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Keeping up with changing standards: as shippers cope with growing demands for bar-code compliance, new technology is starting to shake things up.

These days, almost every manufacturer and distributor, no matter how big or small, must contend with increasing demands for barcode compliance from their customers. Those demands, moreover, are becoming tougher and more costly to meet.

Take Chicago-based electronics distributor Newark InOne, a mid-sized company with a customer base that numbers in the thousands, for example. "Most of our customers are requiring bar codes now, especially our larger customers," says Ray Kernagis, Newark's vice president of distribution. At first, the company tried the gutsy move of charging customers for this costly add-on, but that didn't last long. "We tried to sell these services," says Kernagis. "But finally, it's become a free service."

As Newark InOne found out, complying with customers' labeling requirements--necessary as they are--is neither easy nor cheap. And it's about to get even more complicated, with bar code formats about to change, the federal government planning to mandate tracking technology for international shipments, and radio frequency identification (RFID) poised to become the new standard for tracking materials throughout the supply chain.

Suppliers of retail items have had to mark their products with bar codes that can be read by check out scanners for decades. About 10 years ago, some companies also began requiring suppliers to attach bar-code labels to shipping cartons to expedite handling in distribution centers--a practice known as "compliance bar coding."

Major retailers such as Wal-Mart often have their own requirements for formatting and placement of those labels. In addition, some industries, such as automotive or electronics, have adopted industrywide standards for marking shipments. Suppliers that do not comply or whose bar-code labels fail to meet specifications are often fined by the buyer.

"Basically, you have to comply with bar-code labeling when someone of great influence in your life, like Wal-Mart, asks that when you ship something to the organization, you apply a label in a given format with a given structure so they can process it more efficiently when they receive it," says David Collins, president of the Data Capture Institute, a company that tracks automatic identification developments.

Early on, suppliers could order packaging with preprinted bar codes on them. But when retailers began imposing their own specific labeling requirements, suppliers had to master the technology needed to print bar codes on the spot and affix them to shipments in accordance with each customer's terms. Today, most companies can handle at least the basic requirements. "In the early 1990s, people had a tough time adapting to it, but that's changed," says Mike Lauria, research development advisor at Teklynx International in Milwaukee, Wis. "By now any company that ships goods to retailers is familiar with bar-code issues. They're very educated."

That's not to say that bar-code compliance is a simple matter, though. Complicating things for manufacturers and distributors is the fact that not all industries employ the same standards. Retailers, for example, comply with standards for labeling individual sale items that are promulgated by the Uniform Code Council (UCC). The auto industry uses standards set by the Automotive Industry Action Group. The Department of Defense is releasing identification standards for packaging, and the airline and healthcare industries also have their own barcoding needs.

Despite the differences in standards, the purpose of using bar codes is mostly the same across industries, explains Rick Bushnell of Quad II and founder of Insight U. (, an educational Web site for supply chain technologies. "The auto and airline industries have a way to do it that's different from Wal-Mart, but it's still a matter of matching items to orders," he observes.


Over the next few years, bar-code compliance is likely to become even more complex and challenging. In particular, three major developments--the "Sunrise" deadline for implementing a new 14-digit bar code, rising demand for RFID tags, and the Bureau of Customs and Border Protection's Container Security Initiative (CSI)--are likely to raise the ante for companies that are using inexpensive software to place bar-code labels on shipments to their customers.

The Sunrise deadline of Jan. 1, 2005, marks the moment when the Uniform Code Council will no longer support the UPC 12-digit bar-code standard that has been used throughout North America for decades. Instead, the UCC will support a 14-digit standard that's compatible with the symbology approved by its European and Japanese counterparts. The change to a uniform standard has become a necessity in a world where global sourcing has become the norm and incompatible bar-code symbologies form a barrier to supply chain efficiency.

Reading the new bar codes is one thing; using them will be another matter. "The equipment and the ability to read 14-digit numbers is not a problem," says Larry Zimmerman, a senior consultant at the Teradata division of NCR Corp. in Dayton, Ohio. "What is potentially an issue is whether the fields within databases can accommodate 14 digits when they've been programmed to accept 11-or 12-digit numbers."

Zimmerman says the majority of companies have already adjusted their databases to accommodate the larger fields. "Fifteen or 20 years ago it was 11 digits. Now, most of the systems I come in contact with have made the leap to this thing called a commodity code, which is set up to constantly expand." This capability will come in handy as companies begin to accommodate the large chunks of product information that will be included in RFID tags.

