Barcodes

Group Digital History and Exhibit Project: The Bar Code
The development of the original bar code and its successive iterations has served to make various areas of commerce and shipping much more convenient, efficient, quick, and cost effective not only for consumers but particularly for business management and corporate leaders, past and present. Modern economic history has largely been the story of the battle between workers trying to make a living and management doing their level best to pull in profits hand over fist – often at workers’ expense. The bar code may have made it much easier for workers to do their jobs and for businesses to make higher profits, but the profit gains for management didn’t end there.

Much as the creation of factories and ever more advanced machines in the 19th and 20th centuries allowed business leaders to replace fairly skilled human labor with machine labor, the bar code allowed business leaders of the later 20th century to replace their mathematically astute, fairly well paid workers with those who could take a scanner and run it over a bar code. That is, the old workers were replaced by minimum wage earning unskilled workers who, using bar codes, could do their jobs just as quickly and for a much reduced cost to management. The bar code represented many things and many changes for business, but chiefly it engendered yet another opportunity for business big wigs to rake in higher profits at the expense of workers.

The Bar Codes' Benefits
With the advent of the bar code, suddenly virtually any company that used a checkout counter, did inventory, or moved significant numbers of goods from one place to another had the option of investing money into the new technology in return for significant increases in profit, productivity, and efficiency. Unfortunately, due to the high fixed costs of the technology, it was out of the question for smaller stores and chains to buy into bar coding. Once the technology was in place and paid for, its relatively low variable costs and the higher profits it allowed meant that stores and companies that could afford it had an edge over those that could not, and that larger stores could then easily undercut smaller ones and still make the same profits.

Companies that bought into bar coding technology and infrastructure soon realized increases of several percentage points in profits. There were several reasons for the higher profits possible with bar codes. First, they allowed for much quicker checkout times at the register, which meant that customers could buy products with far more convenience and so, on average, bought more. Second, converting the process of inventory over to bar codes meant that stores knew what products were selling and when to buy more of a given product, allowing them to react to consumers’ wants and restock accordingly, again allowing for an increase in sales. Finally, on the cost side of things, the much increased efficiency and speed of both inventorying and checkout counters meant that stores could either do a lot more with the workers they had, have each worker on average work for fewer hours and get the same amount of work done, or simply hire fewer workers and still sell the same amount of goods. The increases in sales combined with the savings in costs substantially boosted profits for many companies.

Of course, not all stores could afford to implement bar coding technology. Each different company had to set up its own set of bar codes as well as order the labels themselves and the machines to read them. For the most part, bar codes came only with a fixed cost; once the systems were in place, the costs of maintaining them and buying new labels was at best miniscule next to the cost of setting up the system and certainly less than the increased profits they allowed. While bar codes allowed a lot of money to be made in the long run, many smaller stores simply could not afford the fixed costs associated with them and so simply didn’t buy them. For example, a laser scanning checkout till in 1983 cost upwards of $7,000, a very significant sum of money. Additionally, due to the high fixed costs and low variable costs of bar coding, the more goods sold by a store, the sweeter the bar coding deal. For every product sold, the average total cost of putting the bar coding technology in went down. Thus, even among stores that could afford bar coding, those that sold the most benefitted the most, as they paid less on average per product than stores that sold less.

Unfortunately, the higher profits allowed by bar codes also gave the large stores that could afford them a new weapon to use against smaller stores. Larger stores could now easily afford to lower their prices slightly below those of their smaller competitors while still realizing profits as high or higher than they had prio r to bar codes. Thus, for customers who didn’t much care about anything more than prices and convenience, the choice between large stores with their lower prices and fast, easy checkouts and small stores with their higher prices and slow, antiquated checkouts was an easy one. Of course, this process of large stores crowding out smaller stores was already happening to some degree or another in many industries. Economies of scale meant that larger companies paid far less in average fixed costs per good and produced or sold so much that it was generally simply much easier for them to do business than smaller stores and companies. While a small store might resupply with a small or medium sized truck and completely refill its inventory, a much larger store could pay far less per good on average by calling in a massive tractor-trailer instead. This is no more evident than in the case of A&P, which took 20 supermarkets and 14,000 small stores in 1936 and converted them into 1,646 supermarkets and just 4,000 small stores within just five years.

The bar code simply meant that as advantageous as it might have already been to have a few large stores as opposed to many small stores or to produce, inventory, or ship a great many goods as opposed to a moderate amount of goods, it was suddenly even more profitable to do so. Those companies that could not afford bar codes fell further behind, while those that could realized the largest profits by consolidating their business into fewer and larger stores. In fact, the consolidation and noted advantages for large companies seen in the 1900s (both prior to and after the bar code) were hardly new. One can see many of the same ideas at work in the 1800s and before in such industries as the brewing of ale in Great Britain, chemistry in Germany, electric lighting in the US, and railroads in the US. In some cases, such as ale brewing, it was not just economies of scale but also new, fairly expensive technologies that allowed great savings and higher profits over time. Thus, the bar code was for retail and shipping in many ways what the steam powered engine was for ale brewers. Both technologies helped to accelerate the already ongoing process of many smaller companies consolidating into fewer large ones by making it that much more profitable for the large companies that could afford them.

