Introduced UPC to grocery industry, GS1 now pushes broader standards across supply chain.
By Eric Johnson
The name GS1 might ring a bell, but not as loud as the non-profit standards organization did with its major breakthrough four decades ago.
GS1 was behind the development of the uniform product code, or in layman’s terms, the barcode, back in 1970. From that momentous breakthrough, the organization has laid a circuitous path of acronym-laden monikers, but has never stopped trying to drive development of standards in commerce.
Since 2005, the organization has gone by GS1 and is now focused on building consensus among its 2 million global members on supply chain standards.
In the United States alone, GS1 says it serves 300,000 businesses in 25 industries, most notably the apparel, consumer product goods/grocery, food service, healthcare, and fresh foods industries.
“Getting the logistics community to embrace the vision of everyone working together” is GS1’s primary goal, said Bernie Hogan, senior vice president of emerging capabilities and industries for the organization in the United States. “Then the interaction between government agencies. Inbound customs compliance, getting rid of counterfeit goods, product safety, anti-counterfeit, inbound food safety… Showing how GS1 standards can be applied.”
If that sounds like a tall task, it is, but one GS1 presses through a broad global network of members across dozens of verticals.
“We try to make sure our standards are user-driven,” Hogan said. “The benefits are all about scale and growth and efficiencies and risk management.
“The challenge we have in the U.S. is that there are some very large closed-loop systems, and interoperability is not a priority for them,” he said. “It hasn’t been an area of focus, but that will shift in the coming years.”
Driving that shift is the inescapable emergence of omni-channel retailing. The desire customers have to purchase and receive goods on their terms — not necessarily within the four walls of a brick-and-mortar store — has major implications on retailing, and Hogan said driving standards across industries and throughout supply chains will only help retailers navigate this transition.
“Retailers are aggressively pursuing omni-channel, and that means they need to improve fulfillment rates,” he said. “We are actively engaging most of the major retailers. It’s less about technology and more about changing business processes. Every store becomes a distribution center. So it’s about how can I transform my organization so every store becomes a DC, and every smartphone becomes a point of sale.
“Who will be successful? It’s all about execution. But when you have multiple standards and proprietary standards, it’s more difficult. So we’re pushing the idea of shared value to see benefits from both sides of the supply chain.”
So on which standards is GS1 focused?
As an example, Hogan pointed to a pilot study conducted on the import of toy and game products, and how the use of Global Trade Item Numbers (GTINs) and Global Product Classification (GPC) codes could substantially reduce the burden on shippers to ensure compliance with U.S. Consumer Product Safety Commission (CPSC) regulations.
The CPSC is responsible for examining toy imports, and protecting the public against unreasonable risks of injury from consumer products, but the inspection process at international borders is a time-consuming, costly, and often manual process.
The pilot product set consisted of leisure, sports, and educational products intended for children. In 2010, more than 850,000 entry lines of toys and games with a declared entry value of $14.5 billion were imported into the United States.
“Today, the CPSC assesses information on incoming products via written document reviews,” GS1 wrote in a case study on the pilot program. “Relying on the Harmonized Tariff Schedule (HTS code) and the free-text commercial name for the product, the investigator decides which products potentially present the highest risk to consumers, and targets products for examination. Consumer product admission is on a ‘green-light, red-light basis,’ meaning that, by default, toy shipments are admitted unless CPSC targets a specific product for examination. Targeted products are held, samples are collected for lab testing, and a final determination is then made regarding clearance.”
To gauge whether the use of GTINs and GPC codes could improve inspection efficiency, toymaker Hasbro provided product information for 30 containers shipped into the United States in 2010. Containers were selected to provide a variety of typical products and multiple products per container.
“To assess how commonly products repeat in entries over time, Hasbro was able to measure the number of times that products present in those 30 containers reoccurred over the next 12 months,” the case study said.
CPSC investigators at different locations were given a three-part worksheet to evaluate the product classification codes and asked to record, given the information on the sheet, whether in their judgment the product must be examined, should be examined, or did not need examination. With the first worksheet, only the information provided by the HTS codes and product name were listed; the second worksheet included the GPC and GTIN code data in addition to the HTS code; and the third worksheet provided all the information on the second sheet, as well as additional GPC attributes.
The use of GPC and GTIN codes in the inspection had a significant effect.
“The pilot confirmed that GPC codes significantly improved product visibility,” GS1 said. “When the GPC code was used, the number of ‘examine as high-risk’ designations dropped from 178 to 67, a 62 percent reduction in high-risk designations.” When the additional GPC attributes were taken into account, the number of high-risk designations dropped another 23 percent.
GS1 estimates the pilot showed CPSC could expect to see product repetition in 75 percent of the entry lines.
“As a knowledge base of previous admissions decisions is established, three-quarters of all toy entries will quickly have a known admissions history, and investigators can focus on the remaining one-quarter of toy entries with no history or no GTIN code,” the case study said.
In dollar figures, the impact would be profound.
“If the top 10 importers each with an average 49,900 toy and game entry lines utilized GTIN and GPC codes, and government reused the previous admission action as the default action, the trade savings realized by these top 10 importers over a period of five years would be approximately $15.1 million, or about $303,000 annually per importer,” the case study said. “This should prove to be a conservative estimate.”
This case study is just the tip of the iceberg when it comes to standards that GS1 is pressing for. It has a presence in 111 countries and touches 150 nations in all, Hogan said.
“The initial focus was on the consumer products, but the GS1 system has evolved into an extensive suite of standards,” Hogan said.
In other words, things have come a long way since the barcode.
For more information, go to www.gs1us.org