Global Goals

MICHAEL GARRY

At the U Connect conference held in Orlando, Fla., earlier this month, Bob Noe, chief executive officer of 1Sync, was asked a probing question at the end of a series of presentations given by Noe and other top executives of divisions within GS1 US, sponsor of U Connect.

The question for Noe, who heads the leading U.S. data pool responsible for facilitating data sync between retailers and manufacturers, was this: Why is the number of retailers participating in global data synchronization still relatively low? As of a month ago, there were 11,356 manufacturers — but only 141 retailers/distributors — using the Global Data Synchronization Network (GDSN).

“Many retailers hadn't evolved their legacy technology systems to allow them to move into e-commerce quickly,” Noe responded. “They have had to make changes to their infrastructure. But now, as a result of the changes made, we're seeing a more rapid adoption by retailers than three years ago.

“The key is to educate retailers on what they need to do” in changing their business practices, he added. “When retailers do get started with data synchronization, they don't want to start with just 10% of their suppliers, they want to do it with all of them.”

While retailer adoption of data synchronization may still be lagging, the large turnout at U Connect — more than 1,700 attendees, a 35% increase from last year — was testimony to retailers' and suppliers' interest in the process. Attendees were able to get some insight into data sync's intricacies from wholesalers and retailers who spoke about their experiences. They also heard about a new program — Project Etoile — aimed at overcoming some of the barriers to adoption. And they were given a progress report on the soon-to-be released price synchronization standard — what many believe to be the “killer app” that will drive adoption of data synchronization as a whole.

Thus far, data synchronization has focused on making sure item “attributes” — name, description, dimensions — are the same for both retailers and manufacturers. The data travels from manufacturers to retailers through the standardized network established by GS1, the GDSN, which encompasses a supplier's data pool, a product directory called the Global Registry and a retailer's data pool.

This uniformity of information and information flow has enabled pioneers of the process, such as Wegmans Food Markets and Supervalu, among others, to eliminate errors in invoice processing and logistics that have saved their companies millions of dollars.

But synchronization of price is expected to have an even greater impact on invoice accuracy than item synchronization, industry observers believe. “When you start talking price synchronization, people start thinking huge benefits — something they can really take to the bank,” Greg Zwanziger, director, e-commerce, Supervalu, recently noted.

FOCUS ON ACCURACY

The McLane Co., Temple, Texas, a wholesale distributor of food products to convenience stores, drug stores and mass merchants, more than doubled the number of vendors with which it is synchronizing data — from 41 to 86 — between November 2006 and May 2007. The wholesaler has concentrated its efforts on the confectionery category, along with the tobacco and perishable/frozen categories. As a wholesaler, once it receives synchronized data from manufacturers, McLane publishes the information to its retailer customers.

Data accuracy — the dimensions and weights of individual products and cases — has been a focus of McLane's synchronization efforts since 2004. “We were surprised at how inaccurate the data was,” said Beckey James, corporate merchandising EC manager for McLane, who spoke at a U Connect session.

Initially, McLane asked suppliers such as Hershey to send samples of their products so the dimension and weight data could be verified. “We were getting pallets of Hershey products,” said James. “We realized this required too much manpower.” As a result, McLane set up a certification process for data accuracy that ensures a vendor is providing accurate product data without sending case samples. To date, 13 vendors have been certified.

Getting accurate data has had a positive impact on McLane's logistics operations, allowing trucks to be filled with an optimal amount of product. It also helps prevent scanning errors at the POS, James said.

For McLane, another key benefit of data synchronization has been receiving an electronic notification when a manufacturer makes a change to a product, such as new packaging or flavoring. “Before, we would get nothing, or it would come on a piece of paper and go to the wrong person,” she said. “Data sync allows us to apply changes to items systematically.” The company is now working on using data sync in the setup of new items.

Data synchronization is also a priority for Wal-Mart Stores, Bentonville, Ark., although the retail giant still has mountains to climb. While it is synchronizing data with more than 1,000 suppliers, that still only represents just over 7% of its total supplier base, said Ken Wells, Wal-Mart's senior manager, information systems, who took part in several U Connect sessions.

One of the obstacles to data sync that Wal-Mart and many other retailers have been addressing is a lack of understanding or commitment from some of the buyers or merchandisers who have direct contact with the supplier community. “We're still trying to get some merchants on board, but we're making progress,” said Wells. He encourages suppliers who are meeting resistance from Wal-Mart buyers to email [email protected]. “We'll work with the buyers,” he said.

Like McLane, Wal-Mart is working on the data accuracy side of data sync. “Accuracy is our focus this year,” said Wells. “We're looking to build an audit process.” Wal-Mart is also expanding its data sync program this year to other countries where it operates, including Canada, Mexico and the United Kingdom.

Wells described a number of benefits that Wal-Mart is realizing from data synchronization. The merchandising process, for example, is made easier as a result of data coming in from manufacturers “clean and fast,” he said. Accurate data has significant implications at the store level, where having even one incorrect UPC can generate a “huge cost” as well as “frustration to customers” at the checkout, he noted.

On the logistics side, accurate synchronized data is helping Wal-Mart pursue its “remix” project, which involves taking fast-moving non-grocery products and shifting them through a high-velocity grocery distribution center. “Having quality data is critical to that process,” said Wells.

