U CONNECT 2005-06-20 (1)

Michael Garry

Miguel Lopera has a dream.

Lopera, the chief executive officer of both GS1 (formerly EAN International) and GS1 US (formerly the Uniform Code Council), described his dream at the kickoff general session at U Connect, GS1 US' annual conference held June 7 to 9 at the Gaylord Texan Resort and Convention Center in Dallas.

The dream is really quite simple: that the number of U.S. retailers actively pursuing data synchronization with their suppliers will grow from the four or five doing so today to 25 a year from now.

Acknowledging that he had his doubts about the growth of data synchronization nine to 12 months ago, Lopera insisted that he is now optimistic about its prospects. Partly, he said, that optimism is based on conversations he's had with industry executives who have told him, "We can't imagine being without data synchronization at 100%." His conclusion: "It's going to happen, sooner than you think," not just for large companies but for smaller ones, too.

At this year's U Connect, the sense of opportunity, and perhaps urgency, about data synchronization -- encapsulated by Lopera's bold prediction -- was more evident than in recent years. For one thing, it was the first U Connect conference to take place since the unveiling last fall of the Global Data Synchronization Network (GDSN), which allows certified data pools to exchange standard product data registered in a Global Registry. The conference also took place just weeks after two major merger announcements -- one between WorldWide Retail Exchange and GNX, the other between UCCnet, a division of GS1 US, and Transora. At U Connect, one packed session was devoted to a discussion of the UCCnet-Transora deal (see story, Page 48). Mike Di Yeso, president and chief operating officer, GS1 US, made it clear that the chief impetus behind the UCCnet-Transora union was the belief that it would help drive industry adoption of data synchronization.

Even the name change made official at U Connect -- Uniform Code Council becoming GS1 US -- underscored the emphasis on global standards upon which the new GDSN is based.

While retailers like Wal-Mart Stores, Wegmans Food Markets, Supervalu and Ahold continue to report excellent results from data synchronization, it is clearly no longer enough for those retailers to carry the torch while others take a wait-and-see approach. Data synchronization, like other industry initiatives before it such as scanning, becomes more valuable as more companies participate in it.

Thus, many of the speakers at U Connect, and to a lesser extent at the Retail Systems conference taking place a few weeks earlier in Chicago, delved into not just the benefits of data synchronization, but what it will take to drive more industry adoption by retailers, as well as manufacturers.

THE BUSINESS CASE

Wal-Mart Stores, which has long been a leading user and proponent of data synchronization, was represented at both Retail Systems and U Connect. At U Connect, Bruce Hawkins, Wal-Mart's senior strategy architect, information systems division, reported that Wal-Mart is synchronizing 60,000 items in 1,957 categories with 943 suppliers through the GDSN, adding about five new suppliers weekly.

At Retail Systems, Randy Salley, Wal-Mart's vice president, merchandising systems, said that by synchronizing item data through the GDSN with Procter & Gamble, Wal-Mart has seen P&G's new-item introductions cut from four days to four hours, while purchase order corrections have been reduced by 25%. The latter has given P&G "a $1 million annual savings just with us," said Salley.

Thus, the benefits of standards-based product data synchronization are "not a theory -- it's a global change in how retailers and suppliers do business," Salley said. "We're seeing real benefits from doing it."

However, U Connect speakers pointed out that while benefits are available, they are hardly guaranteed. "You need to pull them out of your organization," said Tom Mongoven, senior manager of consumer business, Deloitte Consulting. "A business case has to be built around specific business processes like logistics. It's not just a software investment." In support of developing a business case, Deloitte, along with Food Marketing Institute and Grocery Manufacturers of America, developed a free online tool, GDSLaunch Pad (www.gdslaunchpad.com).

Retailers shouldn't underestimate the internal work and commitment needed to launch a data synchronization effort, noted Korbin King, information systems manager, merchandising support, 7-Eleven. "Senior leadership commitment is a must," he said, as well as commitment from all departments affected, such as merchandising, IT and accounting. Retailers like Ahold have embarked on a global initiative to prepare internally for global data synchronization (see "Building a Global Foundation," SN, June 6, 2005, Page 79).

