The results of an information technology survey of manufacturers surprised me. The study, commissioned by the Grocery Manufactures of American, clearly said, "Current IT [information technology] status is inadequate." I've always thought the manufacturers were way ahead of retailers and wholesalers in this area. The study said -- in a critical way -- that only 26% of available "transaction sets" are being used. Transaction sets are the data processing equivalent of documents used for buying and selling products. What the study is saying is that only 26% of the potential things that could be transmitted are being transmitted electronically. However, that 26% could potentially represent a significant portion of the paper transactions. So I'm not sure the situation is as bad as it sounds. The transaction sets currently being used no doubt include purchase orders and invoices, shipping advice, price changes and promotion advice. The ones being used are likely the ones that occur most often.
There's a whole additional area behind the transmissions that needs work. My understanding from talking with my manufacturer friends is that every functional area within the manufacturer environment has its own set of systems, most of which are not interconnected. These areas include sales systems for pricing and deals, marketing systems to evaluate promotions, create coupons, etc. Accounting systems handle cost accounting, billings, accounts receivable and the returned coupons. Manufacturing systems include process control, inventory, purchasing, engineering. Most of these systems don't communicate with each other, and many.
There certainly has been progress. In the old days, sales representatives sat with buyers, described deals and took orders. They then called to an order taker (talking, on the telephone), the products the retailer ordered. This information was keypunched and sent to a central order system. Then they did a manual check with accounting to ensure that the retailer or wholesaler had paid the last few bills. After that they would check inventory to see if they could ship the product, and then validate if further discounts should be applied based on volume or other considerations.
Next, the order was sent to a logical distribution center, where the warehousing operation merged it with other orders for stores in the same area. Someone confirmed delivery dates, noted preferred receiving time, receiving dock numbers, etc. After the shipment was received, there was paper notification of the receipt. An invoice was generated that contained (it was hoped) all discounts and promotion deductions.
In the future, most of these functions will still exist, but will be completely automated, and most of the human beings in the picture will be doing more productive things. Manufacturers, retailers and wholesalers have to use Electronic Data Interchange -- composed of the transaction sets we talked about, above -- to communicate. It doesn't make sense for retailers and wholesalers to invest in systems if the manufacturer can't receive transmitted, automated data. And it doesn't make sense for the manufacturers to do it if the retailers and wholesalers can't. Both sides need to continue development and progress toward the completely automated systems defined in Efficient Consumer Response.