Overview of barcodes in the Food Industry for dummies

Posted on February 16, 2012 by Administrator

A lot of companies approached me over the past few weeks about challenges they had with barcodes. While I wrote already a few items on the topic, I thought to write a general overview for people with the necessary resources so that they understand the general framework of barcoding.

First of all it helps to understand that bar-codes are just a font. The only difference between these fonts and the one you are looking at while reading this text is, that barcodes are easier to read for machines and more difficult to read for humans. With this said, creating a barcode is actually as simple as formatting a text in MS-Word. It actually is! The only problem is, that companies in the supply chain have agreed on certain standards, so that barcodes generated by one organization can be used by another. In technology terms, you call this ‘interoperability’ or ‘compatibility’.

To ensure interoperability and compatibility retailers and manufacturer of retail products developed standards in the 70s, first the UCC in the United States followed a couple of years later by the EAN in Europe. Both harmonized their standards eventually with Sunrise 2005 and both standardization organizations became GS1. Today, GS1 has a presence in 108 countries, has over 1,000,000 participants in 156 countries. GS1 is the bar-code standard everybody should use because everybody can understand it, there is no alternative. There are proprietary barcodes for internal applications (e.g. 2 of 5 INT) that we still find in legacy applications, but if you implement barcodes today, you should avoid any implementation of barcodes outside of GS1 Standards. These standards are defined in the “GS-1 General Specifications V12″ (free Download from GS1-Sweden, $1,500 via GS1-US, don’t you love Globalization?).

I don’t know if you really bother downloading the specifications (you should) and read the specifications (you should not), but these are very complex. These standards apply to a wide range of industries, so that they are not only in use in food and grocery distribution, but in manufacturing of all kinds of industries. Even auto parts.

To harmonize the adaptation within certain industry segments, GS1 and trade organization defined within the GS1-framework certain implementation guidelines. They basically define a subset of the general specifications and dumb it down to the relevant information for their constituency. There are already a few out there:

These standards define how we interact between business systems, like warehouse management systems and ERP Systems.

Over the past few years, we saw the rise of consumer barcodes using so called QR-Codes. QR codes today enable consumers to scan barcodes using the build in camera of the smart phones to automatically process information. Most applications of QR codes today contain a link to a website, but QR codes can do much more than that. GS1 has addressed the rise of QR-codes in the latest edition of its general specifications, so that we see a convergence of QR and GS1 standards that probably will progress over time.


Companies that need to implement bar coding solutions have different options. It can be as simple as using a generically available labeling software such as Labelview, via industry specific solutions that provide basic database functions with bar coding and data retrieval (e.g. Harvestmark for produce) to fully integrated industry specific ERP and data collection solutions for food (such as CSB-System), which implement all standard business processes such as order processing and manufacturing based on the industry standards above, naturally enabling companies to adhere to these standards.

It is important for companies to understand the scope of their GS1 implementations. GS1 does not stop at bar coding. GS1 standards encompass other areas, such as EDI, data synchronization and even programming interfaces between business systems, like EPCIS, which is basically Facebook for business applications. Expect that a GS1 compliant implementation will grow, you may start very basic but your implementation will grow over time, since your customers and vendors want to make their business processes more effective and efficient in their pursuit of productivity and competitiveness increases. Companies need to make smart choices on how the implement what they need on the short-term to pacify the demands of their business partners and adapt to changes as they will evolve in the future protecting investments into technology already done.


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Expected vs. Actual

Posted on February 9, 2012 by Administrator

Last week’s blog post provoked quite a response. If you remember, we talked about optimization procedures and cost management of your own fleet. Some had difficulties understanding why companies install $6,000 or more in terms of equipment on their trucks and cars to monitor these.


Historically, most companies in food are trying to control and monitor their costs as part of their accounting system. This is the old and traditional approach, and I find that most companies have a hard time letting this approach go. Solutions like these recognize the fact that ever lower costs of hardware and ever increasing costs of doing business enable organizations to have a closer look at their costs. 10 years ago, we were looking at route optimization systems to decrease costs by balancing routes better, cutting down on driving times and mileage driven, but companies learned quickly that this is only half of the equation. Route Optimization modules did not ensure that the driver is actually driving the optimized routes, that he is only spending the time needed to unload at their stop points on the way, and that they do not make any unscheduled stops. So you may optimize something that nobody adheres to.


There have been different approaches in organizations to more effectively control and monitor costs. “Activity Based Costing” was a buzzword in the 90s that companies tried to implement, but failed to execute on, largely because the approach required to capture many actual data they weren’t able to capture. In the 2000′s we saw the emergence of “Balanced Scorecards”. The pendulum swung essentially back, comparing some operational data with financial data in simple benchmarks with a simple target, but these methods have limited value either. Due to the nature of balanced scorecards, you compress a lot of data and must work with long term averages, so that there are always spikes that show, but are maybe related to regular business activities.