But just as important as company commitment is the development of the global infrastructure and standards that make data sync possible. In this area, much has been accomplished, notably the opening of the GDSN last year, but much remains to be done in standards development, especially for pricing standards.

The pace of growth in the GDSN this year has been substantial, Hawkins said. In sum, 269 trading partners -- 252 manufacturers and 17 retailers -- are synchronizing data via the GDSN, a 16% increase since January. There are 306,000 global trade item numbers (GTINs) registered in the Global Registry, a 62% gain since January.

In addition, 10 data pools have been certified for the GDSN, with six of them actively participating. A new certification period is set for July to October, which is expected to yield 27 certified data pools, 16 of them from outside North America. The certification process is handled by Drummond Group, Fort Worth, Texas.

The growth of the GDSN this year suggests that the "pioneering phase" of its development is "drawing to a close," said Steve Vazzano, director of global standards, Transora. "There is data and it works, so we're seeing the next wave."

The GDSN is designed to allow retailers and manufacturers to synchronize data with any trading partner participating in the network anywhere in the world. All that is necessary is to work through a certified data pool -- much like an ISP provides Internet connectivity .

The GDSN is overseen by GS1 GDSN, a division of GS1. Led by Sally Herbert, president, GS1 GDSN includes a board and a Task Group, which meets every six to eight weeks to develop standards for the Network under what is known as the Global Standards Management Process (GSMP).

"High priority work items" for the GDSN Task Group include a new item introduction form, pricing (relationship dependent data), basic party (location) synchronization and item authorization, said Peter Porri, program manager, Coca-Cola. The Task Group is also looking at how to accelerate the implementation process as well as the standards-setting process.

"We've heard that the GSMP is too slow for current implementations," Porri said. "So we are on a fast track to get attributes approved. We want to get it right but we need to move faster. We want to remove barriers and broaden this community."

STANDARDIZING PRICE

Retailers have long wished for price and promotion information to be made part of the standards-based item data transmitted via data sync. However the complexity of ensuring security and privacy for pricing data, often targeted to specific retailers, has prolonged the standards-setting process. In the meantime, Transora has offered non-standard price synchronization to its users.

The group working on industry standards for synchronization of price -- the GDSN RDD-IRT Team -- has scheduled a pilot for October in preparation for implementation of the first RDD (relationship dependent data) standards next January, according to Talvis Hilley, director of business-to-business e-commerce, Ahold USA, Greenville, S.C.

The initial price standards, dubbed the "crawl" phase, would include transaction or list price. "That's a step toward significantly reducing order and invoice errors and develop learning," Hilley said. In the next "walk" phase, the full range of prices, promotional allowances and charges would be included at the item level, followed by a "run" phase that would include all prices at the order level.

The pricing standards intend to eliminate errors in purchase orders and invoices and reduce data management costs, Hilley said. However, he noted, the proposed pricing standards addresses just communication of pricing information, not the negotiation of prices.

Because of the sensitivity of pricing information, the standards will require encryption to ensure security and an acknowledgement that the data has been received, as well as an alert if there is a discrepancy. In addition, an audit trail will be included for accounting purposes. The standards will be applied to prices disseminated to many recipients (neutral) as well as those sent to only one recipient (sensitive).

The pricing standards will include three elements: conditions document, monetary document and trading partner profile. The conditions document will provide standards for pricing components such as promotions, allowances, charges and taxes. The monetary document will offer standards for monetary amounts, rates and currency. Finally, the trading partner profile will record pertinent pricing information such as locations (GLNs), pricing conditions and price application sequence.

Another issue raised at U Connect was the role played by suppliers in promoting data synchronization. Salley advised manufacturers who have not yet engaged in data synchronization not to wait for Wal-Mart to "mandate" their participation. "P&G, Unilever and J&J have all benefited from participating," he said. "There's no reason others should have to be dragged to the table."

Salley's comments were echoed at U Connect by Nigel Bagley, head of customer e-business, Unilever. "You have to do global data synchronization if you're a manufacturer," he said. "So get excited about it. Don't do the least you can do."

Manufacturers are also responsible for improving the accuracy of their data, a prerequisite for data synchronization.

Fixing data accuracy "is a big job -- we're working on it," noted Bagley. "We don't want to fix data with measurements after it leaves our organization. We need to fix it inside our organization."