Universal Product Codes & Barcodes
This article examines the use of universal product codes along with the use of bar codes and scanners that can read and interpret such codes and facilitate the movement of goods through the supply chain. The structure of the Universal Product Code (UPC) is explained, and its practical application is reviewed. How UPCs and supporting technologies have evolved is also reviewed. Issues regarding pricing accuracy in retail stores where bar code scanners are used for checkout are examined, and some of the basic causes, consequences, and solutions for improving pricing accuracy are explained. The penetration of bar codes into other realms of society is also reviewed.
Keywords: Automatic Identification Technology; Barcodes; Examination Procedure for Price Verification; National Conference on Weights and Measures; Point of Sale Systems (POS); Radio Frequency Identification (RFID); Supply Chain Logistics; Scanning Technology; Universal Product Codes (UPC)
The Universal Product Code (UPC) and the technologies that utilize the code are all products of the information age. The purpose of the UPC is to identify and support tagging and labeling of a product. UPCs are unique; there is only one code for each product, and that code is used to identify that specific product. The UPC as we know it, and the bar-coding and reading systems that are used in logistics, warehousing, and retail sales of millions of different items started converging in the late 1960s. By the 1990s, they were in use around the world (Romano, 2004; Smith, 2004). As with many industrial and commercial standards, the UPC has evolved in slightly different forms in different parts of the world, with North America and Europe using different length codes, but beginning 2005, those systems have slowly unified and a global standardized system is emerging (Tsaprailis, 2004). As of 2013, many North American companies in the United States and Canada have sought to transition to processing EAN-13 and UPC-A bar codes, which are both globally recognized (GS1, 2013)
The UPC has three elements. First is the company prefix, which identifies the company that has manufactured or packaged the item. This is followed by an item reference number that identifies the specific item. In a bar code, the last digit is a check digit that helps to ensure data accuracy. In the United States, Global Standards One (GS1) US BarCodes and eCom is the organization for the GS1 System. GS1 is a global organization that supports the development and use of UPCs and bar codes ("What's in a Barcode," 2009). GS1 is a neutral, not-for-profit global organization supported by manufacturers and retailers to improve the efficiency of the distribution of food and consumer goods (GS1, 2009).
How UPCs Work
The use of UPCs is initiated during the packaging process. Once an item is manufactured, it generally is placed in some sort of packaging. The UPC is printed on the package, which could be a can, a box or bag of frozen food, a container that serves as protection as well as display of an item, or a book cover. The individually packaged items are then put in cases — generally in groups of a dozen or more — and the case has an identifying bar code printed on it.
Every time the case is moved in the supply chain, it is scanned and an entry is made to a database that describes the items as well as the location of the items. As the case moves through the supply chain into a retailer's warehouse and then to the retail store, it is scanned at every move. When it reaches the store, the item is shelved and a tag is placed on the shelf showing the item's UPC and price. When a customer takes the item to the checkout, it is scanned and the customer is charged. The retailer's database then indicates that the item has been sold, and the quantity of that item in the database is reduced. The retailer has a permanent record of when the item was sold and for how much (Leibowitz, 1999).
Internally, retailers can also create their own product codes and bar-coded price labels. Just go to the deli counter or meat counter in your grocery store. You ask for four pounds of sliced ham and three pounds of sliced cheese. The counter attendant selects the items and places them on the scale. The scale weighs the item and the attendant punches in a product code. Then a label with a description of the item, the weight of the item in the package, and the price along with a scannable bar code is printed on a self-adhesive label that the attendant places on the package. You take the packages to the checkout, where they are scanned and the store database is updated.
Online retailers also use UPCs to identify the products they sell. You can, for example, go to Amazon.com and find items by entering the UPC. When you look at the bar code on the package of an item, you will see a series of numbers printed under the bar code. Those human readable numbers are what are coded into the bars. You can enter those numbers into an online retailer's search function to determine if they sell the exact same item.
The UPC has evolved over time, as has the technology to read, print, and utilize UPC data. The evolution, however, is far from over. The emergence of radio frequency identification (RFID) technology has brought the UPC into a new era. The major difference between RFID technology and the traditional bar code is primarily in how the information in the tag is collected. With bar codes, a scanner is needed to read and interpret the UPC that is embedded in the bar code. With RFID tags, a wireless device is used to read the information that is emitted from the RFID tag over its radio frequency (McKnight, 2007).
The backend database technology used in logistics management and point-of-sale retail systems is still be able to process transactions and movements just as if the items had bar codes on them. The RFID tag also allows additional information about the item to be stored and retrieved when the RFID tag reader scans the tag (So & Liu, 2006). This additional information makes it easier for logistics managers, inspectors, and others to process items and move them through the supply chain.
Historically, bar codes have only been one-dimensional (1-D), meaning that scanners read the code’s lines linearly. Bar code scanners reflect light off the lines in a traditional 1-D bar code and then decode the detected pattern of reflected light signals ("Bar Code Imagers to 2D Codes," 2013). In the early twenty-first century, two-dimensional (2-D) bar codes began to gain traction. The most common 2-D code is the QR code, which is square, with a pattern of black spots on a white background in the center and black-and-white bordered squares at three corners; in some 2-D bar codes, additional colors are added to increase data storage capacity (Memeti, Santos, Waldburger & Stiller, 2013). These complex codes are read using bar code imagers, which use reflected-light bar code scanning technology and a special camera to capture an image of the 2-D bar code and then decode it ("Bar Code Imagers to 2D Codes," 2013). Although 2-D bar codes provide much more data storage and transmission capabilities than do 1-D codes, researchers are exploring the possibility of creating 3-D bar codes to increase these capacities further still (Memeti, Santos, Waldburger & Stiller, 2013).