Companies need to increase the level of granularity of cost monitoring further and further. The current cost equation for companies in food make actual cost monitoring which have been historically cost prohibitive today easily justifiable if not mandatory to stay competitive. I sometimes chuckle when I go to my local fast food chain where the cash register displays that I was served in 18 seconds, but for these guys, the labor component during order taking must be a significant enough component to manage the costs of a fast food store. I honestly don’t believe that this makes even a single percent of the costs of a fast food joint, but it easily makes up more than a percent of the manageable costs of a fast food joint.

Looking at food manufacturing organizations all across North America, I see a lot of organizations recognizing this fact, trying to mitigate the changing cost landscape be developing ever more and ever more complex MS-Excel Spreadsheets or blowing up their chart of accounts to a degree that nobody really understands it anymore, except perhaps the person who created it. The worst of it all is, that either of these solutions approach the variance question between actual and expected in summarized fashion, in the example of freight costs perhaps based on the total freight bill. The problem with that approach is, that you cannot really analyze the reasons why you have any variances, because the actual data are not detailed enough, they won’t tell you that your trucks may burn 2 Gallons of additional gas, because the driver waits with the door open for unloading or takes unscheduled breaks.

Companies need to think differently about their expected vs. actual. A level of detail in expected data, whether these are transportation costs, bill-of-materials, cut-yields or anything else will not help if you do not have the same level of detail in your actual data collection. Companies need to learn you can monitor almost any actual costs and any actual activity in an organization, that these solutions are more and more cost justifiable and that the bottleneck in the manageability of organizations is not their accounting software, it is their ability to collect detailed actual data to analyze, slice and dice and compare expected vs. actual.


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Freight Optimization in the Food Industry

Posted on February 4, 2012 by Administrator

If you walk through a big box retail store of your choice, you may notice that some of the food items you can buy have the lowest costs per lb in average across the entire assortment. I know from practical experience that freight costs can be huge. I saw instances in which a produce company operating at the east coast occurred up to 40% freight costs on top of the raw material costs for produce purchased in California, in some instances even higher. Even with more expensive items such as meat or dairy, freight costs are after material and labor probably the next highest cost item, which impacts profitability of an organization depending on how well it is being managed.


Things have changed since August 2011, when I wrote my first entry on the topic of freight cost optimization in the food industry. The technology seems to evolve.

Companies like Advantech provide now dedicated computers for cars and trucks that are optimized for that environment. These solutions withstand vibration challenges, broad temperature ranges and provide interfaces that allow seamless integration of tire pressure monitoring systems. These solutions come also with additional sensor integrations capabilities in case you do not have a sophisticated telemetric system in your own trucks, but need the ability to monitor temperature, state of loading doors and other features. These devices can also very well act as sort of onboard server. While the onboard computer perhaps maintains tasks such as Navigation, Truck data collection and information services, it may also serve information to a mobile data collection device like an LXE MX8 for actual business transactions such as delivery and signature capture.


Everybody know that you need software to control the hardware. CSB-System has introduced a solution for Truck Management and Tracing, that leverages the opportunities these hardware solutions provide. CSB-System claims that customers of their solution save $11,310 (EUR 8.700,–) per truck in average (based on 248 km/155 miles per truck per business day). These are tremendous savings and a tremendous opportunity.

These solutions are of course only applicable if you have an own fleet of significant size (at least 10 Trucks) and transportation is a core function of the value your company adds. This will hold true for anybody calling himself a food service distributor here in the United States, but also companies that are involved in other forms of Direct Store Delivery, like Dairy companies, Bakeries, Beverage Distributors and others. The cost savings potential promises a payback time of less than a year, and ROI greater 100% requiring some serious capital outlay. The opportunity is there, we will see how much traction these solutions will get in the next couple of years.


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Trends in software evaluations

Posted on January 27, 2012 by Administrator

It is that time of the year again. Companies look back at their results and look forward creating their budgets at the end of accounting year, which most of the times coincides with the calendar year. That is that time of the year, where management in organizations decide whether they want to invest into a new smokehouse, a new cooler or a new business application and pencil in the numbers they want to spend on each. Comes January, you see a bunch of so called RFI’s and RFP’s flying around the industry. As a sales professional, I don’t need to iterate, that 80% of these are spoiled, even if the government creates them. In 80% if the cases, some company is already on the inside track to earn the business and the customer is pre-disposed a certain solution already. The process is just needed to justify a decision that has already been made. Nobody admits this of course, because the end is bitter for both participants, the buyer that cannot justify the decision and the seller that does not want to admit that he doesn’t stand a chance to earn the business. Yes, and there are still the 20% that may run an honest competition in this process, or at least honestly believe that they run an independent and neutral evaluation. (Hint: If you have a ‘neutral consultant’ involved, chances are that he is predisposed to ERP systems he know and has experience with, for good or bad).

