THE NEW AGE OF GLOBAL STANDARDS 2004-05-24 (2)

LIZ PARKS / Additional reporting by Michael Garry

It appears that the consumer products industry has learned its lesson when it comes to creating technology standards: Make them global.

With some exceptions, it's been a long time coming. Thirty years ago, when standards for bar codes were created, two parallel systems came into being. One, overseen by the Uniform Code Council, was the 12-digit UPC (Universal Product Code), a misnomer since it applied only to North America. The other, an eight- and 13-digit data structure overseen by EAN International, applied to the rest of the world.

It might have been acceptable in the 1970s to have two incompatible bar-coding systems. Yet in today's global economy, it clearly is not.

At last week's Retail Systems/VICS Collaborative Commerce conference in Chicago, Paul Singer, chief information officer for Target Corp., Minneapolis, pointed out the complexities that have resulted from the development of competing standards in the electronic article surveillance market and even in the advent of competing business-to-business exchanges.

Thus, with regard to radio frequency identification, he noted the need for a single global standard. "There's something in our DNA that makes us do things multiple ways," he said. "But without one standard, costs are much greater."

Applying these lessons, the industry is embarked on creating global standards for RFID as well as data synchronization. In North America, retailers are attempting to redress the error of three decades past by preparing to scan and process 13-digit EAN bar codes by Jan. 1, the so-called 2005 Sunrise deadline.

UCC and EAN are also working in closer tandem. Since January, the two have been led by one chief executive officer, Miguel A. Lopera. The boards of both have endorsed their joint mission as promoting standards for global commerce.

Further underscoring the commitment to global standards, UCC and EAN International will be phasing out their names this year and gradually adopting an umbrella name for a single global standards organization, GS1 (see story, this page).

Even before these developments, UCC and EAN jointly managed a "methodology" for developing global supply chain standards called the Global Standards Management Process (GSMP). It ensures that standards are independent of any single technology, and that all participants are certified for compliance with those standards.

In short, despite serious divisions on the political front, we are entering the age of global commerce standards, whereby retail industries worldwide will trade as one.

To that end, global standards of all varieties will be the theme of UCC's U Connect Conference this week at the Hilton Anaheim Resort in Anaheim, Calif.

The underpinning of the global standards movement is the recognition that bar codes should be interchangeable across nations. That will start to happen in January as retailers in North America begin scanning 13-digit EAN codes.

However, that is really just the start. The next step, and one that North American retailers are being advised to take, is to enable their systems to process the 14-digit bar code, thus putting themselves in the realm of the GTIN (Global Trade Identification Number) and its companion standard, the Global Location Number (GLN).

The GTIN is the umbrella standard encompassing all types of bar codes, 14 digits or less. It is also the currency of global data synchronization, which is the standard way by which product and eventually pricing data will be shared by CPG trading partners.

Data synchronization, in turn, is regarded as the prerequisite for high-level collaboration, planning and forecasting that will help businesses meet consumer demand more efficiently, experts said. It is also considered necessary for the next wave of supply chain technology based on RFID and the EPC, or electronic product code.

"We're starting to have a global standard now because of the GTIN," said Pam Stegeman, vice president of supply chain and technology for Grocery Manufacturers of America, Washington. "Once most North American retailers are compliant with 13-digit [codes], it will not be too difficult to move to 14-digit GTINs, and we suggest they continue all the way to 14-digit GTINs because 14-digit GTINs are needed to do data synchronization."

Scanning eight- and 13-digit bar codes will "make the process of sourcing global products for North American retailers much easier in terms of access than it is today," said Mike Di Yeso, UCC's president and chief operating officer.

Registry Going Global

Data synchronization, which UCC has been working on for the past four years through its subsidiary UCCnet, took some giant steps last year as UCCnet's membership mushroomed. This year, UCC officials expect even more progress as new UCCnet members start to synchronize data in earnest.

Synchronization occurs when a manufacturer publishes a specific stockkeeping unit on UCCnet's Global Registry, and a retailer pulls that information into its internal systems. The information gleaned from the Global Registry points to the "data pool" that holds much more detailed information on a product. This all becomes a truly global process on July 31, when the Global Registry, now focused on North America, migrates to a global platform under the joint sponsorship of EAN-UCC, though it will continue to be operated by UCCnet. A pilot of the new platform is slated for September.

The fully globalized global registry is a key part of what is called the Global Data Synchronization Network (GDSN), a worldwide network of trading partners exchanging information in a standardized way.

In a speech this month to the EAN International General Assembly in Chiang Mai, Thailand, C. Manly Molpus, president and CEO of GMA, described a scenario whereby the GDSN would enable a small candy manufacturer in Colombia to sell its products worldwide without hiring a global salesforce.

Retailers in the United States, for example, would be able "to order special products to satisfy their customers and build loyalty from a small manufacturer without spending extensive time searching for them," Molpus said. "And consumers are happy because they have a greater access to products that once would only have been available in a very limited area."

