SCDigest: Worrisome Trend in Retail Label Requirements

Jun 15, 2009

By Dan Gilmore, Editor-in-Chief, SupplyChainDigest

a special arrangement, presented here for discussion is a summary of a
current article from Supply Chain Digest.

While carton labeling
is not exactly a sexy topic, SCDigest has
recently noted two worrisome changes with regard to carton labeling requirements
for goods going to retail that could cause real problems for manufacturers,
and we would argue ultimately retailers and consumers. These changes are
mostly in the soft goods sector.

Problem 1: Several retailers, which include
we believe Macy’s, Dick’s Sporting Goods, and a few others, are starting
to prohibit any other bar code other than that found on the GS1-128 (formerly
UCC-128) shipping label that they require. The GS1-128 is a serialized
shipping container bar code that uniquely identifies each carton, and is
widely used in retail for cross docking. These retailers are levying a
chargeback if any other bar code that is capable of being read by a scanner
is on the box

This is a huge problem.
First, Wal-Mart, Sears, Kmart, and others require a "case code" bar
code, which basically is the product UPC number plus a case pack identifier,
on each carton. So, if you happen to be a manufacturer selling to both
Wal-Mart and Macy’s, you cannot have the bar required by the former when
shipping to the latter, as just one example. The cost in terms of carrying
multiple SKUs (one with the case code, one without) or special handling/processes
would of course be significant for vendors faced with this scenario

Even worse, the requirement
to not have any other bar code on a case basically says the manufacturer
cannot track the cartons internally before the GS1-128 is placed on the
box during picking or further downstream in packing/shipping. This is a
real problem for manufacturers, many who rely on such bar codes to drive
many internal systems.

Problem 2: A small but increasing number of
retailers are moving away from the original "guidelines" for
GS1-128 label placement, which used to be (and still is for most) on the
right hand side of the long dimension of the box. A growing number of retailers
now want the GS1-128 in the lower left hand side, or in the middle of the
side. Others now want the GS1-128 on the top or even the front (short side)
of the box.

As retailers move away
from this simple standard, it can and will cause havoc in consumer goods DCs.
It will cause lots of confusion trying to get label placement right for
different customers, and again even more importantly could make it impossible
for current or future automated material handling systems to work properly – all
over the changes in simple labeling requirements.

Let’s consider the full impact
of these developments, and use some common sense so that costs are not
raised for manufacturers, retailers and consumers, Yes, maybe RFID solves
it all eventually. But right now this is a growing issue that needs to
be quickly addressed through dialog between manufacturers and retailers
and renewed attention from the standards groups such as GS1 and VICS.

questions: Have you seen retailers starting to back away from existing
standards for carton labeling? Do you see a potential negative impact
on logistics processes for manufacturers? What can be done to come up with
something that works for all parties?

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9 Comments on "SCDigest: Worrisome Trend in Retail Label Requirements"

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Ryan Mathews
12 years 11 months ago

I really don’t know the scale of the problem, but it seems to point out, one more time, for the pressing need for a single, uniform, global labeling system agreed on by all manufacturers and retailers. Without it, supply chain optimization will remain a pipe dream as retailers with large order pads are allowed to build unnecessary complexity into the system.

Ralph Jacobson
12 years 11 months ago

This sounds like the old adage, “The Creeping Crud.” We are finally getting some standards, yes…even global standards in place, and individual stakeholders (Retailers in this case) are moving away from what was an agreed-upon policy. I believe this is corporate pride getting in the way of industry-wide implementation of these standards. This is truly frustrating to see, and while I realize there are reasons why this is being done, stakeholders need to work harder at complying with standards.

We are a long way off from fixing the overall problem of consistent policies across the international supply chain, however when rouge participants make their own rules, not matter how big and mighty they are, it delays the success of the effort overall.

Camille P. Schuster, Ph.D.
12 years 11 months ago

Without a common global standard, the use of ANY code is doomed. Covisint was not successful when each of the US auto manufacturers demanded their own standard. One of the tactics that has allowed more efficiency and cost savings in the supply chain was the creation of a single global barcode. With these conflicting standards, the industry is undermining itself.