So let’s talk about the 20% and assume that their approach shall lead to the best solution. Well, it doesn’t!

Month to date, I saw quite a few software evaluations and their approach has changed. To some degree for the better: Most of them are no longer asking for ‘ballpark pricing’ where vendors state like $250,000 to $1,5 Mill or something silly. They also don’t ask anymore these stupid questions about company size, number of employees etc. because these things don’t matter in today’s technology anymore. Companies must have recognized that technology companies burn the candle on both ends usually. Companies succeed very fast in today’s world, look at Zynga, Facebook, Netflix and others, most of which have not been around 10 years ago. So these company credibility attributes don’t really matter anymore early in the evaluation cycle as does not the price.


The RFI’s and RFP’s I am seeing are recognizing these trends. They focus heavily on the feature set of the applications. They ask for ‘catch weight handling’, ‘shelf-life checks’ in shipping and production planning and other features. I actually look at that as a positive trend, unless of course the process is spoiled. Sometimes you tell by the language of the RFI, what ERP System this is already geared to, what system the author knowingly or not was pre-disposed to. But the features alone don’t make a good system.

Just because you use the best musicians and the best instruments does not mean you have the best sounding orchestra. It is as important if not more important, that they play well together and that they play in an environment that supports the best sound possible. This is not very difficult to understand.

Looking at any meat business, you have basically 4 major processes. Accounting is one, that actually does not matter much in software evaluations, since the differences here between different solutions will not affect much your business. You have three major others that do:

-    Order-to-Cash: Your entire sales process from customer contracts, order taking to order fulfillment and invoicing.

-    Production: From Scheduling to production execution, monitoring and yields including plant maintenance (to make products) and HACCP (to make safe products)

-    Procure-to-pay: To get the stuff you need to make products.

I think companies would be much better served to forget the features, but look at their processes. The success of the organization and the benefits of the of the technology investments depends on how well these features are orchestrated. You won’t find this questions that vendors answer with yes/no/maybe. You also don’t find out how well this system plays in your venue, based on the existing skills, infrastructure and user environment. Rethink the way you investigate software and ask yourself how you can get the best solution for your company, not the system with the most features.


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unable or disabled IT department?

Posted on January 21, 2012 by Administrator

I work in technology and I sometimes think that technology sucks. Recently I started learning programming in jscript, as I wrote on this blog a few weeks back, but just the other day I was challenged to program our coffee maker at home. When my wife saw that, the promptly said “Didn’t you say you where learning programming?”. I replied “Coffee makers haven’t been covered yet!”. So sad!


This example illustrates that even I a sometimes challenged using very simple technology, but I think it is fair to say that I should have mastered the coffee maker without any special training classes. Software and Office computers should behave like coffeemakers these days. They should neither require special skill sets to work with them, or to fix them. If they are broken, you want to call the manufacturer to get it fixed within the warranty, and call wal-mart, dell or best buy to get a new one, once they are outside of warranty, since buying new is cheaper than fixing. On top of this, computers are self healing to a certain degree, they install patches automatically, they even send issues off to the manufacturers of software and hardware and notify you when the issue is resolved.

This is all work that used to be done by IT folks in IT departments. The problem is, that we still have the very same type of folks sitting in offices across North America. These people have specialized in tasks that are no longer required, but they have not evolved into business analyst that help people to use MS-Excel more efficient, or help extracting data from their ERP Systems for users. If this sounds a lot like your organization, you definitely have the wrong people in your IT Department, you have unable IT-Folks.

Unfortunately it is not that easy, because I also see a lot of times, that unable IT departments have been disabled by management. I see the very same situation in a lot of organizations: Cheap technologies could make business processes faster, easier, better, safer, reliable and efficient. These are sometimes not big ticket items, but somehow the case of investing into these simple solutions is not accepted or seen by upper management. Sometimes the technology guy cannot make the business case, sometimes the business guy is too inept with technology.


Technology is moving lightning fast these days. Even people in technology have a hard time keeping up, and I think it is common to get disconnected between IT and Management. But what I do not get is, that companies cannot install an IT Manager that can be trusted that has a budget and can, to a degree, evolve and explore the possibilities that make the company more efficient. We do install trusted managers with budgets in all departments across our organizations, why aren’t we able to enable our IT departments to develop more than able people in our organizations?


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