Universal Product Codes and Barcodes

Universal Product Codes (UPCs) and barcodes play a critical role in the modern supply chain, enhancing product identification and facilitating inventory management across various industries. A UPC is a unique code assigned to each product, consisting of a company prefix, an item reference number, and a check digit to ensure accuracy. This system, which began developing in the late 1960s, has since become a global standard, with UPCs being utilized in logistics, warehousing, and retail environments. The transition from traditional barcodes to advanced technologies, such as radio frequency identification (RFID) and two-dimensional (2D) barcodes like QR codes, is reshaping how products are tracked and identified.

Despite the efficiencies gained, concerns regarding pricing accuracy have emerged, especially at retail checkouts where barcode scanning is used. Studies have indicated that while scanning technology generally reduces errors compared to manual entry, discrepancies between advertised prices and scanned prices can still occur. To mitigate these issues, various regulatory measures and retailer practices have been established to enhance pricing integrity. Additionally, the evolving landscape of barcodes includes creative applications in marketing, security, and even in artistic expressions, indicating their far-reaching influence beyond mere product identification.

Published in: 2021

By: Erbschloe, Michael

Subject Terms

Universal Product Codes and Barcodes

Abstract

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.

Overview

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 contemporary UPC 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 in 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. One can go to the deli counter or meat counter in the grocery store and 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. The packages are then taken to the checkout, where they are scanned and the store database is updated.

Online retailers also use UPCs to identify the products they sell. One can, for example, go to Amazon.com and find items by entering the UPC. When one looks at the bar code on the package of an item, they will see a series of numbers printed under the bar code. Those human readable numbers are what are coded into the bars. One can enter those numbers into an online retailer's search function to determine if they sell the exact same item.

RFID Technology. 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.

Multidimensional Scanning. 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).

Applications

Assuring Accuracy in the Use of UPC & Bar Code Technology. 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 2015, 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, 2016). 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).

Accuracy Testing. 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 private industry to conduct price verification inspections in all kinds of retail stores ("Price Check," 1996).

The majority of states have weights and measures offices that have implemented price verification programs, most of which are consistent with the NCWM Procedure. In addition, several retailing associations have established scanning certification programs, including the Pennsylvania Food Merchants Association (PFMA) and Associated Grocers, Inc., of Seattle, Washington. In addition, NIST has opened its NCWM Procedure training sessions to retailers ("Price Check," 1996). Retailers can also obtain information on improving pricing accuracy from the Food Marketing Institute, the Retail Council of Canada (Retail Council of Canada, 2007), and the National Retail Federation ("Price Check," 1996).

The FTC recommends that retailers take some basic steps to improve pricing accuracy:

Obtain information on best practices and processes provided by the various associations;
Document procedures and train employees in those procedures;
Have one person in each store with responsibility to oversee pricing processes; and
Conduct periodic audits of prices to measure the level of accuracy being maintained ("Price Check," 1996).

Issues

The UPC & Bar Codes Penetrate Society. Although slow in coming, there are many new directions for the use of product codes and bar codes. After several decades of use, the UPC and the bar code are being infused with greater ability, utility, and marketability. Bar codes are undergoing redesign to give them appeal. They are also being used to enhance security and reduce theft. Bar codes have also found a few unique niches in the world of product marketing, personal adornment, and fiction.

UPCs in the Military. The use of UPCs continues to grow, and automatic identification technology (AIT) is at the heart of the United States Department of Defense (DOD) effort to improve military logistics support. Technologies already in use in the private sector, including product codes, bar codes, radio frequency identification, satellite-tracking systems, smart cards, and optical memory cards, are being integrated to improve logistics functioning ("The Transportation Command…," 2005). The system allows troops to locate parts or supplies, submit orders, avoid duplications, and track shipments in transit ("RFID Technology," 2010). However, conventional RFID tags have historically not been the most secure means of encoding such data, leading the DOD to pursue secure wireless versions, such as mesh networks, in which RFID tags are electronically interconnected (Edwards, 2011).

Enhancing the Marketing Appeal of Bar Codes. The bar code, although found almost everywhere, is fundamentally boring. A white square with black bars and numbers printed under them does not really scream with eye appeal. Design Barcode, a marketing and design company in Japan, is offering an alternative to the ever-so-boring bar code. The goal is to maintain the technological integrity of the bar-coding process and the usability of the UPC while enhancing the white box that surrounds it with an eye-appealing design. The company won the Titanium Lion, a prestigious award in the advertising industry ("Raising the Barcode," 2006). In fact, Design Barcode created over sixty custom bar codes for companies in Japan and launched a marketing campaign to sell its services worldwide (Shaw, 2006).

Fighting Product Piracy, Counterfeiting, & Theft. A system of covert codes is used to help in reducing brand piracy and counterfeiting. These covert codes are embedded in an authentic bar code but will not show up in the counterfeit bar code (Tampone, 2007). In the United States, Customs and Border Protection (CBP), which is part of the Department of Homeland Security, helps to enforce laws against intellectual property rights (IPR) violations by inspecting cargoes and merchandise being transported into the United States and seizing pirated items. A system of bar codes that help to identify counterfeit goods is helpful in the interdiction program. If bar codes are not present or are tested but do not match the official bar code provided by the legitimate manufacturer, then the shipment may be kept from entering the country.

