TRANSORA CEO SAYS CONSOLIDATION IS YEARS AWAY

David Merrefield

CHICAGO -- Contrary to the long-held expectations of Judy Sprieser, Transora's chief executive officer -- and countless trade observers -- the number of business-to-business net markets isn't destined to immediately winnow down to one.

In an interview with Brand Marketing, Sprieser said that owing to the varying needs of retailers and manufacturers, along with the time lag expected in the development of data standards by different classes of users of hubs, such as Transora, the industry may be years away from seeing just one such service.

"Six months ago, I would have said we absolutely have to get down to one [net market] as quickly as possible," Sprieser said. "I still believe we need to get to one because ultimately that's the only way to deliver the end-state solution.

"But in the meantime, it's going to have to be a little bit messy because manufacturers and retailers have different priority sets. I think we can reconcile that, but we also all have the reality of running our businesses.

"We want to be here to realize the end-state. So right now we're focusing on the manufacturers' need set, although we are keeping the door open to discussions on how to come together as one."

As Sprieser pointed out, the conventional wisdom as recently as just months ago was that Transora, WorldWide Retail Exchange and GlobalNetXchange would have to somehow combine their services -- or some would have to wither away -- for the industry to fully benefit. And, it was expected, that would have to happen rapidly.

Most of the prediction retains its validity, Sprieser now says, except for the speed with which it must happen. Indeed, she said, it may be that exchanges in other trade channels will come together before that happens in the consumer-packaged-goods sector.

"I could argue that there might be cross-industry combinations, or overlaps, sooner. Within our vertical, which would include exchanges for retailers, manufacturers, ourselves, our European counterpart and the various supplier exchanges, as I would guess it today, it's a two- to three-year scenario before it boils down to one."

Many observers have voiced the opinion that the best fit among the vertical exchanges would be Transora and WWRE. Transora was founded by 58 consumer-packaged-goods manufacturers, WWRE by 59 retailers. Both offer services such as collaborative planning, forecasting and replenishment (CPFR), backstage logistics, procurement and the like.

But, Sprieser said, the reality may not be as simple as that. "What results may not be what people were envisioning six months ago," she said. "I think it may be a multitiered organization that has a governing body and some subcomponents that can focus in on specific needs of the sectors they represent."

Sprieser said another factor that may delay the union of the vertical exchanges is that data standards have been more difficult to implement than had been earlier anticipated. "One of the big issues we face as we look upstream is that there has not been as much progress on data standards for the supplier community as is needed. There has been a lot of work on defining standards for finished consumer products, but as we get into [specifications concerning] flavorings, packaging and things like that, and they're way behind. So there's a very distinct need set there that is going to cause the technology to develop at its own pace."

Asked how such standards can be developed, Sprieser said the industry's governing body, the Global Commerce Initiative, is working to establish them and is letting software vendors know in clear terms that they must develop products that hew to the standards. "We now anticipate that standards bodies are going to define the standards that are required and that it will be said to software vendors 'if you don't use these standards, you're out of business.' This is very encouraging."

Sprieser said the other factor in delaying the availability of standardized information is manufacturers' own inability to rapidly sweep together information they need for product-oriented data catalogs.

"The product-data catalog is a tool we have ready to populate [with manufacturers' product specifications]. But a lot of manufacturers need to spend a lot of effort in-house to find all the product attributes that are needed. Various parts of the information may be in many places within an organization.

"So we've built a supporting service to assist manufacturers to obtain the data. This is a service we might have created long ago if we knew there was a need."

As for Transora's own internal functions, as has been reported, many steps have been taken to preserve cash. Sprieser sees that as a critical element in the quest for Transora's break-even point, which, she predicts, may be found at the end of this year. Among the cash-preservation actions required have been many tough ones concerning Transora's head count.

"We have terminated some people," Sprieser said. "We've been tough-minded about that during our life cycle. When we first formed, we were a research and development shop. So the people who worked in Transora at first included a lot of strategists and a lot of consultants.

"Now we're a commercial operation that actually repeats things. We're much more like a job shop now. That requires a different type of person and a different type of organization. So we have been hiring; we've been terminating. It's a tough business model, but maybe not too much tougher than many other businesses.

"We do have to keep a close eye on cash. That means we have to have exactly the right type of people that are good at exactly the kind of work we're doing right now."

Transora's revenue model is one of fee-for-service from suppliers. Most retail-service components are offered on a no-charge basis.

Asked if at the end of the day, Transora is likely to be among the exchanges that survive the upcoming shakeouts and changes, Sprieser said the issue of finding a solution to industry challenges is more important than is the survival of any given entity.

"In my mind, the issue of Transora's survival is not as important as having a successful exchange that works and delivers on the vision," she said. "[A net market] is a necessary component in making this industry successful. The [CPG] industry is facing some very challenging fundamentals. There aren't too many new frontiers to explore to get double-digit revenue growth. There aren't too many out-of-the-box product ideas that are going to blow out the top line.

"So we have to get to work on taking out costs. [Some observers think] there are literally billions of dollars of waste in the supply chain. I think this industry can live for decades on taking out those costs. But we can't do it individually. It's got to be through this type of mechanism."