Getting In Synch

Food retailers are seeing the benefits of global data synchronization.

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.

Ed Licul, World Wide GDS Strategy Leader with the WebSphere Product Center of IBM Software Group, Chicago, who's been involved in the synchronization effort from early on, says no one should make the mistake of thinking the initiative is going to go away.

Retailers, he says, are looking for growing volumes and types of information to feed to their downstream systems.

"They also need to provide consumers with increasing amounts of extremely detailed information about products today," he points out.

There is a reason some suppliers may have underestimated retailers' interest in GDS, he adds. After putting out their initial demands, most of them did not follow up quickly with their suppliers to insure that they are in compliance.

"A lot of retailers may look like they've gone dark or fallen off the radar. But that's because in the interim, they've been busy concentrating on their own internal requirements for GDS. Many have been installing Product Information Management systems and lining up their legacy systems to send and receive data through the PIM," Licul says. As this work is completed, no doubt retailer pressure on suppliers for compliance will grow.

One sign of mounting momentum is a letter sent out jointly last November to their suppliers by Albertsons, Associated Food Stores, Associated Wholesale Grocers, Supervalu, Unified Western Grocers, Wal-Mart and Wegmans Food Markets. The group endorsed the Global Data Synchronization Network and requested that all their vendors use GDSN to synchronize data with them.

Among self-distributing retailers, Rochester, NY-based Wegmans in particular has been a leader and prime mover in prodding and cajoling suppliers to get with the program. Its dedicated efforts have paid off. By last fall, the supermarket operator reported commitments from nearly 1,900 suppliers to synchronize their data, representing 95 percent of the chain's cost volume.

Nearly 900 of these vendors, accounting for 92 percent of volume, were already engaged in the effort, and more than 350 suppliers, representing slightly less than half of Wegman's business, had completed their synchronization projects.

The company has already reaped substantial benefits. As a participant in the A.T. Kearney study, Wegmans documented savings of $500,000 annually based on participation by a then-smaller percentage of its vendor base.

Extrapolating from Wegmans' experience, and that of two other retailer participants, Ahold USA and Shaws Supermarkets, the A.T. Kearney study projects retailers can achieve savings ranging from $700,000 to $1 million for every $1 billion of sales by synchronizing data with suppliers.

A Multi-Stage Process

It is important for retailers, as they get involved in this initiative, to realize that data synchronization itself is not the value driver or the end goal. It's only the requisite foundation for other, more complex steps toward increased efficiency.

"The idea isn't just to synch up with each other on what an item is, but to be able to exchange useful information about items.

For example, once retailers have synchronized data with their trading partners, manufacturers and retailers can both use their data processing systems to automatically exchange such information as how much of a given product is in inventory, what quantities a retailer plans to order when, and what the manufacturer's production capacity and shipment capabilities are," notes Kim Ekstrom, senior consultant with Teradata, a division of NCR Corp. based in Dayton, OH. "GDS provides the bridge to communicate all the elements necessary for these kinds of collaborative activities."

It is through such improved business processes, as well as by elimination of data input errors through the use of synchronized information, that some of the biggest benefits can be derived. But before they can play on this field, companies have to take the first, foundational steps of synchronizing their data.

To do so, manufacturers and retailers first need to agree on what an "item" is, Ekstrom comments. This means creating standard ways to identify and describe products, including all the attributes that pertain to them and how these attributes should be expressed and encoded.

Second, it helps for there to be a central repository or global registry of information, where all industry participants can publish and access data.

These two preconditions are already in place, thanks to several organizations that have developed public data pools for the CPG industry over the past several years. A single non-profit body, GS1 USA (formerly the Uniform Code Council), Lawrenceville, NJ, certifies and publishes the standards for how the data is to be configured.

Recently, several of the data pools themselves have merged, so there are now just two primary repositories of product data serving the CPG supply chain in the United States. One is 1SYNC, operated by GS1 USA, a new, non-profit enterprise formed by the merger of UCCNet and Transora. The latter was a privately held data exchange originally founded by a group of industry members, primarily large U.S. CPG manufacturers.

The other data bank is operated by World Wide Retail Exchange, Alexandria, VA, a private enterprise originally formed mostly by retailers. WWRE merged last year with GNX, another data exchange company. The new, combined entity's subscribers include a number of U.S. grocery retailers as well as other kinds of retail outlets and overseas companies.

Data in both systems is configured according to the standards published and overseen by GS1 USA, and the two exchanges are designed to be interoperable.

For manufacturers the first project, after joining one of the public data pools, is to organize and "cleanse" their product data internally before formatting it according to the public industry standards established by GS1 USA. This initial clean-up effort is crucial (remember the old adage, "garbage in, garbage out.")

After this, manufacturers can upload their data to the global repository of their choice, making it available to any of their trading partners via the Internet.

The retailers' main job, aside from subscribing to one of the data pools, is to adapt their internal systems to become compatible with the public standards so they can use the data in their day-to-day operations. To do this, they must go through a series of preparatory steps to organize and order their product data, similar to the job that the vendors must undertake.

In both cases, the project typically involves finding all item data wherever it is located in a company's various and often disparate computer systems, so it can be aggregated, cleansed and reworked or translated into the standard formats. Aside from making it possible to synchronize item data with all participating trading partners, this step also provides the benefit of creating within each company a single collection of standardized, accurate descriptions for each SKU handled throughout their operations.

The best and most economical way to accomplish this goal for most companies is not to redo all their applications, but to invest in a type of software program known as a Product Information Management system, or PIM.

"Unless a company wants to go in and replace or update all its legacy applications to use the new synchronized data formats, they need a PIM system," IBM's Licul comments. Its job is to serve as a unified, corporate-wide repository for all product data, helping to insure that all facts and figures about products are synchronized internally across all of an enterprise's applications and locations—as well as externally with trading partners.

Another piece of software companies generally need, adds Karen Romanov, research director with AMR Research, Boston, is an integration tool to move product data from place to place.

"It's basically a set of pipes used to transfer data from the legacy systems into the PIM and then out of the PIM to whatever applications are being fed," she says.

The PIM can also be used by retailers to manage the downloading of data from the public data pools, and to manage data workflows and user security, Licul notes.

While he knows of some companies that have chosen to develop their own product information management systems, Ekstrom says that more are turning to outside sources for solutions, whether off-the-shelf or custom-tailored.

Teradata, for example, offers master data management software. The solution is basically an electronic data warehousing tool designed as a central repository and clearinghouse for information on a wide range of business objects, including customers, vendors, transactions, products and more.