeline, everybody's still in the assessment phase, trying to figure out what to do."

The difficulty is similar to the one posed by the Year 2000 computer problem, when computer software had to be switched from two-digit entries identifying years to four-digit entries. Before Jan. 1, 2000, millions of lines of code had to be rewritten to avoid widespread computer failures.

Bar codes have been used in packaging since 1974, when the first item, a pack of chewing gum, was scanned at a supermarket in Ohio. The codes identify a product, distinguishing between an eight-ounce can of Del Monte creamed corn and a medium-size pair of Hanes boxer shorts. When a bar code is scanned, the information in the store's database lets the retailer assign a price and track sales and inventory.

"The bar code is the linchpin upon which everything in retail depends," Mr. Friedman said.

The reason for expanding the 12-digit bar code, known as the Universal Product Code, is twofold. First, there is a shortage of U.P.C. numbers. "There's only a certain amount of 12-digit numbers, and we're going to run out," said John Terwilliger, vice president of global markets at the Universal Code Council, a nonprofit organization based in Lawrenceville, N.J., that assigns codes in the United States and Canada. Second, 13-digit bar codes are used almost everywhere else in the world. The council's European counterpart, EAN International, based in Brussels, assigns these numbers, called European Article Numbers, to companies in 99 nations. "Right now," Mr. Terwilliger said, "foreign importers have to get a 12-digit U.P.C. to do business over here, which they haven't been too happy about."

Foreign manufacturers currently pass on to consumers the cost of getting an additional bar code and creating special labels for products sold in the United States and Canada. "It's an added expense for them, and they have to recoup it somewhere," said Debra Shimkus, marketing manager at the Chicago Importing Company, a specialty food importer whose overseas suppliers are often incredulous when they are told they have to get new bar codes for their products before they can be sold in American groceries.

Many foreign manufacturers decide that it is not worth the trouble. "A lot of companies have been unwilling to accept the additional burden," Mr. Terwilliger said, "and have stayed out of the market entirely."

American and Canadian exporters have not had the same obstacle because foreign retailers can easily incorporate a 12-digit number into their 13-digit databases by making the first digit zero. That is why American and Canadian manufacturers of products that now have 12-digit codes will not be affected by the code expansion. A two-liter bottle of Coca-Cola, for example, will keep the same U.P.C., but a zero will be added to the beginning of its bar-code number in retailers' product databases.

"The effect of the change in the U.P.C. code falls squarely on retailers," said Mr. Friedman. He estimates that the upgrade will cost at least $2 million for a chain of 100 stores with 10 checkout lanes a store.

The expense will vary depending on the age of a retailer's databases, software and hardware and whether it has to hire outside consultants to make the change. Scanners and other hardware bought more than three years ago will not read longer codes and will have to be replaced. Software more than five years old will also have to be scrapped.

"Thank God we'd already planned to buy new equipment for a lot of stores this year," said Richard S. Gilbert, director of store systems at Duane Reade, a chain of 200 drugstores in New York City. The stores have a total of 3,500 scanning devices, each costing $1,000 to $2,500. As for the cumbersome database modifications that need to be made, Mr. Gilbert said: "Our consultants say they are working on it, but they haven't gotten back to me with a plan. I still don't know how big a deal it's all going to be."

He might want to ask John Poss. Mr. Poss is the merchandising coordinator for Ace Hardware, which has 5,100 stores and sells some 65,000 coded products. Ace overhauled its computer systems to accept longer bar codes in 1999. The company, based in Oak Brook, Ill., has retail outlets in 70 countries and more than a hundred foreign suppliers.

"It was such a struggle to get manufacturers to relabel things for North America," Mr. Poss said, "and we wanted the same system in place globally, so we decided to make the change."

The company hired a consultant, Cognizant Technology Solutions, which is based in Teaneck, N.J., and is a division of Dun & Bradstreet. Ace's in-house team worked on the project during the day while a Cognizant office in India took over at night.

Even so, the project took almost two years to plan and carry out. In addition to equipment upgrades, modifications had to be made in more than 500 software programs in various company divisions (50 in distribution alone). The most tedious and time-consuming part of the conversion, Mr. Poss said, was making adjustments to databases. "Every database in every division touches bar code information, and they all needed to be reworked," he said. "It's like Y2K, where you had to go in and expand fields and find every reference to the date."

Though Mr. Poss would not disclose the cost of the project, he said the gains in efficiency and in suppliers' good will had been "well worth the expense." His advice to other retailers is to "get busy because you're facing an extreme challenge."

But moving to 13 digits may not be enough. The Universal Code Council and EAN International, which formed an alliance in 1996, strongly advise manufacturers and retailers to go a step further and prepare their systems to accommodate a 14-digit code. That is the length of a newly patented bar code that takes up less space. Its reduced size means that it can be affixed to small items like loose produce, and the extra digits let a retailer keep track of additional data like batch and lot numbers.

That additional information would make product recalls easier. "Today," Mr. Terwilliger said, "once a product is taken out of the shipping container in the warehouse, you really can't track it anymore."

Shipping container bar codes are already 14 digits. The different bar-code standards mean that retailers need different computer systems for shipping and receiving, inventory and sales. By adopting a 14-digit standard, retailers should be able to put all the information into a single database.

Mr. Poss said Ace had added the capacity to scan and store 14 digits when it made its conversion three years ago. "Now we can scan anything," he said, "whether it's in the warehouse or at the register, and it immediately goes in to a centralized system. No more sending data between divisions."

The cost and work of making the transition to 14 digits, he said, was the same as it would have been for a change to 13 digits.

Representatives from the standards groups said adopting a 14-digit structure a step for which no date has been set could help streamline the sharing of data among all parts of a retail operation. It would also make it possible, they said, to identify products anywhere in the world at any time during the trade process.

"And to think it all started with pack of gum," Mr. Poss said.

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