Even before it becomes certified as global, data synchronization is proving its worth in this part of the world. Synchronized data, observers said, is making it possible for new products to get to market faster; for promotional products to reach stores in time to be effectively featured and displayed; and for shrink, attributable to supply chain loss, to be minimized.

A recent study on data synchronization, implemented by A.T. Kearney on behalf of Food Marketing Institute and GMA, concluded that manufacturers using global data standards would generate an additional $1 million in savings for every $1 billion in sales, while retailers would generate $500,000 in additional savings for every $1 billion in sales.

Peter Abell, founder and president of The ePC Group, Boston, noted that data synchronization can't just be for the big retailers. "It has to be affordable for the mom-and-pop shops in China and other global markets," he said. "They have to feel as comfortable with data synchronization as Wal-Mart."

To that end, GMA and FMI are launching a project to identify key barriers to data synchronization and to define and develop a set of tools that small to midsize companies can use to get over those hurdles.

Meanwhile, Di Yeso reported that subscriptions to UCCnet, up 33% in the first quarter of this year, now total 3,309 trading partners, 31 retailers, and 3,278 suppliers. The number of items registered -- 216,893 as of May 10 -- was up 200% in the first quarter. The number of members synchronizing data was also up 200%, reaching 1,137 in May. Earlyadopters include CVS, Walgreens, Ahold, Wal-Mart Stores and Wegmans.

"We've made a lot of progress," said Di Yeso. "We still have a long way to go, but we're on fire right now."

UCCnet is striving to hit around 16,000 UCCnet subscribers by the end of this year, he said, with at least half synchronizing data with their trading partners.

Still, Di Yeso estimated that it could take as long as three to four years for data synchronization and trading partner collaboration to reach critical mass.

"But it will happen," he said. "It will be like people subscribing to the UCC because they need a bar code. It will just be what happens in the marketplace."

Patrick Walsh, the director of industry relations at FMI, cautioned "it will take several years of very, very hard work where retailers and manufacturers really have to step up and commit time, money and resources to make this happen." The first step is for retailers and their suppliers to get their data aligned internally within their enterprise systems.

Next Stop: EPC

Following data synchronization, the next major global commerce standard is expected to be the EPC, a digital product identifier, under the auspices of EPCglobal, a joint initiative of UCC and EAN.

EPCglobal has already published Version 1 of the EPC Network, including specifications on tags and readers, and expects to issue Version 2 this fall.

Moreover, EPCglobal has made it possible to port GTINs into the EPC. "Now a company that uses a 14-digit GTIN can take that number and put it inside an EPC and work within the EPCglobal network as it's built out, "said Di Yeso.

Yet before retailers can properly pursue the EPC, they need to use GTINs to support data synchronization. "If you don't have your data correct in the first place, you will make things worse with EPC/RFID because you will be trying to do things automatically without human intervention," said Abell. "There will be a lot of mistakes with EPC/RFID if the databases are not clean."

Nonetheless, like many executives involved in supply chain evolution, Di Yeso predicted a relatively fast adoption rate for EPC/RFID. "Over the next 12 to 24 months," he said, "we will continue to develop standards, and you will continue to see lots of pilots. I think you will start to see significant use of the EPC technology at the case and pallet level, and from that point on, it will become a ubiquitous standard."

Leading retailers like Wal-Mart, Albertsons, Target, Tesco and Metro, as well as the Department of Defense, have already told their top suppliers they want products shipped into specified warehouses tagged with EPC-based RFID tags starting, in some instances, in January of next year.

Joy Nicholas, principle management consultant for Potomac Falls, Va.-based Cascades Retail Technologies, a retail consulting company, said mass global adoption of the EPC will be facilitated by closer cooperation between UCC/EAN and the International Standards Organization (ISO).

New Name for Standards Group

CHICAGO -- Uniform Code Council and EAN International will be phasing out their organizations' names this year and establishing GS1 as the name of the umbrella organization overseeing global standards for bar codes and other commerce systems. The change was described last week by Miguel A. Lopera, chief executive officer for both organizations, at the Retail Systems/VICS Collaborative Commerce conference at McCormick Place here. The name change, he noted, reflects a new centralized organizational model aimed at eliminating duplication in the creation of global standards. "People in Brussels and Princeton have been working in parallel," he said. "Now they will be working only for GS1."

GS1 will have a "different culture" marked by collaboration and "entrepreneurial spirit," Lopera said.

Individual country organizations will be named GS1 followed by the name of the country. UCC, for example, will be renamed GS1 USA. The GS1 name, which was proposed last year but put on hold, will be used at "any opportunity," said Lopera. A new, logo for the umbrella group has also been released. GS1 will be based in both Brussels, Belgium, and Lawrenceville, N.J.

The GS1 USA division will focus on "accelerating global standards for data synchronization and EPC," he said. In addition, the U.S. division will work on better aligning its divisions, such as UCCnet and EPCglobal USA, under the leadership of Chief Operating Officer Mike Di Yeso.

Michael Garry