TAKING STOCK OF THE BAR CODE 2004-07-12 (2)

MICHAEL GARRY

WASHINGTON -- The Universal Product Code, the ubiquitous bar code that recently passed the 30th anniversary of its initial live scan in a supermarket, has saved the food retailing industry billions of dollars. Yet the bar code and product identification are undergoing change as new technologies, such as the EPC (Electronic Product Code) and RSS (Reduced Space Symbology) code, begin implementations. To gain an understanding of that change, SN turned to the Food Marketing Institute here, an organization that has been instrumental in the development of the bar code over the years, and is now supporting growth of the EPC. Michael Sansolo, senior vice president, FMI, has been its point man for analyzing and reporting on industry trends since coming to the association a decade ago.

SN: What was the biggest impact the bar code has had in retail over the past 30 years?

Sansolo: The torrent of information it's unleashed. We certainly know more today about products moving through the supply chain than we did before the UPC. In addition, one of the shocks for me is how ubiquitous the code has become. We go to a ball game and it's on the ticket; I give blood and it's on the tag. I wonder if [the UPC's creators] had any inkling it would be like this?

SN: What do you predict for the future of the code?

Sansolo: We are not done with the bar code. Even though there is considerable promise in the EPC, there are so many items in supermarkets for which the economics of the EPC remain questionable. The bar code works. So we might have a long stretch where we might have a hybrid of the two. Also, with a lot of the folks I talk to there's significant excitement about the RSS bar code -- how that can take the traditional UPC and extend it out to perishables. That way we make sure we're gathering the same kind of marketing intelligence on all parts of the store. So I would not be surprised if 10 years from now we will continue to see use of the UPC.

SN: Will the EPC ultimately replace the UPC?

Sansolo: There was a long curve in the use of the UPC. Even in the late 1980s, 15% of stores were not scanning. There are still issues that need to be resolved so the EPC works on all kinds of packaging and products. And we have some very low-cost items in supermarkets. Will the EPC work on those items, or will there be a secondary code -- the UPC? So the EPC still has a lot of unknowns about it, from technology to economics to privacy to consumer education. We're at the beginning of something interesting, and we will all learn a lot as we go ahead. How ubiquitous the EPC becomes depends on how well we educate people and prepare the foundation.

SN: How big a roadblock to EPC is the privacy issue?

Sansolo: It depends on how we handle it, but the FMI board of directors views privacy as an extremely significant issue. First, we have to work with all of the other parts of the supply chain so we have common privacy policies. But education is the key. We have to educate consumers on what it is and what it isn't. They have to understand the benefit it brings to them, such as better in-stocks and the potential of recalls. There are folks who were there in the 1970s who say the same type of education had to happen with the UPC to show shoppers why it would benefit them. The shopper is the ultimate arbiter of what works and what doesn't.

SN: What are you hearing about the overall progress of the industry in meeting the 2005 Sunrise deadline for adapting to 13- and 14-digit bar codes?

Sansolo: There is a significant number of companies ready to go and other companies are still working on it to see what changes they've got to make. For some companies, the changes are relatively minor; it depends on when they bought their hardware and software. The real excitement is that the expanded code enables you to get a greater level of information to help with decision-making. I'm sure we'll reach 2005 without everybody making the change, but it isn't like Y2K where things would stop working.

SN: Would you agree that we're in the midst of a wave of new standards-based technologies in retail, especially on a global level?

Sansolo: Yes. No one wants to waste their resources doing this. Think of the VCR with the VHS and Beta formats -- what a waste. It's better to recognize the superior format. Global standards seem like overkill in the beginning, but then they're a wonderful enabler as we source products from different parts of the globe and new relationships happen. So standards are not necessarily sexy, but they're essential for creating efficiencies in investment down the road.