IBM at 100: UPC … The Transformation of Retail

In my continuing series of IBM at 100 achievements … this is one of my favorites of all the ones I plan to republish here. The humble Universal Product Code (UPC), also known as the bar code, along with the related deployment of scanners, fundamentally changed many of the practices of retailers and all organizations that buy and move things, from large industrial equipment to pencils purchased in stationery stores. These two technologies led to the use of in-store information processing systems in almost every industry around the world, applied to millions of types of goods and items. UPC is planet Earth’s most pervasive inventory tracking tool.

N. Joseph Woodland, later an IBMer but then working at Drexel Institute of Technology, applied for the first patent on bar code technology on October 20, 1949, and along with Bernard Silver, received the patent on October 7, 1952. And there it sat for more than two decades. In those days there was no way to read the codes, until the laser became a practical tool. About 1970 at IBM Research Triangle Park, George Laurer went to work on how to scan labels and to develop a digitally readable code. Soon a team formed to address the issue, including Woodland. Their first try was a bull’s-eye bar code; nobody was happy with it because it took up too much space on a carton.

Meanwhile, the grocery industry in post-war America was adapting to the boom in suburban supermarkets–seeking to automate checkout at stores to increase speed, drive down the cost of hiring so many checkout clerks and systematize in-store inventory management. Beginning in the 1960s, various industry task forces went to work defining requirements and technical specifications. In time the industry issued a request to computer companies to submit proposals.

IBM’s team had also reworked its design going to the now familiar rows of bars each containing multiple copies of data. Woodland, who had helped create the original bull’s-eye design, then later worked on the bar code, writing IBM’s response to the industry’s proposal. Another group of IBMers at the Rochester, Minnesota Laboratory built a prototype scanner using optics and lasers. In 1973, the grocery industry’s task force settled on a standard that very closely paralleled IBM’s approach. The industry wanted a standard that all grocers and their suppliers could use.

IBM was well positioned and became one of the earliest suppliers of scanning equipment to the supermarket world. On October 11, 1973, IBM became one of the earliest vendors to market with a system, called the IBM 3660. In time it became a workhorse in the industry. It included a point-of-sale terminal (digital cash register) and checkout scanner that could read the UPC symbol. The grocery industry compelled its suppliers of products in boxes and cans to start using the code, and IBM helped suppliers acquire the technology to work with the UPC.

On June 26, 1974, the first swipe was done at a Marsh’s supermarket in Troy, Ohio, which the industry had designated as a test facility. The first product swiped was a pack of Wrigley’s Juicy Fruit chewing gum, now on display at the Smithsonian’s National Museum of American History in Washington, D.C. Soon, grocery stores began adopting the new scanners, while customers were slowly educated on their accuracy in quoting prices.

If there had been any doubts about the new system’s prospects, they were gone by the end of the 1970s. The costs of checking out customers went down; the accuracy of transactions went up; checkouts sped up by some 40 percent; and in-store inventory systems dramatically improved management of goods on hand, on order or in need of replenishment. And that was just the beginning. An immediate byproduct was the ability of stores to start tracking the buying habits of customers in general and, later, down to the individual, scanning bar coded coupons and frequent shopper cards. In the four years between 1976 and 1980, the number of grocery stores using this technology jumped from 104 to 2,207, and they were spreading to other countries.

In the 1980s, IBM and its competitors introduced the new technology to other industries (including variations of the American standard bar codes that were adopted in Western Europe). And IBM Raleigh kept improving the technology. In December 1980, IBM introduced the 3687 scanner that used holographic technologies—one of the first commercial applications of this technology. In October 1987, the IBM 7636 Bar Code Scanner was introduced–and as a result, throughout the 1980s factories adopted the IBM bar code to track in-process inventory. Libraries used it to do the same with books. In the 1990s, hand-held scanners made it easier to apply bar codes to things beyond cartons and cans and to scan them, eventually using wireless technology. Meanwhile innovation expanded in the ability of a bar code to hold more information.

These technologies make it possible for all kinds of organizations, schools, universities and companies in all industries to leverage the power of computers to manage their inventories. In many countries, almost every item now purchased in a retail store has a UPC printed on it, and is scanned. UPC led to the retirement of the manual and electro-mechanical cash registers which, as a technology, had been around since the 1880s. By the early 2000s, bar code technologies had become a $17 billion business, scanned billions of times each day.

The full text of this article can be found on IBM at 100:

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s