‘N Sync

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When Shaw’s Supermarkets Inc. receives information on new products from one of its 2,000 suppliers, 18 managers must review a long list of product attributes—over 100 fields of information for each item—to decide whether and how to merchandise each product. The process is time-consuming, difficult to manage and rife with potential for inaccurate data. Those inaccuracies lead to costly mistakes in the way products are processed for delivery to stores, for merchandising and for payment to suppliers.

And the entire process impedes getting products to shelves and thus into customers’ shopping carts. “With 100% of items presented on paper, we need a flow chart to understand where items need to go for review,” says James Sheehan, director of external standards. “It takes a long time.”

Shaw’s is not alone in dealing with a cumbersome process of reviewing product information. All retailers have struggled with streamlining the process in the last few years. But the paper-based problem is especially acute in supermarkets, which stock 35,000 items in a typical store, according to trade group the Food Marketing Institute. And the problem is becoming worse as manufacturers introduce a growing stream of new products. In fact, the average supermarket chain deals with about 20,000 new products every year, says trade group Grocery Manufacturers of America Inc.

But the information that Shaw’s managers review on paper, while mundane, is crucial to a chain’s operation and includes such data as size and weight of products and number of items per package. So the solution is not simply to reduce flow from the source, but, rather, to find more effective ways to manage it.

Possible expansion

Thus Shaw’s has become a pioneer in employing a web-based process to synchronize product data between suppliers and retailers, implementing a system that reduces manual data entry and expedites the review process with about 40 of its 2,000 suppliers. The system not only makes data more accurate from the start, it also makes catching mistakes easier and faster. And it allows for the rapid dissemination of information and greater accountability of managers’ actions. “We realized if we could put this paper information into electronics, it could go to multiple desks at the same time and we could track its movement,” Sheehan says.

If it likes the results from the 40, it will extend the web-based system to as many of its 2,000 suppliers as possible by the end of this year, Sheehan says.

The problem of data synchronization stems from the complexity of stocking retail chain stores. Retailers need all kinds of data to know how to best merchandise products. But because both supplier and retailer rely on multiple steps of manually entering data—starting with the supplier creating a new-item product list and the retailer entering product data into multiple applications including logistics, merchandising and accounting systems—there are multiple points for data entry to go bad, resulting in time-consuming efforts to correct and re-enter data and re-arrange operations. “If a supplier said we’d get a case of 24 items but we actually got a case of 12, we’d have to change our system to reflect 12,” Sheehan says. “That slows down the flow of product information.”

In more severe cases, he adds, inaccurate data can lead to costly changes in multiple operations. “If information on just one item is inaccurate, it might not be bad,” Sheehan says. “But if it’s a large order with wrong data, it could be that we’ll need 50 trucks instead of 40 to deliver items from our distribution centers to stores.”

Add to that equation the fact that some managers are better at getting to the paper on their desks than others, and the review process—and catching mistakes—ends up taking a lot longer than necessary.

Shaw’s is employing the web-based Vista Retail application from JDA Software Group Inc. to receive product data from Kraft Foods and other suppliers. The data are electronically and automatically entered into a web-based registry maintained by UCCnet, a service of the Uniform Code Council. UCCnet has established standards and protocols to assure that trading partners are using the same definitions to describe products.

The new number: 14

Data synchronization tools like VistaRetail communicate between retailers and suppliers to assure each party that the retailer has received the suppliers’ latest product information, which the supplier has described under standard guidelines of UCCnet, and updated its databases. “The supplier is assured that all retailers who buy its products have current data,” says Gene Alvarez, vice president of technology research at research and consulting firm Meta Group. To receive data from UCCnet, retailers must first align their SKU data with global trade identification numbers, or GTINs. That requires extending 12-digit UPC codes by two digits to accommodate 14-digit GTINs, which are designed to align with product data from suppliers worldwide.

Now Shaw’s and its suppliers start out with more accurate data, thanks to synchronized and cleansed data and less manual data entry. Shaw’s saves time in processing incoming products and has more accurate and timely information for arranging logistics and merchandising plans. And it deals with better information on pricing and promotions to assure that it’s sourcing and selling products at the best price. “Data come with one format, one defined approval process and a clearly defined set of attributes and product classifications,” says Milan Vacval, senior director at JDA Software.

A main, long-term benefit of these applications lies within their ability to bring trading partners into a more productive level of communication, Sheehan says. By saving time on checking scores of details on every product, retailers and their suppliers have more time to discuss information and strategies related to improving product selling and merchandising. “It replaces a lot of personal communication on mundane stuff that no one wants to do and let’s us devote time to more productive meetings,” Sheehan says. “We can discuss what value products will bring by placing them on our shelves, what data are available to show how well products are selling in other parts of the country. That’s the stuff you want to talk about.”

Simultaneous access

All Shaw’s managers who need to review product lists can simultaneously access information through browsers on their desktops, or information can be routed through workflow to a required series of reviews. Managers can also receive messages forwarded to mobile devices, then send reply messages to the supplier to accept, reject or comment on a new product to, for example, clarify a package or order size.

Retailers can program the VistaRetail system to provide retail supervisors with automated alerts that indicate when a manager has taken too long to complete a review of a product list. The web-based review process takes about two hours to learn, says Vacval, adding that each manager in the review process receives only the section of a product list that he or she needs to review. “VistaRetail is targeted for merchandise buyers and category managers, not tech people,” he says.