The Bar Codes' Drawbacks (for Workers)
Ever since the industrial revolution, the major objective for most companies has been to cut costs in order to maximize profits. The competitiveness of the market forced companies to invest a vast amount of money and resources towards research and development, which was responsible for the development of new products as well as new technological advancements to improve the efficiency of manufacturing and facilities functionality. The Universal Product Code (UPC) known today as the bar code was one of the many fruits of investment that saved the grocery and supermarket industry a vast amount of money. Many of the savings, new profits, and changes created by the bar codes came at workers’ expense. During the mid 20th century, with the development of automated technology, skilled labor gradually lost its place to computerized machines. Highly efficient methods and technology such as Henry Ford’s factory system and the automated machine significantly decreased the number of workers needed by the companies and factories. These revolutionary changes allowed the companies to dramatically reduce their costs while maintaining, if not improving their overall productivity. With the high increase of efficiency, companies were able to reduce or terminate the working hours of many employees.

Prior to the introduction of bar codes, grocery stores relied on their mathematically skilled workers to process the groceries at the checkout stands. Since the cashiers were required to sum the price of the each grocery in their heads, the checkout process was very slow and required fairly expensive labor due to the combination of long checkouts and labor skill needed. Bar codes not only increased the efficiency of checkouts in stores but had a great impact on many aspects of businesses, especially in the shipping and inventory sectors. Bar codes and scanners significantly improved the efficiency of these processes and the expensive, skilled labor was no longer required. Stores were able to pick up almost anyone from the street and with very little or no training, these workers were able to perform the same tasks at a much faster rate and at much reduced cost. The highly skilled workers were either replaced or had to agree to a substantial salary reduction in order to keep their jobs and continue to support their families.

The dependence of the companies on the skilled labor prior to the bar codes gave the working force a considerable amount of power over their bosses. In a small store, if half of their employees refuse to work over wages, hours or conditions disputes, the outcome was a massive loss of income to the store. The work force used this power to their advantage and forced the companies to increase their salaries as well as their benefits. The newfound dominance of various sectors of business, particularly retail, by giant corporations due to economies of scale helped largely by the bar code meant less power in workers’ hands, since then even if an entire store is shut down, the company as a whole is not massively effected, meaning that only a strike by massive, organized numbers of workers stands a good chance at making most companies change their ways. Furthermore, workers in very large companies are far less acquainted with the company higher ups than their small store counterparts. In a small store, workers probably know the store’s manager and owner, and can personally speak with them about pay and the like. In a massive chain with hundreds or thousands of stores, an individual store manager or owner has very little power in the corporate structure as a whole and can do little to nothing to affect wages and benefits.

Wal-Mart: Exemplifying the Change Effected by the Bar Code
There is perhaps no better example of the gains possible from adoption of bar code technology as well as of a company spending as little as possible paying its workers for profit’s sake than in Wal-Mart. In 1982, the company was making about $0.16 to $0.17 of profit per dollar spent on their labor, made about $5 in revenue per $1 spent on labor, made just under $2.5 million in revenue and spent just under $.5 million on labor. Around 1984, the  company began wide scale adoption of bar codes in all of its stores, and by 1987 revenues were up to nearly $12 million, labor costs were at around $2 million, the company was making nearly $6 in revenue per $1 spent on labor, and dollars in profit per dollars spent on labor had gone up significantly to about $0.224. Such increases in revenue and costs per year are to be expected for any growing company, but such massive gains in dollars of profit per dollars spent on labor and in dollars of revenue per dollar spent on labor are hardly the norm and coincided with the bar code’s adoption by Wal-Mart. For Wal-Mart, the bar code was the driving force behind no less than a 20% increase in profitability per average worker at Wal-Mart, measured in dollars in profit per dollars spent on labor. This is especially noteworthy because Wal-Mart has been criticized frequently on treatment of its workers; its gains in costs due to labor are not from increases in wages so much as new hiring to staff bigger and more numerous stores. The bar code allowed Wal-Mart to rake in more profits hand over fist while the average worker at Wal-Mart saw few to no benefits at all monetarily.

In Conclusion
All told, bar coding technology was a great boon to the world’s economy as a whole. Everything from inventory and retail to shipping and travel were made faster, cheaper, more efficient, and more convenient with the adoption of bar codes, and the technology has allowed businesses the world over to realize record profits and decreased costs as a result.

That said, not everyone has benefitted from the bar code. Workers in particular at the companies that gained so much from the bar code have themselves generally gained very little. While the increased profits as a result of bar codes have allowed many companies to expand and hire many new workers, gone are the days of mathematically skilled workers making decent wages for skilled work. When a machine can do all of the calculations instantly, any person can be taken off the street and hired for unskilled labor at minimum wage and do the job formerly done for higher wages by skilled workers. Additionally, the bar code helped accelerate a decades old process of small stores being replaced by much larger ones, as was seen with the supermarket and in massive stores like those owned by Wal-Mart or by Target. When a worker is no longer one among a few but one among thousands or millions in a company, and when he or she no longer has direct contact with company management, said individual worker’s bargaining power is massively reduced, and only labor unions of thousands of workers can have any major say.

More than anything, though, the bar code represented another escalation in the centuries old battle between workers and their management for ownership of the money generated by business as well as for control of the workplace. The bar code allowed management to replace skilled workers with unskilled ones who could be fired and replaced much more easily and who were paid lower wages, and it allowed greater profits for management and the company as a whole while workers saw little to no financial gains as a result. Furthermore, it allowed larger companies to realize greater profits than could smaller competitors, which meant that the larger companies could easily undercut and put out of business any companies that could not afford the bar coding technology.

Much as the prevalence of the factory in the industrial revolution (and ever since) allowed management to both have greater control over workers and replace them to a great deal with machines, the bar code, too, has helped to put control and record profits firmly in the hands of management while being of little to no benefit to workers themselves.

References:
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