Mary Baum
Mary Baum
12 years 11 months ago
As an outsider looking in, it seems to me that this is an area where manufacturers simply must come together and draw a line in the sand. Again, I’m an outsider and I don’t have any background in this, but what it looks like to this outsider is that retailers see two things: 1. The success of Walmart at bullying its suppliers over the years has created the false impression that the road to success is to make manufacturers jump through hoops in the name of efficiency. 2. Retailers, admittedly getting squeezed from every corner, are looking for anyone to squeeze in return. I realize you can draw me a diagram of a warehouse and show me exactly why your barcode has to be exactly there for your distribution system. But I draw diagrams every day (we just call them site maps, ad layouts, logo designs) and you can draw them lots of ways that will still deliver a highly profitable setup without making it impossible for manufacturers to deliver their products at breakeven, Seriously.… Read more »
Dan Gilmore
Dan Gilmore
12 years 11 months ago
As we note in the original article, what I believe has happened here is fairly clear. The “guidelines” (and that is all they are) from GS1 and VICS received a lot of attention in the 1990s, as these programs were first developed. Then, as everyone basically assumed “problem solved,” they (and the rest of us) moved on to other things. Now, a new generation of industrial engineers and logistics managers comes along, with little knowledge of the “standards” and why they are important, and doesn’t see much promoting/educating what they even are. So, they simply design distribution center systems that seem best for them. This issue is containable now (and we are getting positive response from GS1 and VICS on it), but if it were to continue to grow it would develop into a huge problem. One manufacturer has a $5 million conveyor system in its DC that could become obsolete if many more retailers go down this path. It would have to rip it out and go back to manual handling. We have subsequently… Read more »
Bill Bittner
Bill Bittner
12 years 11 months ago
I had to do a little research to prepare a response to this article. My thanks to the website, where I found a good overview of the barcode technology under discussion. I have always been an advocate of picking labels for merchandise being shipped from the DC to the stores. My support has come from three perspectives. Merchandise that arrives at the store is the result of manufacturer and supply chain processes. If the carton and its contents are correct, the manufacturer has done their job. If the supply chain process delivered the right (undamaged) carton, then the supplier did their job. Picking labels attached to the delivered carton gives the store some assurance that a miss-select has not occurred. My second reason for supporting picking labels has been the need to give the store additional information about an item or delivery. Merchandise meant to pre-stock a coming sale or to satisfy a customer request can be identified on the label and handled appropriately at the store. Finally, returns or “strays” are handled more… Read more »
Ed Dennis
Ed Dennis
12 years 11 months ago

Allowing a buyer to set standards might seem to be “customer service,” but it is in reality an invitation to bedlam. Industry associations should perform this function and if they can’t or won’t then the federal government should be invited to mandate standards.

Allowing the buyer base to make decisions always means that the least sophisticated buyer has an undeserved amount of clout in determining standards. Of course, none of these problems would exist if vendors were forbidden to alter a standard for a buyer. However, if any economic advantage is to be gained, a vendor will roll over faster than a puppy.

Dan Gilmore
Dan Gilmore
12 years 11 months ago

As just a note to one of the comments above, in this specific area at least Wal-Mart is extremely reasonable and logical in its requirements.

As a matter of fact, contrary to what most believe, Wal-Mart has never required unique UCC-128 serialized carton labeling (as for example Target does), and had hoped to skip an evolutionary step by going from basic labeling (every SKU of the same type has same bar code – that is what drives Wal-Mart’s internal conveyor systems) to RFID.

It is that bar code which Wal-Mart requires (and any others on the box) that some retailers now refuse to allow on cartons shipped to them.

Queue a dilemma, especially with chargebacks involved.

Dan Gilmore
Dan Gilmore
12 years 11 months ago
As per another comment above, Macy’s for one explicitly prohibits the placing of the UCC128 bar code label over top of existing labels on the carton. Not sure about the two others we know with this same “no other bar codes” requirement. Just to be clear, while UCC128 labels (a specific form, if you will, of “pick labels” referenced above) are not required today for most grocery retailers, they are almost universally required by most soft goods/apparel type retailers, the home products retailers, most mass merchants (outside of food), and a growing array of others. The “advance ship notice” works directly in conjunction with this serialized label – just as GS1 and VICS designed it. Many bar codes used by manufacturers are not printed directly on the carton, but rather placed as labels during the manufacturing process. Regardless, the effort to “cover up” an existing bar code would very much slow down picking efficiency. And as noted above, even this only works if UCC128 label placement is consistent – if it varies, even this bad… Read more »

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