When RFID first appeared, most industry experts were convinced that the electronic chip technology would not replace bar codes. In the last few months, though, analysts are starting to change their tune as the price of RFID tags begins to fall and companies like Gillette and Wal-Mart throw their weight behind the technology.

Zimmerman predicts there will be an extended period of time when companies will have to support both technologies. "Ten years is the soonest that bar codes will be replaced by RFID," he says.

Customs' Container Security Initiative could give the shift to RFID tags an extra push. Customs' plan calls for all export and import shipments to carry some sort of electronic means of identification and tracking, either bar codes or RFID tags. But according to analysts at the CSI Institute, a unit of technology services provider Covansys Corp. in Farmington Hills, Mich., bar codes may not be capable of meeting CSI's needs because they must be visible to be scanned, must be read sequentially, and they contain limited information.

Gordon Fuller, who heads up the secure logistics practice at Covansys, is already betting that bar codes won't meet the requirements of international trade security. "Bar codes are an older technology," he says. "RFID chips give more information the government can use for security purposes."

The Department of Homeland Security, which is responsible for federal security programs, is testing a number of options and has not made any decisions regarding technology requirements. That leaves exporters and importers wondering what their next move should be. Says Newark InOne's Kernagis: "We're going through the process of getting certified by U.S. Customs, but we haven't seen any changes yet due to security. We still don't know if they're going to begin using bar codes to screen products going in and out of the country."


Systems for creating and applying bar-code labels will continue to represent an added expense for manufacturers and distributors in the future, but some observers say it may not be quite as high a cost as many assume. Companies that prepare goods for retail distribution, for example, can incorporate the necessary bar codes into a product's packaging. The additional label needed for tracking goods in transit, moreover, adds little to the cost of moving those goods.

"For retail, the cost is virtually zero, since it's incorporated into the package," explains Collins. "For outer cartons, the cost is very little. It may take a few dollars--a maximum of $10,000 for equipment--but the ongoing cost can be viewed in terms of pennies."

Rather than look at customer-driven bar coding as simply an extra cost and labor burden, some companies have used those compliance requirements to their own advantage. Some, for example, have incorporated them into their own systems for tracking goods internally to gain cost-saving efficiencies.

"When people use a term like compliance, they think, 'Aw, jeez, I've got to do this for the customer,'" says Bushnell. "But if you scan the bar code to verify shipments and get inventory information to help track orders and send advance shipping orders, which also become the invoices, you can save money."

Given the benefits to be had, it's surprising how few companies are leveraging customer-imposed bar-code systems to gain internal efficiencies. "Only about 15 or 20 percent of companies are using bar codes for things like taking a physical inventory," says Bushnell.


As automatic identification technology continues to develop and change, companies may end up relying more than ever on their bar-code software and equipment providers to help them keep up with compliance developments. These vendors must keep current on shifting standards to make sure their products enable clients to meet their own customers' demands.

It's a major selling point, moreover, if they can make compliance as easy as possible for shippers that are struggling under the burden of meeting shifting requirements. "We supply them with a predetermined label and instructions that can't be misunderstood," says Amir Kassill, president of Flexible Information Systems Inc. in Dedham, Mass. "The customer simply fills in the variable information, clicks, and prints."

Even with help from software and services vendors, juggling changing barcode compliance demands will be a challenge for many companies. It will be difficult enough for suppliers that have a few customers in one or two industries. For those that must satisfy the needs of many customers in a variety of industries, compliance with bar-code--and eventually, RFID--requirements will require an ongoing commitment of management effort and expense.


Bar-code standards are created by industry organizations with input from their members. The following Web sites offer information on industry-specific standards for bar-code compliance.

Automotive Industry Action Group ('s Automatic Identification Committee sets technology standards for suppliers and manufacturers in the automobile industry.

Automatic Identification Manufacturers ( group represents companies that manufacture equipment for barcode production and scanning.

Food and Drug Administration ( FDA will require specific types of bar codes on all medications in 2005, but the final rules had not been issued at press time.

The Health Industry Business Communications Council (www. organization is involved in setting standards for the health-care industry.

Uniform Code Council ( UCC is the central organization for setting and maintaining retail and grocery bar-code standards in North America.

Robert Spiegel is freelance writer who covers technology and the electronics industry.
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Title Annotation:Bar Codes
Author:Spiegel, Robert
Publication:Logistics Management (Highlands Ranch, Co.)
Geographic Code:1USA
Date:Jan 1, 2004
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