NOW FOR THE HARD PART 2004-02-02 (2)

JOHN KAROLEFSKI / Additional reporting: Michael Garry

No doubt about it, data synchronization had a banner year in 2003.

The numbers tell the story. Membership in UCCnet, the data sync arm of the Uniform Code Council responsible for the Global Registry of item data that makes synchronization possible, swelled to 2,419 companies last year, compared to 296 the year before.

Many of the major food distributors signed up with UCCnet in 2003, including Kroger, Safeway, Albertsons, Price Chopper, Publix Super Markets, Pathmark and H.E. Butt Grocery; this brings to 27 the number of distributors on board and accounts for a big chunk of the national all-commodity volume (ACV). There are now some 460 companies in production -- that is, loading information into the registry and setting up a trading relationship with another company.

This has all understandably put the people behind the scenes in a positive mood. "Data synchronization has taken hold in the industry," said Glen DuBois, chief operating officer, UCCnet, based in Lawrenceville, N.J. "It is no longer a question of if we are going to do it, but when and how we do it."

"We finally got the top management attention that was needed to make things happen," said industry veteran and former P&G executive Ralph Drayer, president of Supply Chain Insights, a Cincinnati-based consultancy. He credits the Global Commerce Initiative, a global user group working closely with retailers, suppliers and the primary trading exchanges. "That's really what put the understanding and the teeth into launching this thing."

"Manufacturers and retailers alike are moving from an internal focus on development and item data collection to a trading partner-based focus on implementation," said Ken Fleming, president and COO of Transora, a leading business-to-business exchange focused on manufacturers. As a result, he added, data sync implementations are increasing, and the benefits of the process are beginning to be realized.

Russ Ross, chief information officer, Giant Eagle, the Pittsburgh-based chain that joined UCCnet in October 2002, said he is encouraged by "the continued growth in supplier and retailer involvement with UCCnet."

Indeed, UCCnet, at least in North America, has been the linchpin of the data synchronization movement. Through its Global Registry, UCCnet provides a repository for item data (such as weight and dimensions) as well as location and trading partner data.

UCCnet checks suppliers' data for compliance to industry standards, ensuring that all trading partners are using identical, updated, standards-compliant data. UCCnet can also handle actual synchronization, though exchanges and data pools are increasingly performing that function.

What does this mean for retailers and manufacturers in dollars and cents? Quite a bit, judging from several industry studies. In a study with three retailers (Shaw's, Wegmans and Ahold USA) and three manufacturers (P&G, Nestle Purina Petcare and Kraft Foods North America), A.T. Kearney reported benefits between $700,000 and $1.2 million for every billion dollars in sales.

In a separate study, Cap Gemini Ernst & Young found benefits equal to 1% to 3% of supply chain costs. And this is just with item information; adding price and promotion information is expected to "magnify the effect," said Scott Langdoc, vice president, research, retail industry, AMR Research, Boston.

Where do these benefits come from? With clean and synchronized data, retailers and manufacturers can reduce costly administrative errors in invoice pricing, purchase orders, product delivery and scanning accuracy, explained DuBois. In addition, companies increase the speed of getting new products to market and facilitate continuous exchange of changes to existing item information.

Giant Eagle's Ross noted that in addition to streamlining the addition of new items and eliminating errors, data synchronization will provide a foundation for future collaborative activities such as CPFR (collaborative planning, forecasting and replenishment) and SBT (scan-based trading). Data synchronization is also seen as a key requirement for RFID (radio frequency identification) programs.

PREPPING DATA

While nobody would deny the progress being made with data synchronization, is the industry now ready to cash in on its benefits? Well, not quite. Companies, both retailers and manufacturers, have first to do some heavy lifting in terms of data cleansing and internal integration, observers said.

AMR Research reports that 60% of the time allocated for data synchronization projects has gone to internal data preparation. "Most [companies] have underestimated the effort" required to make data sync happen, said Langdoc.

