Solving POS Specifications Challenges in Retail Distribution Centers

banner image of boxes and items being scanned

As more and more brick and mortar retailers dive into digital commerce, they are finding their distribution center operations need to fulfill single item orders as if they were taken from a store shelf and scanned at a checkout register.

Traditionally, most retail distribution center (DC) operations and systems were centered around processing cartons, which held multiple numbers of individual items (let us say a wine bottle). All they needed to do was bring cartons in from suppliers, store them in the warehouse, and pick and ship the cartons to the retail stores, where their contents would be broken down and put on the shelves for customers to purchase. The point-of-sale (POS) systems (checkout lanes) in the stores were designed to read and process the barcodes on these individual items.

Now, with the shift to more online ordering and direct fulfillment to customers, these same distribution centers must have the capability to receive, sort, pick, and ship those same individual wine bottles to individual customers. This trend has created pressure on DCs to adapt and change their operational processes to maintain high rates of throughput so both store and end consumers expectations are met. 

Making a smooth transition to this new paradigm is not without challenge. One of the main issues behind the operational challenge is the barcode specifications for POS are different than those for the distribution center.

GS1 Codes Have Different Specifications for DCs and POS


Let us take a minute to understand the basics behind barcode specifications that are used by retailers, both at the POS level, as well as the DC. Retail POS systems and distribution centers usually have their systems designed around the GS1 code specification. However, within the GS1 spec, there are nuances. For the POS environment, barcodes and scanning systems conform to the POS GS1 specifications, which means smaller barcodes, with different data elements, that can be presented by a human to a barcode reader (typically a reader specifically designed to read small codes from small distances). On the other hand, in the DC, GS1 specs are different – they are designed to support conveyance (moving through the facility on a conveyor at high speed). Codes are larger and are meant to be read anywhere on the conveyor. The differences between the two specs have made it challenging for DC control systems with traditional scanning systems to support both.

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Options for Distribution Centers

So, what is the best approach for DCs to adapt to this new paradigm? There are multiple ways to approach this challenge. At a high level, retailers have a couple choices: 1) they can retrofit their distribution centers with technology that supports both sets of code standards, or, 2) they can create separate fulfillment centers that only handle direct to customer shipments from online orders.

Retrofitting Existing DCs

It should be noted that operational processes and equipment required to fulfill individual items for either single-line or multi-line orders for consumers are different than those to receive, store, and ship bulk cartons of goods to stores. In addition to adapting processes to achieve efficiency, the underlying technology (warehouse management system [WMS], storage and conveyance infrastructure, and barcode reading equipment) should be examined to see if it supports handling both “conveyable” and “POS-based” goods. At the core of the system are the barcodes, so barcode reading technology should be able to support both types of code specifications simultaneously. Image-based barcode readers, such as the Cognex DataMan 470, are ideal for these situations.

Dedicated Regional Fulfillment Centers

If retrofitting existing DCs is not a viable option, then perhaps designing dedicated regional fulfillment centers that are strategically located and stocked such that most online orders can be received by customers within 1-2 days is a good alternative. This model has been successfully implemented in the home improvement industry with a leading retailer. With online demand growing every year, consumers have made it clear that they enjoy the convenience of ordering items digitally and are happy with not having to drive to a store to pick it up.

Choosing between these two options depends on the volume of your online business and if it is worth putting the capital investment into facilities dedicated just to online order fulfillment.

Examples of POS Applications in the DC

Given the fact most retailers have an online presence that offers omni-channel shopping experiences, it comes as no surprise that POS type applications have found their way into retail distribution centers. Here are a few application examples that highlight how processes can be adapted to meet the needs of single item (POS-type) orders.

Presentation Reading for Warehouse Fulfillment

For example, Ocado, an online-only grocery store, picks, sorts, and delivers over 1.5 million items per day directly from its warehouse. To meet volume demands, operators must quickly and accurately pick individual items (with smaller barcodes) from inventory to fill orders. Essentially these actions would be found in a brick-and-mortar grocery store. To accomplish this, they set up overhead hands-free image-based barcode reading stations to help them meet the error-free throughput required to meet same or next day delivery expectations. For productivity comparison, using this process their pick rate was twice of what they previously were able to do using traditional hand scanning during picking.

Logistics Point of Sales in DCs - Ocado

Receive Tunnels

Another example where POS type requirements have come to the DC is where inbound logistics teams must be able to process either both single items (POS-type UPC specification) as well as cartons and overpacks (conveyable code specifications) or have a receiving system that is designed specifically for POS-type items. Using a receive tunnel with technology that provides the flexibility to read both barcode specs at high speeds, such as Cognex image-based barcode readers that support multiple symbologies, have variable focal length to read labels of any size and can read code on any side of the item, can bring significant gains in throughput and efficiency.

Logistics Point of Sales in DCs - Receive tunnels

Item Singulation

Loosely packed POS-type items (i.e. a shampoo bottle) often arrive in overpack cartons or totes. To support rapid single item fulfillment, the overpack boxes are broken down and the individual contents must be inducted, sorted, and stored for fulfillment. Conveying and reading codes on these types of items, especially those with curved sides or barcodes is hard for standard systems that are accustomed to reading large codes that are on a predictable axis (i.e. on the side or top of a box). Cognex barcode reading systems take multiple images of the code as it passes, regardless of the angle on the conveyor. Using our ability to read codes at extreme perspectives (tough angles) as well as decode damaged codes provide, we get extremely high read rates, which are needed to meet throughput requirements.

Logistics Point of Sales in DCs - Item singulation

Those Who Adapt Will Compete

As you can see, with the direction consumer shopping is going, it will be very important for retailers who want to succeed at this online order/direct fulfillment model to adapt their operations and technology to support both wholesale packaging (cartons and pallets) as well as individual products that consumers would otherwise go to a store and by off the shelves. Those who adapt will succeed and those who do not may face an uncertain future.

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Mike Poe

Global Content Marketing Manager, Cognex

A technology marketer for over two decades, Mike enjoys communicating how technology can improve business outcomes. Over his career, he’s helped businesses in many industries understand the value of technology through work at Dell/EMC, Sun Microsystems, a few technology startups, and, since January 2020, at Cognex. When not extolling the virtues of using machine vision across various industries, he can be found exploring local Massachusetts and Cape Cod waterways with his kayak, taking in local craft breweries, or working on home improvement projects.

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