NEW SYSTEM BEGINNING TO CATCH ON

Bar code’s replacement packs data into a series of squares

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A seemingly random collection of black-and-white blocks will become an increasingly common sight when we buy soda out of a vending machine, bet on a horse race or purchase items at a store.

Described as the next-generation bar code, capable of storing more data and with greater versatility, these new symbols are finding their way into a growing number of business operations.

While a conventional bar code can contain information equivalent to about 20 characters, the new symbol can store up to 100 times that.

Officials of Mitsukoshi Ltd., which uses the symbols on invoices, said these tiny squares will eventually save millions of yen a year and reduce the company’s vast volume of paper traffic.

The major department store chain, which receives some 4 million invoices from its suppliers annually, said it used to spend 80 million yen — 20 yen per sheet — to have staff punch the invoice data into the company’s computer data base.

This created massive flows of paper, while buyers and store clerks had to keep carbon copies of the invoices that were attached to the items because it took a long time to manually type all the data into the system, according to Mitsukoshi officials.

Under the new system, which was introduced in October, invoices issued by suppliers bear the square symbols, which contain all the information on the invoices, including the name, number and price of the items.

Upon receipt of the supplies at Mitsukoshi’s warehouse, staff simply have to run hand-held scanners over the symbols to input the data into the company’s computer.

Inventory updates can be effectively instantaneous and render the drag of punching in the data by hand unnecessary, saving millions of yen.

According to Mitsukoshi officials, currently about one in three suppliers send invoices bearing the new symbols, a number that is expected to grow rapidly in the near future.

“We hope the system will eventually cover 90 percent of invoice transactions,” said Akihiko Ikeura, manager of the merchandise administration division at Mitsukoshi.

Of course, the department store chain could be completely paper-free if it opts to go online — as it did with bulk suppliers three years ago. Yet officials say online transactions are still limited to only about 60 large suppliers, given the high costs of introducing the system and management costs for the suppliers.

“It does not make economic sense unless a supplier has annual transaction volume with us of 1 billion yen or more,” Ikeura said, adding that those firms account for only 5 percent of its 4,000 suppliers.

However, a simple PC and a laser printer are all that are needed to print the new symbols on their invoices, with the software required to create the code provided by Mitsukoshi for 10,000 yen, Ikeura said.

While not as familiar as the regular bar code, the new symbols have recently started to be more widely used, with the QR code, developed by major automobile parts maker Denso Corp in 1994, enjoying dominance.

Initially created for use in Toyota Motor Corp.’s “kanban” just-in-time parts supply and inventory management system, the QR code, in addition to being able to store a large volume of data, is highly versatile and can even function when smudged with oil, according to Hiroshi Ikuta, senior marketing official at Denso Wave Inc., a Denso subsidiary.

Assembly lines are not the only place where the new symbols are used. The Japan Racing Association, a semipublic operator of horse races, introduced the symbols on its betting tickets in June 2001.

The automatic payback machines, which read the coded symbols printed on the tickets, are cheaper than those for conventional paper incorporating magnetic strips, according to JRA officials.

Telecom carriers and other businesses see the coded squares as ideal low-tech bridging media. They can be downloaded from the Internet and onto cell phone displays, where they are used as debit points when purchases are made from specially equipped vending machines.

Subscribers can sign up and pay for the service via certain Internet sites.

In April, Coca-Cola Japan Co. started the Cmode service with NTT DoCoMo Inc. and Itochu Corp., using the symbols to connect cell phones and Coca-Cola vending machines.

Designed to attract young people back to vending machines, the service offers various other conveniences, including maps and fortunetelling slips.

The program is currently available at about 350 machines and has attracted 110,000 users since its introduction in April.

“Other wireless means, such as infrared lights, are technologically feasible, but they have problems in terms of user numbers,” said Makoto Sato, vice president for marketing at Coca-Cola Japan, pointing out that only a limited number of cell phones capable of transmitting infrared light are available.

Toshinobu Honda, president of Internet startup Target-One Inc., said using the new symbols as an identification tool on a cell phone display panel could eventually free people’s wallets from discount coupons and point cards.

The company claims that it invented most of the basic technologies and business models for the new-style symbols on the cell phone display panel, saying it has applied for patent rights.

“Honestly, such an idea was a bit too advanced only one year ago,” Honda said. “But it has come to be recognized widely recently, not only in Japan, but overseas as well.”