Open Loop or Closed Loop…Which schema is right for my company?
A common question people ask is “Should I use an Open Loop or Closed Loop format when encoding data into my tags?”
First, let’s clarify what Open Loop and Closed Loop systems are, then discuss when each should be employed.
Data in Open Loop systems must be encoded into the tag in a standardized format. Different types of products, applications, etc. each have different standardized formats. The benefit to this Open Loop approach is that it allows data generated, to be shared among all trading partner systems, to be read and interpreted by all parties.
Closed Loop systems instead do not follow a standardized prescribed format when encoding the tag, instead this format is determined by the brand owner. This means that the data format is proprietary to the brand owner, and all other parties which need to read and interpret this data, must be provided the Product Catalog with related definitions. This un-standardized approach allows companies to utilize the tags memory bank in any way they wish that might benefit their company.
Ok then, so what are advantages and disadvantages of each, and when do we recommend each?
If you answer yes to the following questions you will use Open Loop:
- Do your Retail partners require that you use the UPC barcode format? This would have required that you purchase a GS1 Company to create this UPC.
- Do you sell product to a variety of Retail locations such as Macy’s, Nordstrom, and Lord & Taylor?
- Does your data need to be read and interpreted by any third parties?
For sellable product which uses the UPC barcode, we encode the RFID equivalent called the SGTIN (Serialized Global Trade Identification Number). This SGTIN contains similar elements to the UPC, including your GS1 Company Prefix, and the Item Reference #’s used to create your UPC codes, as well as a serial number which distinguishes this item from all others in inventory. All Open Loop tags are written in Binary and represented in Hexadecimal (HEX).
Pros: Interoperability with other partners who utilize GS1 standards. No need to “invent” a format for any item.
Cons: Fixed format requires that the tags be encoded exactly to specification. Standards change over time requiring vendors to adapt. GS1 charges a yearly fee to “license” a Company Prefix. Unless you sell your product in Retail establishments that require the standard there is no benefit.
The second option is Closed Loop. We have created the option to allow users to create products in either in ASCII or HEX formats this Closed Loops system. Advantages of using a Closed Loop option is that you ultimately decide what data to include on the tag level, as well as how this data should appear in the tag. Open Loop system offer the advantage of having no restrictions to creating a desired format. Additionally GS1 modify their standards as chip sizes grow, however Closed Loop formats never need change.
Pros: No restrictions on formatting. Allows user to customize format to suit their own needs. Free. Does not require payment to any governing body.
Cons: Outside parties can’t read the data unless the legend of SKUs is shared with them.