May 28, 2003, 12:00 AM

Trying times as trading exchanges trace a path to their transformation

(Page 2 of 2)

Keeping pace with this market potential, the exchanges have been promoting both data synchronization and collaboration services. WWRE and Transora each offers a data synchronizing or data cleansing service that makes sure product descriptions meet industry standards, and each offers connections to industry data pools, such as the Germany-based SINFOS, which stores product information from about 1,000 European companies. The WWRE said last month that it was planning to build 12 or 13 connections to industry data pools throughout the world by year-end. Meantime, Transora has built several connections. It’s also working on a project to let GNX’s retailers make worldwide data connections through Transora’s own data pool of mostly CPG manufacturers. GNX will also be able to offer Transora’s data synchronization service.

Few takers

GNX, WWRE and Transora are also touting their respective offerings in supply chain collaboration services, which are available to any retailers and their suppliers. GNX offers a range of services including CPFR, a Supply Link tool for sharing basic document with trading partners, sourcing and negotiation tools, an exchange for managing the replenishment of perishable products, a collaborative product development service for private label food and non-food grocery products, and the GNX Catalogue, which is being developed with Transora and will collect supplier data that could be integrated into retailers’ back-end systems to support collaboration services.

The same types of collaboration services are also available through the 62-member WWRE, though with some notable differences. Last fall, for instance, it introduced a hosted digital asset management application that supports retailer-supplier collaboration in working on new product designs. The application, developed with Artesia Technologies, enables designers in remote locations to simultaneously work on audio, video, photographic as well as text images of a product in development. WWRE also offers its own data catalog and synchronization service, WorldWide Item Management, for providing integration with data pools as well as retailers’ own systems. Transora, which offers CPFR as well as procurement services, focuses mostly on data synch services and its own industry data pool.

But drumming up business beyond basic auction and procurement has so far produced modest numbers. Transora, with more than 50 members, notes that it had 25 customers for its data synch services by the end of April. WWRE says its data synch business has been picking up following Wal-Mart’s directive to its partners.

GNX, which serves more than 30 retailers, says only seven are now involved in some form of collaboration with their suppliers, including Sears and Germany-based Metro AG, which has begun sharing forecasting data with Procter & Gamble and other suppliers. And U.K.-based food retailer J. Sainsbury plc is using GNX to collaborate with suppliers in developing private-label products. GNX says its other collaboration customers have yet to publicly announce their projects.

A mixed approach

Like GNX, WWRE so far can point to only isolated use of its collaboration services. Parnaby says the most interest expressed so far by WWRE’s retailers is in its Collaborative Planner CPFR service, a hosted web application that lets retailers and manufacturers share supply and demand data to support replenishment of products. The first users are Walgreen Co. and health care products supplier Wyeth Consumer Healthcare in a pilot project that has resulted in improved communication between the two companies in sharing supply and demand forecasts, WWRE says. No other performance results were released. “We’re hopeful of seeing nine or 10 similar projects in the works within a year,” Parnaby says.

GNX and WWRE each charges $200,000 or more per year to subscribe to supply chain collaboration and data synchronization services, depending on number of products and type of collaboration. Data synchronization services can cost less if used separately from collaboration services.

Analysts contend that to get many more retailers to adopt collaboration services, the exchanges will have to go back to making good on one of their original promises: enabling retailers and manufacturers to collaborate between their back-end software applications, a higher value proposition that can produce better results in reduced inventory costs and merchandising that produces more sales.

The exchanges, however, are taking a mixed approach toward their new opportunities in data synchronization and supply chain collaboration services. On the one hand, they downplay the need for retailers and manufacturers to first synchronize all data before beginning to collaborate. They point out that GNX member Sears and WWRE member Walgreen started their collaboration projects without first completing synchronization projects, offering them as showcases for supply chain services. “We don’t follow the view that you need to synchronize data before doing supply chain collaboration,” Laughlin says.

A range of services

On the other hand, GNX and WWRE as well as Transora are preparing for a range of services through which companies will have multiple options to integrate their data and collaborate: retailers and manufacturers will be able to take the Sears or Walgreen route of collaborating through an exchange-hosted application, or using the exchanges as conduits to conduct back-end-to-back-end collaboration. But it will take some time to get this into widescale use, says WWRE’s Parnaby. “Some members really see the opportunity for data integration behind the firewall, but it will be a few years before we see this as the next EDI for back-end-to-back-end integration,” he says.

The long-term benefits of such integration still have to be proven, but they’re not hard to imagine, says AMR’s Romanow. For instance, she says, a retailer’s back-end merchandising system could get automated updates from a supplier’s production and logistics systems detailing the particular style, color, fabric treatments and assorted sizes of an incoming container of blue jeans, as well as the expected time of store delivery. “Once a retailer has that information in a merchandising system, think about what a merchandise planogram would look like,” she says. “They could actually plan it. Now they just guess based on what merchandise they think will arrive.”

Now it’s up the exchanges to convince retailers and their suppliers, she adds, that such collaboration is more than an empty promise.

Auction boom at GNX

(Value in millions of auctions conducted by retailers and manufacturers)

Q1 2002 $700

Q1 2003 $1,400

Source: GlobalNetXchange

paul@verticalwebmedia.com

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