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All about Barcodes

Wherever you go, the grocery store, department store, on line at Amazon or your own refrigerator or pantry, you’ll find that everything that you purchase has a UPC barcode on it. Sometimes they are a little hard to find, but if you flip the package around, it’s there.

A barcode is an optical machine-readable representation of data. One of the first uses of barcodes was to label railroad cars, but they were not commercially successful until they were used to automate supermarket checkout systems, a task in which they have become almost universal.Systems such as RFID are attempting to change the standard, but the simplicity, universality and low cost of printed barcodes has limited the role of these other systems. It costs less than one-half of one cent to implement a printed barcode compared to seven to thirty cents to implement a passive RFID.*

George Joseph Laurer developed the Universal Product Code in 1973. As an engineer at IBM he was asked to develop the pattern used for the Universal Product Code (UPC-A Barcode).

GS1, which used to be called the Uniform Code Council (UCC) is the provider of UPC barcode prefixes. A company goes to the GS1, they purchase the prefix and then are responsible for the self-assignment of the identification numbers that go after the prefix.

The Barcode prefix, the first 6, 7, 8 or 9 digits, is called a UPC Barcode Prefix The company who has been assigned the UPC Barcode Prefix is responsible for the assignment of the next digits (making up a total of eleven digits) to their products.

Then, as the barcode number is designated, the last number is mathematically determined through an algebraic equation to create a checksum (check digit). This check digit is the final digit. When you join GS1, you get a prefix certificate along with your start-up package.

As far as we know, there are only a small handful of companies that require a copy of this certificate: Kroger’s, Wal-Mart/Sam’s Club and Macy’s.   The common denominator of these companies is that they are using the manufacturer prefix for their EDI (Electronic Data Interchange). Since this is how they make sure their vendors get paid,

Unless you are specifically going to do business with these three chains, you have the option of using a company that is legally able to subdivide their barcode prefix.

The GS1 maintains the database of Prefixes. It is our opinion that, although this database is conceptually a great idea, and has to be maintained, it is virtually ignored, unknown and unused.

Retailers input information from product data sheets filled out or given to them by their suppliers. The supplier gives the retailer the product information including the barcode based on the human readable numbers (12 digit UPC or 13 digit EAN)  and the retailer enters it into their point of sale system.

There are no formal centralized databases of product barcodes. Using the mathematical formula x=11×10 there are potentially 10 billion products that can be represented by UPC-A barcodes at any given time – 100 billion if you take add the extra digit on an EAN.

This, more than anything else, explains why there is no centralized database of products. No one has the bandwidth, energy or resources to catalog something this massive.

There is nothing programmed into a UPC or an EAN barcode. The bars only represent the number that is the barcode. The retailer associates these numbers with the product information. This information is pulled from the retailer’s database when a product is scanned.

You have two choices when you need to buy a barcode or block of barcodes. You purchase directly from the GS1 (They charge a minimum of $750.00 plus a yearly renewal fee) or you purchase from us or a company like Nationwide Barcode (www.nationwidebarcode.com).  Nationwide Barcode and similar companies received their prefixes in the 90’s or early 2000’s

In 2002 GS1 attempted to codify the agreement with UPC Barcode prefix holders which included renewal fees. The codified agreement included rules that were in the form of a contract which included not being able to subdivide a barcode number. Prior to this, none of this existed.

The GS1 decided to change the way they were doing business. They started sending out renewal notices insisting that the prefix holders pay renewal fees and agree to the new terms and conditions.

Ultimately a class action suit was levied against the GS1 in the state ofWashingtonand the GS1 lost. All prefix owners prior to August 28, 2002 became exempt to the GS1’s renewal fees and new codified agreement.

Quoting the UCC Settlement web site: 

This Settlement provides that companies who became members of UCC before August 28, 2002, are not obligated to pay membership renewal fees to UCC to maintain membership as a condition for their use of Company Prefixes issued to them by UCC, or as a condition for Basic Membership Benefits as defined in the Class Settlement Agreement. Class members who have paid a renewal fee to UCC are entitled to compensation from a $3,895,000 settlement fund. The settlement also provides that the “licensing agreement,” which accompanied UCC renewal fee invoices, is null and void as to those who became members in UCC before August 28, 2002. ** 

Quoting George Laurer, “Often I am asked if a person that purchases a number from a subset seller will have legal problems in the future. Again, I am not a lawyer, but if the number was originally assigned to the seller by the UCC before August 2002, the answer is no problem.”****

Nationwide Barcode is one of the companies deemed legitimate by George Laurer. www.laurerupc.com

The decision to go with the GS1 or Nationwide Barcode (or a company similar to Nationwide Barcode) is a matter of economies of scale. GS1 charges an upfront fee and a yearly renewal fee based upon the number  barcode numbers that you need along with your company’s revenue.

The more you make, the more the barcode prefix will cost you, and this amount can increase over time.

We believe that the GS1 is a great organization, they provide a tremendous service, however, for a small business with a limited budget, a Barcode Subdividing company makes the most sense.

* Text provided by Wikipedia and is available under the Creative Commons Attribution/Share-Alike License. http://en.wikipedia.org/wiki/Barcode ** http://www.ibcaweb.org/ucc-settlement.htm *** (page on George Laurer’s website) **** http://www.laurerupc.com (George Laurer’s site)