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Web-based trading exchanges are finally seeing some action as retailers start to understand the power of data synchronization.
It may not sound very exciting to retailers who relish getting into the psyches of consumers to figure out which of an ever-changing array of products they will respond to and then how to market the merchandise so consumers will buy from them and not from the competition. But synchronizing product data between merchant and supplier is high on the mind of Ruud van der Pluijm. The reason: It`s one of the key elements in making sure that those products that merchandisers are so excited about get to the shelves so those fickle consumers can buy them while the item is still hot.
Van der Pluijm is vice president of b2b e-commerce for Royal Ahold, the Netherlands-based food retailer that operates supermarket chains and Peapod.com in the U.S. For starters, he says, data synch is important because it keeps the robots working in the warehouse. Without them, no products would find their way to the shelves.
If the incoming cases are the wrong size because the supplier started with inaccurate information on product or package dimensions, the robotic machines won`t be able to fit their picking arms around the products to lift and move them. "So somebody has to re-program the robots," he says.
Bad data=$40 billion
Stalled warehouse robots are only one problem resulting from unsynchronized and inaccurate product data shared by retailers and their trading partners. Van der Pluijm adds that about 30% of product data from suppliers is inaccurate, a situation that causes about 70% of all invoice problems. The grocery industry forfeits more than $40 billion a year due to inaccurate business documents processed with trading partners, according to an often-cited study by consultants A.T. Kearney.
Operating with an agreed-upon version of products and orders leads to more accurate purchase orders, invoices and inventory records, resulting in multiple benefits. Retailers and suppliers not only transact accurate payments, avoiding chargebacks and re-orders, but they also save time in correcting errors. And with accurate and consistent information supporting everything from purchase orders to warehouse robots, retailers achieve a better record of avoiding out-of-stocks and getting the right products to the right stores while customer demand is at its peak.
It all sounds great and very utopian. But cleaning up and synchronizing product within a retailer`s internal systems as well as with partners takes time and money--and many companies have resisted sharing information in an Internet-based system for fear of exposing sensitive data--such s promotional pricing--to competitors. "They want to make sure that P&G; is not inadvertently sending pricing to Kroger that was meant for Albertson`s," says Rob Garf, analyst with AMR Research.
This has left a void in a data synchronization market that many retailers extol, but few actually participate in. "The critical mass still hasn`t been achieved," says Jack Langowski, who advises retailers and manufacturers in Internet commerce developments as director of solutions engineering for consultants BearingPoint Inc.
Only about 20 retailers are actively involved in the two main retail industry trading exchanges --the retail-focused WorldWide Retail Exchange and the manufacturer-focused Transora.
But the market for data synchronization and related services is beginning to change, the exchanges say. "We`re just starting now to see people scale up with data synchronization," says Nick Parnaby, chief marketing officer for WWRE, whose data synch clients include Best Buy Co. Inc.
WWRE`s most direct competitor for data synchronization agrees. "Just in the last six months have we`ve seen the market take off," says Transora CEO Judy Sprieser. "Some retailers have gotten enough experience in the market and that`s giving more retailers the confidence to move forward. Some of our members have been using our network for a couple of years now and are starting to show some ROI."
Big guys push
There are several reasons for this new interest, they add. The early moves by Wal-Mart Stores Inc., Procter & Gamble Co. and others to share synchronized data with trading partners has raised the comfort levels of others waiting on the sidelines. The retail industry recently launched the Global Data Synchronization Network, which links industry data pools in multiple countries. And many retailers and manufacturers are moving toward a January goal of sharing product information based on global standards under an initiative known as the global trade identification number, or GTIN.
The retail industry`s increased demand for data synchronization and related services in retailer-supplier communications is coinciding with a new round of services and competition among the providers of these services, including the WWRE, Transora and Global eXchange Services.
Sensing an opportunity to build market share with growing numbers of members, each of these organizations has a similar game plan: provide the most attractive set of value-added services supported by basic data synchronization.
The WWRE, GNX and Transora started out as industry trading exchanges intended to serve as on-ramps for retailers and manufacturers to conduct commerce transactions and collaborate in supply chains over the Internet. Their ideal was to let retailers and suppliers find virtually unlimited numbers of trading partners and share product and pricing data with one another to support commerce.
That ideal has yet to happen. Although the exchanges got off to early starts providing auction and procurement services--still a significant source of business for WWRE and the retail-focused GlobalNetXchange--the retail industry soon realized it needed to develop effective industry data standards before the Internet could meet its potential as a conduit for trade.
The non-profit data standards-setting body, Uniform Code Council, and its European counterpart, EAN International, responded to this need by developing data standards that companies would use to share information through the Internet-based Global Registry, the central data repository of company information supporting the Global Data Synchronization Network. The trading exchanges in turn responded by providing data synchronization services to prepare companies for trading their information through UCCnet, the UCC`s designated data synchronization pool for channeling data to the Global Registry.