Assuring Accuracy in the Use of UPC
About $3.77 trillion was spent in retail goods in the United States in 2012 (Bureau of Economic Analysis, 2013), and the vast majority of those sales are rung up with electronic checkout scanners that read the bar code on the product ("Price Check," 1996). The bar code contains the UPC of the item and matches that code with the price in a store's database. The customer is then charged for the item.
Retailers implement systems that support UPCs, bar codes, and scanner technology to help speed checkout time, lower labor costs, and improve sales and inventory records. Most retailers also contend that scanning technology results in fewer pricing errors than manual price and item number entry ("Making Sure the Scanned Price is Right," 2009). The use of checkout scanners has resulted in lower labor costs because stores no longer needed to mark prices on each individual item. Consumers not only benefited from faster checkout times but also are provided with detailed cash register receipts that provide both product and price information ("Price Check," 1996).
Although checkout scanners have been in use for several decades, concerns remain about their accuracy ("Price Check," 1996). Scanning errors can result in overcharges as well as undercharges. Overcharges, of course, are passed onto the shopper unless they keep a watchful eye on the checkout system. Consumer advocate groups as well as regulators are concerned about frequent inconsistencies between advertised or posted prices and prices stored in the computer.
Errors can easily occur because prices in the store database are inaccurate or have not been updated to match current signage or advertisements. Consumers can report recurring problems to their state attorney general's office or the state's office of weights and measures. Consumers can also file complaints with the Bureau of Consumer Protection at the United States Federal Trade Commission (FTC) ("Making Sure the Scanned Price is Right," 2009). By 2013, nineteen states and two US territories had enacted legislation or regulations regarding unit pricing and eight states required additional mandatory item pricing (National Institute of Standards and Technology, 2013). Over the years, state and local enforcement of pricing accuracy laws has resulted in large fines against a number of retailers using scanners, reinforcing the continuing concerns about scanner accuracy ("Price Check," 1996).
To test the accuracy of prices charged at the cash register, the FTC and the Technology Services Division of the National Institute of Standards and Technology (NIST), along with the states of Florida, Michigan, Missouri, Tennessee, Vermont, and Wisconsin, and the Commonwealth of Massachusetts, conducted studies in 1996 and 1998.
During the 1996 study, participating states used an inspection procedure developed by the National Conference on Weights and Measures (NCWM) to inspect pricing accuracy in 294 retail stores. The inspection process required the comparison of scanned prices with the lower of the posted or advertised price of a randomly selected sample of items. The results of these tests showed the number of items for which shoppers were undercharged was greater than the number of items for which shoppers were overcharged ("Price Check," 1996).
The 1996 test included over 17,000 items, of which 2.58 percent scanned lower than the posted or advertised price and 2.24 percent scanned higher than the posted or advertised price. The total dollar amount of the items for which there were undercharges exceeded the total dollar amount of items for which there were overcharges. The inspectors also found that there were wide variations in pricing accuracy at the checkout. These variations were found among different types of stores as well as different stores in the same chain. Food stores had the lowest error rate, while department stores had the highest error rate ("Price Check…," 1996).
The 1998 study was expanded to include thirty-seven jurisdictions compared to the seven jurisdictions in the 1996 study. It showed that stores in general had better pricing accuracy compared to the 1996 study, but also showed that several problems remained. Many stores did very well in the 1998 study with 43 percent showing no price errors and 71 percent passing inspections with at least 98 percent of the items checked correctly priced. In 1996, only 45 percent of the stores passed. In 1998 study, 9 percent of the stores had an average of only 91 percent of tested items priced accurately ("Price Check II," 1998).
In the 1998 study, the number of overcharges was slightly higher than the number of undercharges. However, the total dollar amount of undercharges was substantially higher than the total dollar amount of overcharges. Food stores were found most likely to have acceptable pricing accuracy, and hardware stores were the least likely to have acceptable pricing accuracy ("Price Check II," 1998).
Efforts to Improve Pricing Accuracy
The 1996 and 1998 studies showed that scanner errors adversely affect both retailers and consumers. Retailers lose profits on undercharges, and a failure to comply with pricing accuracy laws can lead to the imposition of substantial fines ("Price Check II," 1998). In Michigan, for example, J.C. Penney was fined $100,000 for scanner errors in 1999 when the state attorney general found high error rates ("J.C. Penney Slapped…," 2000). In Arizona, Wal-Mart faced a one-million-dollar fine for inaccurate prices in 2009 ("Wal-Mart," 2009). Consumers are hurt by overcharges and are inconvenienced when they must bring errors to the store's attention. Errors can occur when prices in the store's computer are not updated in a timely and correct fashion. Errors can also occur when shelf tags and sale signs are not changed to correspond to the new prices in the computer system ("Price Check II," 1998).
Many of the most widely used methods of checking and monitoring pricing accuracy were developed by the NCWM, which is the national forum for industry, business, government, consumers, and others who are interested in issues relating to weights and measures administration in the United States. The NCWM supports the use of the Examination Procedure for Price Verification (NCWM Procedure), which sets forth a sampling and inspection procedure that can be used by government agencies as well as...
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