DATA COLLABORATION

MICHAEL GARRY

In "The 10 Rules of Sam Walton," a new book outlining the guidelines established by Wal-Mart Stores' legendary founder, Rule No. 4 reads, "Communicate with people and show you care."

When it comes to its suppliers, Wal-Mart has embraced that rule, especially the communication part. The Bentonville, Ark.-based global giant is famous for establishing electronic lines of communication, notably its Retail Link extranet, which gives suppliers daily SKU-level and store-level updates on POS movement in Wal-Mart's stores. Wal-Mart has also been a pioneer of other communications technology, including electronic data interchange, data synchronization and RFID.

In addition to simply sharing data with suppliers, Wal-Mart has fostered a spirit of collaboration by which the retailer and its suppliers leverage the data to drive mutually beneficial business goals.

Collaborating around shared data is a strategy that may be catching on among some retail and CPG companies. At the Retail Systems 2006 Conference and Exposition, held May 21-24 in Chicago, several CPG companies reported on their efforts to collaborate with Wal-Mart as well as other retailers, while Wal-Mart, Wegmans Food Markets and other merchants talked about their experiences in trading partner collaboration.

While far from a panacea, the picture painted by these reports is much different from the often contentious relationship seen in trading partner communications, which have been marked by a reluctance to share data regarded as proprietary.

For example, at Retail Systems, Brian Wisniewski, director of customer development, PepsiCo International, Chicago, provided a detailed look at how PepsiCo uses Retail Link data in such countries as the United Kingdom, Mexico and Canada to support its own sales efforts as well as Wal-Mart's. The relationship with Wal-Mart, he noted, is based on PepsiCo's willingness to take Retail Link data and fashion reports that help Wal-Mart as well as PepsiCo.

"Wal-Mart is clever," Wisniewski said. "You sign a confidentiality agreement and then they rely on you to do the work for them." In exchange for access to Wal-Mart's sales data, for example, PepsiCo is responsible for generating weekly category reports for Wal-Mart. "They save head count, but it's a win-win," he said. "By sharing insights to maximize opportunities, we get that seat at the table."

For PepsiCo, having a seat at the table means that it can participate in category management, joint business plans and promotions that, together with Wal-Mart's organic growth, can double PepsiCo's sales at Wal-Mart in three years, Wisniewski said. "PepsiCo is committed to leveraging Retail Link to its full capabilities."

In order to efficiently meet Wal-Mart's requirements, PepsiCo invested in database software from Vision Chain, Washington, with which it developed the PepsiCo-Wal-Mart Reporting System, or POWER. Using Retail Link data, the system "provides key performance indicators, automates reporting, does data analysis and identifies business opportunities," Wisniewski said.

One report is a country overview of sales performance, including weekly, month-to-date and year-to-date sales figures, as well as top 15 and bottom 15 SKUs and store rankings. Other reports include a new-item tracker that looks at sales per store and a promotional item review. Many of these reports are being made available on the Internet.

In its roll as a category advisor or "captain" to Wal-Mart, PepsiCo generates confidential category scorecards by store that incorporate other suppliers' sales data. "We look at how participating stores track vs. the national average," Wisniewski said. "Store managers like to have this report."

Syncing Data

While not many food distributors have supplier portals on the level of Retail Link, a growing number are beginning to engage in data synchronization with their suppliers. Using the Global Data Synchronization Network, retailers and suppliers, in concert with data pools, are synchronizing item-level product data. The GDSN, a division of GS1, Brussels, recently announced that 5,000 trading partners (mostly suppliers) are using the network.

Wegmans Food Markets, Rochester, N.Y., has established itself among the leading retailers in data synchronization, with 82% of its cost volume completely synchronized. This means that for suppliers of those products, "their back-end system matches our back-end system," said Brad Papietro, e-commerce manager, Wegmans, at a Retail Systems session.

Having demonstrated that data sync technology works, trading partners are now more focused on the business process changes that synchronization makes possible, noted Simon Glass, senior program manager, Procter & Gamble, Cincinnati, who spoke in the same session as Papietro.

"It's not P&G's business process only or Wegmans' only, but the need to collaborate to understand the end-to-end business process around synchronized data," Glass said. "We need to sit down and map out what the current processes are and what the future processes will be."

One example Glass cited was the need to automate the transmission of data from the selling group within CPG companies, which today is still often done manually. "We have an opportunity to eliminate some of those manual processes," he said.

Wegmans welcomes collaboration, Papietro said. "We want to give our partners access to our business. The more information we can give the P&Gs of the world, the better they will make our business."

In their data synchronization work, Wegmans and P&G realized they needed to break it down into separate categories like grocery, HBC and cosmetics rather than taking on everything at once, Papietro said.

Even at this early stage, Wegmans has observed benefits for itself and its suppliers from the data sync process. For example, manufacturer sales reps no longer need to fill out new item forms; they simply enter the product's Global Trade Item Number and its information populates the form.

