After years of seeking their mission, Internet trading exchanges are finally showing promise.
When grocers Wegmans Food Markets Inc. and Supervalu Inc. participated with their suppliers in a pilot project earlier this year to share synchronized data over the Internet on meat and poultry products, there was more at stake than tasty burgers and tender chicken. One package of chicken wings may look similar to another, but chances are its size is slightly different, causing its package weight and price to differ from other packages as well. The pilot, using product information maintained in data pools hosted by industry trading exchanges Agentrics Inc. and 1SYNC, a unit of GS1-U.S., proved that the Internet could serve as a base for sharing data on such product categories, which have been notoriously difficult for retailers to process with accurate and up-to-date information from suppliers.
The project’s results showed that the early promises of the Internet-serving as a medium for retailers and manufacturers to collaborate in ways that would make them more efficient and productive than ever before-is reaching milestones that until now have been elusive largely due to the difficulty in working with multiple versions of product information.
A significant step
“This is a significant step for retailers,” says Richard Vander Horst, manager of business solutions and implementation services for Wegmans. “Synchronization allows trading partners to match product information in their back-end information systems.”
That synchronization of product data means that buyers at Wegmans, Supervalu and other grocers can order products from Tyson Foods and other participating suppliers without the problems that have long plagued retailers-inconsistent and inaccurate product data that have led to inaccurate purchase orders and invoices, the delivery of the wrong products and missed opportunities to display the right products at the right time. The consumer products industry can save billions of dollars a year by avoiding such problems, according to a widely cited study by consultants A.T. Kearney Inc.
The mpXML project is still in its early stages. Having proved the concept of sharing consistent product data on meat and poultry (the “mp” of the name) products via Internet-transacted XML, or Extended Markup Language, the industry still needs to establish common standards for such transmissions and elicit broader participation among retailers and manufacturers.
But the mpXML project also has broader implications, experts say. Like other developments in Internet-based communications and commerce among retailers and manufacturers, it has helped to prove the value to both retailers and manufacturers of participating in Internet-based exchange services, leading to broader support of web-based collaboration among retail industry trading partners, says Christopher Sellers, CEO of Agentrics.
“We’re seeing more benefits every day on a case-by-case basis in data synchronization and other forms of collaboration,” Sellers says.
The level of activity in Internet-based products and services that Agentrics is offering-including its three primary areas of supplier sourcing, product lifecycle management and supply chain collaboration-he adds, has made the organization profitable since it was formed in November 2005 through the merger of the GlobalNetXchange, or GNX, and the WorldWide Retail Exchange, or WWRE, two organizations that had struggled financially as they tried to build a critical mass of participants.
Bill Swanton, an analyst who follows b2b e-commerce at AMR Research Inc., says Agentrics has found profits because it has focused more on services that bring value to retailers and manufacturers. “It’s profitable because it has finally gotten core competencies up and running,” he says.
1SYNC, formed earlier this year as the merger of Transora, an Internet trading exchange centered on helping consumer products goods manufacturers synchronize their product data with retailers, and UCCnet, a data standards organization, is also hitting a more positive course, it says. 1SYNC has gained users this year to expand its total to more than 4,000 manufacturers and about 50 retailers.
Confirming the case
By increasing its data synchronization services among more companies, 1SYNC is helping to prepare retailers and manufacturers to participate in the Global Data Synchronization Network, which supports the ability of trading partners to share product data over the Internet.
“As major manufacturers continue to join this effort, it confirms the business case that data synchronization provides value to retailers and manufacturers alike,” says Bob Noe, CEO of 1SYNC. “By working together to achieve end-to-end supply chain accuracy, the industry will be able to reduce costs and delays.”
The turn of the trading exchanges toward stronger market positions follows a fundamental change in their goals, Swanton says. The original charges of the retail industry exchanges were to realize early promises of the Internet to serve as a grand meeting place for buyers and sellers, and reap revenue and profit in transaction fees that, theoretically, retailers and manufacturers would gladly pay for the chance to trade online. “The original idea was that, in setting up an exchange, the operators would get rich taking fees for transactions-like an early eBay,” Swanton says.
But that model never really worked, as the exchanges were unable to build the expected critical mass of participants. A big reason for the unmet expectations: A lack of perceived value on the part of many trading partners, and the lack of industry standards for synchronizing and sharing product data.
But following reorganizations and mergers in the past several months, Agentrics and 1SYNC can more effectively meet their goals of fostering commerce, their top executives say.
Agentrics, by combining the memberships and resources of the former GNX and WWRE, has created more of a critical mass to push progress within particular retail categories, Sellers says. In the grocery industry, for example, Agentrics’s clients now include The Kroger Co., which had been a member of GNX, and former WWRE members Safeway Inc. and Albertson’s Inc. “Bringing those three together gives us critical mass in the grocery business,” Sellers says.
Agentrics has also formed critical masses in other retail categories, including pharmacies with both CVS Corp. and Walgreen Co. “In most areas, we have the top three or four retailers working on our platform,” Sellers says. Agentrics now directly serves about 50 retail companies, including 17 of the largest 25 worldwide. Adding in the manufacturers it serves, Agentrics has about 250 paying customers but works with more than 80,000 companies, many of them manufacturers it helps to connect with retailers, Sellers says.