Wells also cited a case in which a supplier reduced the size of the cartons in which its products are shipped. In the past, it would have taken between two and four weeks for Wal-Mart to receive dimension updates on the cases, but with data sync the information was received the same day. “We were able to immediately calculate full trailer loads [with the smaller cases],” which resulted in fewer deliveries to Wal-Mart, he said.

PRICE ARRIVES

Developing a standard way of communicating price information from manufacturers to retailers has long been the Holy Grail of data synchronization. Under existing practices, manufacturers send price data via a variety of mechanisms, such as EDI (electronic data interchange), XML or proprietary means, that tend to be “more expensive and resource-intensive than the industry-standard GDSN solution” under development for several years, said Gina Tomassi, senior manager, customer supply chain and logistics, PepsiCo, Purchase, N.Y., another U Connect speaker.

That standard for transmitting price information via the GDSN has finally arrived this year. A pilot for testing the standard was successfully completed this spring, and price synchronization is “getting ready for prime time,” said Tomassi. Data-pool certification for price data is going “really well,” she said, adding that the standard itself “will sometime shortly be approved and be ready for use in production.”

Price synchronization is expected to drive a number of benefits for retailers and manufacturers, including the elimination of paper-based processes, a significant reduction in the number of invoice errors and discrepancies, and faster time to market for new items, said Marie Perry, director of business development, Coca-Cola, Atlanta, who spoke at U Connect.

A FLEXIBLE STANDARD

The GDSN price standard, said Tomassi, is a flexible model that supports all types of pricing, including brackets, allowances, charges, list price and transaction price. It also includes summary-level and line-item pricing. For CPG companies like Pepsi, price synchronization should mean that “expected payment equals actual payment, therefore reducing discrepancies and deductions across the supply chain,” she said.

Security has always been more of a concern in communicating price data than it is for item data. As a result, price data, unlike item data, does not go through the Global Registry as it traverses from manufacturers and their data pools to retailers and their data pools. “Price is a targeted message and is meant for one recipient only,” noted Tomassi. Also unlike item data, price data requires retailers to send a confirmation to manufacturers verifying that they received the data.

To address the security concerns that surround price synchronization, GDSN has compiled a best practices security document that is available to GDSN users.

Tomassi recommended that companies interested in implementing the price sync standard look at an implementation guide that is available through the GDSN. She also suggested talking about it with trading partners and data pools. Internally, she advised companies to “get your infrastructure in place, understanding how the data will flow in your environment.” As for making a business case, “talk to your A/R, A/P and logistics departments about how to quantify the benefits,” she said.

While price synchronization may take some time to get off the ground, its benefits may be the incentive that will draw retailers and additional manufacturers into both item and price synchronization, item being a prerequisite for price. “We see an ROI for price synchronization,” said Kim Johnson, national data synchronization manager for Supervalu, Minneapolis, a speaker at U Connect. “It will spur more people to do item synchronization.”

Supervalu, which is synchronizing item data with more than 500 suppliers, was one of the U.S. food distributors that participated in the price pilot this year (the others were Piggly Wiggly Carolina and the Army & Air Force Exchange Service). In the pilot, Supervalu exchanged price data — transaction prices, allowances and bracket pricing — with PepsiCo divisions Frito-Lay and Quaker, Tropicana and Gatorade. “We learned how to use the standard in internal pricing procedures, and how to respond and send a confirmation,” said Johnson.

Supervalu has a price synchronization project scheduled for next year, and will begin implementing price sync in late 2008 and into 2009, Johnson said.

Johnson told SN that Supervalu expects price synchronization to eliminate the manual price-change form its suppliers currently use, just as item sync has eliminated its manual form for new item setup.

Project Etoile

For data synchronization to work, retailers and manufacturers need to share accurate product data via their respective data pools. But some top executives have found that the data pools' ability to share data — their “interoperability” — “should be easier,” said Pete Alvarez, senior director, Global Data Synchronization Network (GDSN), Lawrenceville, N.J.

In an effort to improve interoperability among data pools, GDSN launched “Project Etoile” in February. The initiative is expected to “reduce implementation barriers” to data synchronization and “improve collaboration between trading partners,” said Alvarez.

The program includes retailers and suppliers in six countries: France, Germany, the Netherlands, Spain, the U.K. and the U.S. Retail participants include Wegmans Food Markets, Wal-Mart Stores, Royal Ahold, Tesco, Carrefour and Metro Group. Supplier participants include Kraft Foods, Colgate-Palmolive, Procter & Gamble, Unilever, PepsiCo, Coca-Cola and Johnson & Johnson.

Of the 23 GDSN-certified data pools, “many are synchronizing without the full use of the GS1 system standards and the GDSN/GS1 Registry,” said Dave Hutchings, senior director, business-to-business, Kraft Foods Global, Northfield, Ill. “This minimizes the ROI and compromises the mission and vision of the GDSN.” Data pools, he added, should be “as interoperable as cell phones.”

The business cases pursued in Project Etoile “will better assist new users to implement successful data sync programs via the GDSN,” said Hutchings. In addition to data pool interoperability, the project will focus on data quality and the reduction of redundancy in work processes, duplicate portals and associated paper forms.

In the third quarter of this year, companies in Project Etoile will develop and execute a “migration plan.” That will be followed in the fourth quarter by the achievement of full data pool interoperability. Expansion plans will be developed next year, along with publication of business cases.
— M.G.