"Signing up for UCCnet is just one piece of the puzzle," noted Drayer. "A lot of the tough blocking and tackling is in the internal data cleansing and being able to feed UCCnet with accurate data." While some companies have made the internal changes necessary to get the full value, he observed, others are being pulled along because key customers have asked for it. "Or they feel like they'd better do it, but don't fully understand it yet."

"Most manufacturers haven't got a clue how bad their product data is," said Jeremy Hollows, director of B2B, Carrefour, Paris. "And it takes a minimum of nine months to get it right."

Al Joughin, vice president, Information Technology Systems, Shaw's Supermarkets, a leader in data synchronization based in East Bridgewater, Mass., pointed out that data synchronization is not just connecting and sending data to UCCnet, but requires "multiple steps to eliminate the manual, error-ridded processes necessary to truly realize the greatest amount of benefits."

Drayer said that data cleansing requires following very specific GTIN (Global Trade Item Number) application rules, and also application rules for the global data dictionary. Many companies are now adopting GTINs, the 14-digit data structures that can be used in bar codes, as an extension to the UCC's 2005 Sunrise mandate that companies be able to scan and process the 13-digit bar codes used outside North America.

"Once you sign up, you begin to understand exactly what it's going to take to enable you to use the UCCnet synchronization services," added Drayer. "I think this is an area where trading exchanges have been helpful. P&G, for example, chose to use Transora as its data pool, as have a lot of other manufacturers, which simplifies the process. That's one point where retailers can go to get accurate, timely item information from a number of manufacturers, rather than point-to-point contacts with all these manufacturers."

Food Lion, another data sync pioneer, has already invested in getting its ship afloat. About 18 months ago, Food Lion, Salisbury, N.C., deployed a new item management solution, IBM's WebSphere application, to integrate with suppliers and speed products to market.

The solution is performing well for Food Lion and has met all expectations, reported Carolyn Hager, e-business manager for the chain, a subsidiary of Delhaize America. "We are not prepared to discuss benefits in terms of measurable dollars or resources at this time, but I can say that the promises of accurate data for the entire supply chain and speed to marketing for new items are being fulfilled," she said.

THE FUTURE IS NOW

Those companies who make the effort to handle item synchronization will be positioned to leverage the more advanced forms coming soon. For example, Transora is leading an industry initiative focused on DSD (direct-store delivery) data synchronization that includes price and promotion at the store level. The first release of this functionality is complete and the second release, which includes price/promotion synchronization, is expected this month.

This initiative has participation from Kraft, Coca-Cola Enterprises, Pepsi, Sara Lee Bakery Group and Kroger as well as UCCnet. Its objective is to add DSD-specific functionality to the Transora Data Catalogue and UCCnet's GLOBALhub (data sync service) to facilitate information exchange at the store level.

"Improving the quality and speed of information exchanged with our retail partners will reduce inefficiencies and costly errors that result from bad data," said Dan Marr, chief customer officer, Coca-Cola Enterprises. "DSD has unique data synchronization requirements and we believe that we must work together to create a solution that goes beyond the proprietary solutions available today."

The challenge of exchanging accurate information between retailers and DSD manufacturers is larger because of the need to communicate down to the store level, according to Barry Beracha, chief executive officer, the Sara Lee Bakery Group.

"Product lists, item pricing and promotional pricing vary by store, creating enormous complexity and great potential for significant improvement through data synchronization," Beracha said. "With more accurate information flowing in real time, retailers and manufacturers will benefit from more accurate orders and invoices and from reduced out-of-stock situations."

Beyond DSD, Transora officials predict price and promotion will become synchronized in the future. They also expect expansion of the Global Data Synchronization vision as more retailers in Europe and Latin America initiate data synchronization programs, such as Carrefour in France and Gigante in Mexico. (See story, Page 43).

Overall, Transora also expects more items to be loaded and synchronized between trading partners. This will be due to more requests from retailers for synchronized data (both item and price/promotion), scaled-down solutions from providers to make data synchronization easier for small and midsized enterprises, and the addition of more categories from early adopters such as Procter & Gamble, Kraft and Unilever.