Brand piracy and counterfeiting is a very expansive situation for manufacturers. In fiscal year 2016, the domestic value of IPR seizures was estimated at $1.38 billion. The country shipping the most infringing products in fiscal year 2016 was China, which accounted for 52 percent of the total domestic value seized that year. In fiscal year 2016, there were 31,560 IPR seizures executed by CBP. Apparel and accessories were the most frequently seized item and accounted for 20 percent of the total domestic value of infringing products in fiscal year 2016. But many other patented items were also seized, including $653.6 million in jewelry and watches, $122.9 million in consumer electronics, and $110.8 million in clothing and accessories (US Customs and Border Protection, 2016).

Another unique approach to using the bar code as a security feature is emerging in the diamond industry. Using laser inscription technology, a miniature bar code can be inscribed on the diamond. The code can include a variety of data, including clarity, cut, color grades, country of origin, the manufacturer, and more. Reading the bar code requires a specialized scanner, whereas a traditional laser inscription could be read through a microscope (Shor, 2007).

Exploiting Bar Code Notoriety. The SEIKODO Corporation, headquartered in Nagoya, Japan, has introduced Barcode Kitties™ for licensing in the creation of a wide line of products targeting young girls ("Cat Scans," 2006). These include handbags, stationery, novelty socks, underwear, hosiery, sportswear, sleepwear, loungewear, daywear, costume jewelry, hair accessories, and stickers ("Barcode Kitties…," 2004). Barcode Kitties™ is a girl's character product featuring a group of cute little kitten characters with bar code whiskers (Wilensky, 2005). The theme behind Barcode Kitties™ is that they are "a secret group of kitties who use their paws to scratch barcodes into every product in the world" ("Barcode Kitties Scan the City!" 2009). The SEIKODO Corporation, through CopCorp Licensing, has licensed the anime-themed group of kitties who battle the Glitches, a group of mice who cause problems with product bar codes and scanners ("North America," 2007).

Bar Code Art, Fiction, & Consumer Goods. Bar codes have found a place in the art world, too, and have been used in several mediums, ranging from videos to paintings. One can get a personalized bar code tattoo with your name, birthday, or any other phrase that is up to fifteen digits in length and can include letters, numbers, and spaces. The bar codes are designed using Code 128-style encryption and thus can be read by nearly all bar code scanners. The temporary tattoos are constructed with medically approved decal paper. Bar code tattoos come in multiple sizes and can be shipped to over a dozen countries ("Custom Barcode Tattoos," 2009).

There are also those people that feel that there is a threat of an emerging fascist government requiring everybody to have a permanent bar code tattoo—at least in the fiction work of Suzanne Weyn in her book entitled The Bar Code Tattoo, written for elementary school children. In the year 2025, the book's heroine, Kayla, almost 17, joins the resistance movement to fight against Global-1, the evil corporation that has made the tattoo mandatory. The book has a little bit of everything: intrigue, love, and debates on the ethics of enhanced genetics and cloning (Rawlins, Jones, Toth, Charnizon, Grabarek, & Raben, 2005).

A short shopping spree will yield a new world of bar code decor and apparel. One can get bar code–decorated doormats, wristwatches, handbags, tote bags, belt buckles, T-shirts, swimwear, and a wide variety of clothing and accessories from designer clothing companies. There is even a band named Barcode.

Conclusion

The development of UPC and bar code printing and scanning technology has drastically changed how the supply chain operates on a day-to-day basis, affecting virtually all industries. As the global economy and the geographical redistribution of manufacturing activities have evolved, it has become more important to unify differing approaches to UPC codes. These codes are being merged and made uniform, which will ease movement of consumer products from one trade region to another.

There are still concerns about potential error rates in the use of bar codes, especially on the consumer end, where pricing accuracy has not yet been perfected. Human error or the lack of attention is the biggest source of problems in pricing accuracy, and scanners can help to quickly test pricing accuracy. Because bar codes, scanning, and other automatic identification technologies speed the movement of materials through the supply chain, human error at any point in the system can result in items being shipped to the wrong point or inventories being inaccurate when shipments arrive.

The future of identification technologies and how they are used is really only limited by how system developers view supply chain functioning. For the most part the supply chain is a one-way trip for products, with them ending up in the homes of consumers. As identification technologies evolve, it may eventually be possible to track items all the way through to their ultimate recycling. This ability will have greater significance as ISO 14000 environmental management standards are implemented around the world.

Terms & Concepts

Automatic Identification Technology (AIT): Miniature technologies that can be embedded in or attached to an item that allow electronic scanning of items to identify what they are and the quantity in which they are packaged.

Bar Coding: Various technologies that support placing a bar code on an item that contains its unique universal product code (UPC) and the scanners and other emerging technologies that can read the code printed in the bar.

Examination Procedure for Price Verification: A process by which to test pricing accuracy based on applying sampling and price verification methods in retail stores.

National Conference on Weights and Measures: The organization in the United States that advises and sets standards on the process of weighing or measuring items that are sold and to assure the accuracy of those measuring systems.

Point-of-Sale Systems (POS): The integrated systems consisting of hardware, software, networks, and scanners that support the checkout systems in retail stores and provide customers with receipts, update store database and inventory systems, and facilitate charges to credit cards or other credit devices.

Supply Chain: The integrated system of manufactures, shippers, distributors, and retail outlets that support the manufacturing, ordering, purchasing, movement, and sales of consumer goods and other products.

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Universal Product Codes and Barcodes

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Subject Terms

Universal Product Codes and Barcodes

Abstract

Overview

Applications

Issues

Conclusion

Terms & Concepts

Bibliography

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