The retailer has also noticed an improvement in case weight information. "One of our trading partners paid for data synchronization by [correcting] the case weight for one top-selling item," Papietro said. "By reducing the case weight, they were able to use fewer trucks." With P&G, Wegmans collaborated to ensure that shelf tag information for paper towels was accurate. "We didn't always have a consistent unit of measure on the shelf tags," Papietro said.

For Wegmans, the benefits associated with synchronized data will only be fully realized "if the data is accurate," Papietro said. Data accuracy - meaning data that accurately reflects the dimensions and other physical characteristics of a product or case - has proved to be well of the mark. As a result, retailers and manufacturers focused on synchronizing data are also engaged in making sure that the data itself is accurate.

"If we had to do it over again, we would have cleaned up the data before we synchronized it," Papietro said. "But we're cleaning it now. Everybody can get their hands around data accuracy very quickly."

By partnering with 25 of its grocery warehouse suppliers, including P&G, Quaker Oats, Hershey, Smucker's and Campbell Soup, Wegmans has improved its data accuracy from 36% to 63% "and growing daily," Papietro said.

Meanwhile, last week GS1, Belgium, announced the release of the GS1 Data Quality Framework, which includes a best practice protocol for companies to establish and improve data quality management systems. Wegmans was among the retailers who created the framework, which is available at www.gs1.org/dataquality.

RFID Possibilities

Another new technology that retailers and manufacturers can use collaboratively is RFID. This technology, which employs RFID tags containing an electronic product code identifier, enables trading partners to track cases and pallets from the manufacturer to the store. With RFID, Wal-Mart and large suppliers like P&G and Kimberly-Clark are targeting perennial supply chain issues like out-of-stocks and promotion compliance.

P&G's Gillette division has been able to ensure that tagged promotional displays and pallets are moved to the sales floor at Wal-Mart stores, noted Randy Salley, Wal-Mart's vice president of supply chain systems, at Retail Systems. If displays are found to still be in the back room, "they can mobilize their mobile field force to help," he said. This resulted in a 19% sales increase for certain promotions.

Another Wal-Mart supplier, Salley said, is using RFID for electronic proof of delivery, thereby streamlining the claims process. "If they ship 1,000 and we say we received 950, and they show us the other 50 reads, then it's our mistake," he said. This can "help us receive product properly."

Neenah, Wis.-based Kimberly-Clark plans to send retailers RFID data, giving notice that "there are cases or display units headed your way tied to this purchase order," said Larry Roth, senior supply chain consultant, Kimberly-Clark. RFID data will also be used for proof of delivery, he added. "Retailers will be able to see the supply chain life cycle just as we can."

Roth is another executive who sees the ultimate benefit of sharing RFID data as changing business processes. "There's a lot of potential to improve processes at the dock, save time at the [distribution center], reduce deductions, improve the accuracy of receiving and reduce out-of-stocks," he said.

Kimberly-Clark is also participating in a recently announced program designed to validate the return on investment from RFID-enabled promotions. The program will extend over six months and include 10 stores from each of five to-be-named retailers and five to 10 CPG manufacturers. Retailers will be provided equipment from OATSystems, Waltham, Mass., and ADT, Boca Raton, Fla., enabling them to track promotional products and provide information back to manufacturers.

Keeping Score

Procter & Gamble, Cincinnati, is a big believer in linking its measurements of business progress with those of its retail customers, according to Jim Flannery, managing director, customer development, for P&G's global operations.

"To win with our [retail] customers, we need to align our measures with theirs," he said at the recent Retail Systems 2006 Conference and Exposition in Chicago.

One way to do that is for P&G and its retailers to take advantage of the Global Scorecard, a free tool managed by the Global Commerce Initiative and available at www.globalscorecard.net. The Global Scorecard enables individual retailers and manufacturers to calculate their own key performance indicators and compare them with those of other companies around the world that participate in an annual survey July-September.

KPIs include on-time delivery, lead time, invoice accuracy, out-of-stock rate, service levels to warehouses and stores, among others. The scorecard also looks at "implementation measures" such as use of Global Trade Item Numbers, use of data synchronization and others. "It helps P&G understand what we need to improve," Flannery said.

Flannery compared mock P&G scorecard figures with the weighted average of 109 European retailers and manufacturers compiled in 2005. While P&G's service level numbers were above the weighted average, its lead time numbers were below it, indicating that "lead time needs work," Flannery said.

P&G also plans to use the scorecard collaboratively with specific retail trading partners. "If I have trading partners working with other manufacturers that have shorter lead times, then I've got best practices that I can tap into," Flannery said.

Flannery believes that collaborating around aligned measures is more productive for trading partners than negotiations focused on price concessions. "Collaboration on aligned measures, broader goals and meeting the needs of consumers is facilitating innovation and bigger opportunities," he said.