Another Digit, Another Deadline

Shades of Y2k: U.S. retailers must update their systems to handle longer bar codes by Jan. 1, 2005.

The IT department at Ahold Information Services in Greenville, S.C., has been working for years toward a deadline that's little known outside the retail world.

"We began designing data warehouses and new projects three, four, even five years ago with this in mind," says Ed Gropp, chief business and technology officer at the subsidiary of Ahold USA Inc., which operates U.S. supermarkets including the Stop & Shop and Giant Food chains. The company is "fairly well along," Gropp says, and he's confident Ahold will be ready.

But others in the retail industry are less prepared.

The dust has barely settled over Y2k, and there's another technology deadline approaching. Sunrise 2005 is the Uniform Code Council Inc.'s (UCC) mandate by which all U.S. manufacturers, distributors and retailers must be able to process new, longer product codes by 2005. Like Y2k, this is a business issue that involves database field formats, so responsibility falls heavily on IT. Like Y2k, it's a seemingly simple task that becomes more complex as you get more involved. And like Y2k, it leaves most retailers with no choice but to comply.

A Globalization Issue

Sunrise 2005 is essentially about numerical limits and globalization. In the 1990s, the Lawrenceville, N.J.-based UCC, which assigns the 12-digit universal product codes (UPC), determined that the numbers would eventually run out if more digits weren't added. The council notified retailers in 1997 that as of Jan. 1, 2005, it would introduce 13-digit UPCs and that they would have to be able to process them.

Sunrise 2005 is also a step toward global synchronization of retail data, which is expected to cut precious time and billions of dollars out of the supply chain. Current UPCs conflict with the eight- to 13-digit European Article Numbering (EAN) codes used throughout the rest of the world.

When foreign products are traded here, they must be relabeled so that U.S. 12-digit systems can read them, a time-consuming, expensive and error-prone effort. This relabeling will end in 2005.

A final twist: Sunrise 2005 requires that U.S. retailers be able to process 13 digits, but the UCC recommends that they process 14 digits. That's because 14-digit codes will be required for global synchronization as well as emerging supply chain tools such as reduced space symbology (RSS) and radio-frequency identification (RFID).

Although Sunrise 2005 also affects manufacturers, the bigger issue is for retailers, says Pam Stegeman, vice president of supply chain and technology at Grocery Manufacturers of America Inc. in Washington. Manufacturers won't need to change UPCs on existing products, and their back-end systems can already process 14-digit codes, which are often used on packing crates.

Many retailers with large volumes of international trade have been processing EAN code for years. "Wal-Mart is compliant and has been for several years," says Linda Dillman, CIO at Wal-Mart Stores Inc. "Because we have global systems, which means the same applications support all of our operations in other countries, we have supported a 13-, 14-digit product code since the mid-'90s."

The Navy Exchange Service Command is also ready. "We are an international retailer, so we already deal with 13-digit EAN codes, and our system will support 14," says Bill Finefield, retiring CIO at the Virginia Beach retailer for Navy bases and ships. Because many software vendors cater to international companies, all his systems were built to be compliant with international standards, he says.

Alan Garton, director of channel management for general merchandise at the UCC, says that a large percentage of traditional department stores and mass retailers are already compliant. "Big-box" retailers of appliances and electronics are a "mixed bag," he says. Some are ready; others still have work to do.

But grocery retailers are lagging because many have older systems that were set up in the 1970s and '80s. Among grocers, global retailers like Ahold tend to be working on remediation, and national chains are at least gearing up, says Patrick Walsh, director of industry relations at the Food Marketing Institute in Washington. "The challenge is whether the wholesale community and small, independent operators will be prepared," he says.

Failure to comply isn't seen as potentially catastrophic -- just unwise. "This is not a Y2k in any way, shape or form," says Gropp. "Companies are not going out of business if this doesn't get done."

"It won't cause systems to crash," Garton explains. "You can still do business, though you may have to reconstruct data and fix problems."

Huge point-of-sale problems aren't anticipated, because scanners built since the mid-1980s can already process 13-digit codes. The trouble will arise if larger codes are incompatible with back-end databases.

"Even if point-of-sale scanners can read the bar code, you won't be able to process the data as a result of the scan," says Chris Sellers, a Chicago-based retail consultant at Electronic Data Systems Corp.

In other words, you may be able to sell an item to a customer, but your inventory systems won't know it's gone, your stocking system won't reorder, and your revenue systems won't record the sale. The trouble this could cause will depend on the volume of non-U.S. items and new items with 13-digit UPCs that you trade.

Remediation, Again

Sunrise 2005 is like Y2k in that retailers have to hunt down and expand numeric fields in their databases. But it's also different. "It's not a date field, which is relatively discreet and easy to find," Sellers notes. And the code can show up in unexpected places. For example, product codes are used internally in financial systems and externally with suppliers of materials and packaging, distributors, and logistics services. "It's messy," says Gropp. "These numbers show up in almost every report, every screen, every file you process."

Gropp has integrated the Sunrise 2005 remediation into virtually every IT project for years. "It's not one thing; it's a piece of a lot of other projects," he says. "Every time we get into a system or we're designing a new application, we make sure that it can process the codes," he explains. "If we're updating a purchasing application, we incorporate this into it."

More Hurdles

Finding the code is one challenge, but there are others. Under the current UPC system, the first half of the number is a vendor ID, the second half is a product ID. The code as a whole is supposed to be "nonintelligent," signifying nothing except a unique product. But some retailers have been "parsing" the code, using the first six digits as a vendor reference code to point to their internal data on that vendor. Parsing the code in this way will no longer work. Because EAN codes and new UPC codes will have vendor numbers up to 10 digits in length, the first six digits will no longer be unique.

If retailers want to use the number as a vendor reference, they will need to use the entire number, Garton says. "But the tougher part is how people have entire systems built on this," he says. "I believe this [problem] is bigger than most people are admitting."

For companies that have yet to begin remediation, the time and effort involved will depend on their size, the state of their technology and whether they have been parsing code. EDS's Sunrise 2005 services for large companies include a four- to six-week assessment and a three- to nine-month remediation.

The current economic doldrums and enduring Y2k fatigue among executives make this a difficult time to garner enthusiasm for another IT deadline. Gropp says that among his peers, other priorities have often taken precedence. "They say, 'I've got other projects with higher return,' " he says.

You can put Sunrise 2005 on your company's radar by accentuating the positive, Sellers says. "You don't want to say, 'We have to do this,' " he explains. "You want to say, 'Here are the benefits.' "

Sunrise 2005 is a voluntary deadline, but if you deal in a large volume of non-U.S. or new products or you share data electronically with suppliers, it should be a priority. "If you want good customer service and you want to share standardized data, you have to do this," Garton says. Finefield agrees. "We learned years ago that the best thing you can do is be standards-compliant," he says. "Typically, retailers wait too long and then hurry to catch up. If it's going to impact your business, you need to do it."

Melymuka is a Computerworld contributing writer. Contact her at kmelymuka@yahoo.com.

Copyright © 2003 IDG Communications, Inc.

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