Sure, barcodes, with their familiar black and white stripes, will remain a force in the auto-ID marketplace and in warehousing. But emerging technologies, such as two-dimensional (2D) barcodes and radio-frequency identification (RFID), will play a larger role than today.

Warehousing managers can also look forward to more industry consolidation and further development of bar-code standards that would make overseas shipping easier.

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Sales on the upswing

Sales are soaring for auto-ID equipment, which includes bar-code scanners, printers, radio-

frequency devices and sundry other technologies used to mark products and capture that data. Venture Development Corp. (VDC ), a technology-research firm in Natick, MA, says that the market for auto-ID equipment last year totaled $10 billion. And the company expects that market to top $18 billion by 2000, with the increase fueled by foreign sales. [See "The global market for auto-ID equipment," above.]

Leading the auto-ID sales pack is Symbol Technologies Inc. The Holtsville, NY-based, concern earned $774 million in sales in 1997, according to Christopher John Rezendes, a director with VDC. In second place was Intermec Corp. of Everett, WA, with an estimated $700 million in revenue. Paxar of White Plains, NY, placed third with $567 million in sales. [See "The auto-ID Big Five," page 40.]

Late this spring, Symbol Technologies roiled the industry with its announcement that it wanted to purchase the number-four company, Telxon. Symbol offered $38 per share--or some $800 million--to buy its rival, but at press time, Telxon had rebuffed the offer. Many industry analysts believe Symbol will press ahead in its attempt to acquire Telxon, which has one of the largest customer bases of batch mobile computers and radio-frequency terminals in the industry.

Although the bar-code players have undergone consolidation in recent years, Symbol's acquisition of Telxon could spur an industry shakeout.

"I definitely think that companies are going to have to consolidate to compete against the biggest guys like Intermec and Symbol," observes Norman Katz, president of auto-ID consulting firm Katzscan Inc., Dania, FL.

But there's another factor driving industry consolidation: To stay on top of rapidly evolving auto-ID technology, suppliers will be forced to make more mergers or acquisitions.

"You'll see acquisitions to get products and skill sets not in their organization because of time-to-market [concerns]," David "Zap" Czaplick, a vice president with systems integrator Systems Technical Sales Corp., Bellevue, WA, says. "If it will take too long to bring new products to market, the best way is to acquire the technology and resources."

2D and RFID

Besides market consolidation among equipment suppliers, the nature of the auto-ID industry is changing. Over the last decade, auto-ID manufacturers sold equipment to support linear barcodes, the familiar black-and-white markings used to represent letters and numbers. Auto-ID sales consist primarily of laser scanners and printers to support bar-code encryption of information. Today, however, a number of other technologies are gaining a place in data identification, and many of those hold promise for use in the warehouse.

Foremost is the so-called 2D barcode. Introduced in 1987, 2D codes use the horizontal and vertical axes to cram more data into a smaller space than conventional linear codes can accommodate.

"2D codes give you more data in a small space plus error correction," says Craig Harmon, president of QED Systems, a Cedar Rapids, IA, consulting firm. "If you destroy part of a linear barcode, you can't read it. But you can have 35% of the code with a 2D [symbol] and still read it."

Although express parcel carriers and truckers have begun placing 2D codes on carton shipments, they haven't been used as much as forecasted. That may change now that the Automotive Industry Action Group has endorsed the 2D symbology PDF417 as the code of preference for container labels and documents in automotive manufacturing.

In fact, consultant Katz contends that 2D codes could replace advanced ship notices, electronic messages sent in advance of a shipment to let a warehouse know that a truckload of goods is on its way. A 2D code placed on a carton could carry all the shipping information, and warehouse workers would scan the 2D marking at the dock door.

"Sometimes the goods arrive at the warehouse before the warehouse receives the advance ship notice," he explains. "Why transmit the information if you can send it along with the case?"

RFID promises to be another growth technology for auto ID that will see more acceptance in warehousing. That technology uses radio-frequency (RF) tags to mark items. RF tags generally consist of a memory chip for data storage and a radio antenna. A worker placed several feet away can pick up the chip's signal and access information on a tag without a direct line of sight. Right now the technology is being used more in the transportation industry. A reader could determine the contents of a shipment by decoding an RF tag placed on a truck while the rig is traveling down the highway. RF tags may also be used to mark pallets and totes in a warehouse.

Recent developments show that auto-ID companies consider the warehousing market as strategically important. Unova Inc., the Beverly Hills, CA, industrial conglomerate that owns Intermec, made two acquisitions to bolster its presence in the RFID market this year. Unova purchased the rights to IBM's proprietary RFID technology recently. And in May, it signed a letter of intent to buy Amtech Corp.'s RFID unit. With those moves, Unova's chairman and chief operating officer, Alton J. Brann, noted that the radio-frequency identification market is expected to reach a worth of $2 billion in the next five years. Many of those anticipated RFID sales could come from warehousing, because those tags are deployed in distribution.

