Almost everyone knows the story of the tower of Babel. People were working together, trying to build a tower to Heaven. But God didn't like the idea, so he caused everyone to start speaking different languages. No longer able to communicate, the people couldn't cooperate and the project flopped.
Substitute the grocery supply chain for the tower, and you could say that what leading members of the CPG industry are trying to do today is reverse-engineer the story.
Every participant in the grocery supply channel speaks his or her own language presently, in terms of how each company's data processing systems identify items and describe product characteristics and business processes. If everyone agreed to use the same language, information could move faster and more efficiently between trading partners—creating a situation that many in the industry might liken to Heaven.
A host of errors and inefficiencies that currently plague the supply chain could be eliminated, and new, more collaborative and productive business processes would become easier to implement.
The problems caused by everybody being "out of synch" came to the fore in 1999-2000, as the industry made forays into new kinds of cross-enterprise activities like vendor-managed inventory. Pioneers quickly bumped up against the hard reality that every company's software systems had different ways of identifying and describing products, as well as processes like purchase orders, shipments, receipts and payments.
It became obvious that in this environment it would be extremely onerous if not impossible to put into place the kinds of rapid, highly accurate data exchanges needed to support collaborative business practices at any significant level of scale.
Clearly, everyone was not going to replace their data processing operations with a single system. The next best, realistic solution was to find a way to translate data so it could flow seamlessly and automatically between different companies' systems. Thus the idea of global data synchronization was born.
The core mechanism for achieving synchronization of product information is the global data pool. This is a public repository of information where any manufacturer can publish product information according to industry-wide standardized formats, and from which all subscribers who need product information, such as retailers and distributors, can draw.
After several competing providers of such data pools were launched, the initial hoopla waned. To those not directly involved, the concept of global data synchronization may have looked like a non-starter.
In 2003, however, industry interest was galvanized again by a report detailing six case studies conducted by A.T. Kearney at the behest of the Grocery Manufacturers Association-Food Marketing Institute alliance. It clearly demonstrated numerous benefits to from data synchronization.
Since then, a growing number of companies at both ends of the supply chain have begun moving more rapidly toward global data synchronization, and an increasing number of software suppliers have developed tools to support the activity.
All Trading Partners Benefit
One factor that may have retarded supplier participation to date is a perception that while most of the benefits of GDS flow downstream to the retailer, costs are incurred mainly by manufacturers.
A look at the results that can be achieved through synchronization (see Synchronicity sidebar) clearly demonstrates, however, that there are plenty of gains to be gotten on each side. And, while manufacturers may be required to take the first steps toward synchronization—since they have to gather and format the product data to populate the pools—retailers also need to make significant investments before both sides can reap benefits. For retailers, the biggest costs are involved in reconfiguring their back-office applications to receive and use the synchronized data.