"RFID is turning a corner,'' says David Collins, president of Data Capture Institute, a consulting business in Plymouth, MA. "It's going to be used more widely, especially for pallet-level loads."

But even though 2D codes and RFID are generating much excitement, at least one expert believes that linear codes shouldn't be viewed as "down and out."

Consultant Bert Moore, president of IDAT Consulting and Education in Pittsburgh, says the industry is developing another generation of linear codes that will compact more information into a smaller space and provide error correction.

Super terminals

As other data-capture technologies become common in industry at large and in warehousing, they will accelerate the trend toward smaller, more powerful data-collection terminals. Almost every supplier produces a terminal that fits into the palm of a worker's hand and does tasks besides scanning barcodes. These days, terminals come equipped with an alphanumeric keypad for manual data input and a radio unit for wireless data transmission. Terminal manufacturers are also increasing memory size of chips inside the terminals, turning many handheld units into portable minicomputers.

Auto-ID manufacturers have also begun combining pen-based computing capabilities with handheld scanners. Pen-based computing allows a worker using a stylus to manipulate a touch screen to input data.

"Pen screen terminals will evolve into something you can slip into your shirt pocket," Moore predicts.

It's no wonder, then, that simple units strictly for bar-code scanning are destined for oblivion. In the future, multifunctional handheld units will receive data entered at a variety of new sources. They may include a vision system employing a miniature video camera or even a voice-recognition system to decipher human speech.

"We'll see more applications developing multiple technologies, where people just don't apply barcodes," says bar-coding consultant Karen Longe of Karen Longe & Associates, Lake Bluff, IL. "You'll see more use of voice and RF tags. People will have to learn [to use] the appropriate technology for a particular application."

Challenges ahead

Despite projections for strong growth in the industry, auto ID faces a number of hurdles.

Lack of worldwide standards, for instance, prevents trading partners around the globe from interpreting a barcode the same way. But efforts to change that have begun. [See "A push for worldwide standards," page 42.]

"There's an increased effort to have standards worldwide, and that's a positive sign" Jim Fales, director of the Center for Automatic Identification at Ohio University in Athens, OH, says.

In particular, lack of a universal standard for RFID has hobbled the wider deployment of that technology, QED Systems' Harmon says.

Everybody has a financial interest in a proprietary tag," he adds, "and that's going to create problems if the protocol is not in the public domain."

Absence of uniform standards isn't the only issue facing the industry, though. Rezendes says that suppliers have the notion that their sales growth stems from compliance labeling, a mandate from buyers to suppliers to place bar-code labels on products as a sales requirement. His research shows that compliance labeling accounts for only a fraction of sales in the auto-ID market.

"Most of the suppliers have been living off of [the myth of] compliance," he explains. "Suppliers are not well prepared to drive new growth."

Although foreign sales will drive the market in the short run, the industry must take other steps to maintain strong growth into the next century. Rezendes contends that suppliers must provide more education to bolster such emerging technologies as 2D barcodes. He adds that warehousing workers haven't received sufficient 2D training.

A supply-chain advantage

Those obstacles notwithstanding, the auto-ID sector is in warehousing for good.

As more corporations embrace a supply-chain strategy to reduce inventory while bolstering customer service, they will rely more than ever on data-capture technologies to track goods in warehouses.

A scan of that situation spells g-o-o-d n-e-w-s for makers of auto-ID hardware.

The global market for auto-ID equipment

Foreign sales are expected to push the market upward in the next two years.

Year Value of equipment sales

1997 $10 billion

2000 $18.5 billion

The auto ID Big Five

According to Venture Development Corp., a Natick, MA, technology-research company, Symbol Technologies leads the pack in the auto-id marketplace. Symbol, and the other top-five grossing auto-ID companies and their annual revenues, are listed below.

Company 1997 revenues

Symbol Technologies $774 million

Intermec Technologies $700 million*

Paxar/Monarch/IIMAK $567 million (includes printing supplies)

Telxon Corp. $466 million

PSC $208 million

*Estimated

Source: Venture Development Corp.

Resources

These establishments are mentioned in this story.

AIM International

(412) 963-8588

Automotive Industry Action Group

(248) 358-97777

Center for Automatic Identification

(614) 593-1452

Data Capture Institute

(508) 746-5120

IDAT Consulting and Education

(412) 344-9020

Karen Longe & Associates

(847) 615-5421

Katzscan Inc.

(954) 929-2569

www.katzscan.com

QED Systems

(319) 364-0212

www.QED.org

Systems Technical Sales Corp.

(425) 462-8008

Unova

(310) 888-2500

Venture Development Corp.

(508) 653-9000

www.vdc-corp.com