The VistaRetail application sits on a web server hosted by the retailer, which pays fees based on the range and number of messages it receives, including information on item dimensions, pricing and promotions under multiple product classifications.

VistaRetail is designed to integrate with data that suppliers have already integrated with UCCnet. For suppliers that have not integrated data with UCCnet, JDA offers the VistaKiosk version of VistaRetail, which provides a web page for suppliers to input product data by following instructions for entering definitions synchronized with UCCnet standards (see box, page 23.)

Other data synchronization applications for retail partners include QRS Catalogue from QRS Corp. QRS Catalogue, which synchronizes partner data through UCCnet, costs retailers a one-time start-up fee of $300, plus additional fees per synchronized item and per partner. Because the ongoing monthly cost to retailers is based on the number of suppliers and the number of items sourced from each supplier, that cost can vary widely among retailers. But the average cost for a mid-size retailer is about $2,500, says Renee d’Ouville, vice president of product strategy.

Significant savings

Partner communication systems like VistaRetail and QRS Catalogue support an integrated network flow of product data, so that suppliers’ electronic product catalogs can electronically and simultaneously distribute information to multiple managers within a retail organization as well as to multiple retailers. When data discrepancies occur, the simultaneous electronic distribution of information makes it more likely that retail managers will quickly notice errors and notify the supplier, since the review process isn’t slowed down by paper documents being transferred from one manager’s desk to another, Sheehan says. The supplier can then correct its database and immediately apply the fix to its distributed data.

Sheehan says Shaw’s expects to realize significant savings within a few years, once all suppliers are on board with the data synchronization system. He expects savings to coincide with estimates by consulting firm A.T. Kearney, which figures that retailers stand to save $700,000 through synchronizing and improving data flow with partners for every $1 billion in sales, while manufacturers will save $1 million for every $1 billion in sales.

The savings are tied to multiple improvements in the way product data are handled, experts say. Not only do retailers save time through a faster review and approval process of new product data, but increased accuracy in product data provides greater assurance that products are delivered, merchandised and priced according to plan—and reflected correctly in invoices. Retailers spend less time correcting records and renegotiating with suppliers to correct discrepancies in orders. “Companies pay for data synchronization projects with reduction in manual data entry and errors,” Meta Group’s Alvarez says. “If a company had close to 30% errors in its supply chain data, it would get a quick payback within a year.”

Retailers can begin to realize savings gradually as they go through the multi-step process of synchronizing product item data, then partner identifiers, then pricing and promotions. Reaching maximum payback also requires getting all suppliers on board—a process that can take two years or more to get all small suppliers connected. To expedite the process, system providers offer enlistment or “supplier enablement” services, through which the vendor will approach all unconnected suppliers and explain how they can get connected. “We’ll call each supplier to get the entire community to participate, so a retailer can get completely up on data synchronization within a year,” d’Ouville of QRS says.

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One step at a time

Shaw’s is still in the initial phases of implementing JDA’s Vista Retail partner communication system. In the first phase, which it started exploring in 1999, it synchronized product data through Vista Retail and UCCnet. Shaw’s chose JDA’s VistaRetail partly because it was already using JDA’s Intactix shelf management system and because it felt JDA offered a strong platform for data communication, Sheehan says. Having the Intactix application provided for instant integration within the JDA platform. JDA also provides integration tools and services for building integration with other non-JDA applications. Retailers can also use data translators from companies such as Ascential Software and Sterling Commerce to integrate data from back-end applications including ERP, order-management and supply chain systems.

Shaw’s is now working through the second phase, building on its product data synchronization to improve communications with particular suppliers like Kraft. This involves synchronizing data on supplier identifications, including global locator numbers, or GLNs, so that the retailer can be sure it’s connecting new product data to the correct supplier to keep accurate supplier and billing records.

By the end of this year, Shaw’s expects to complete the third phase, which will coordinate pricing and promotions with its suppliers—the step that will provide the greatest financial benefit by assuring that products are listed for sale at the correct price without having to input corrections, Sheehan says. “Synchronized pricing is where the real benefits are,” he says. “The biggest data errors occur when there is a question over how to correctly price an item.”

The synchronization of pricing and promotions leaves no doubt about the terms connected with particular pricing, Sheehan adds. “I can get different pricing based on qualifiers,” he says, “If I send my own truck it can be a certain price, or if I buy a thousand pieces it can be a different price. The variability is so high, the chances for errors are great.”

By synchronizing the terms used to define promotions and pricing, Shaw’s and its suppliers are assured they’re using the same information. “I know that suppliers are using the same conditions behind pricing,” Sheehan says.

Partner profiles

Indeed, Internet-based data communication is fostering stronger merchant-supplier communications in elementary ways that have long eluded trading partners, Sheehan says. The most important: formalizing ground rules for setting prices. Before the web became available as a communications network, Sheehan says, it was too cumbersome and expensive to establish and carry out rules. “The Internet was the driving force behind this because of the ability to have instant, easy communication,” he says. “All that information would go into any transaction—item description, price, etc.—but then it would get lost in past conversations and dropped from transactions.”

Moreover, by operating with synchronized and “clean” data that accurately describe products in a consistent form, the global retail industry is moving toward a universal system that supports research of any product from any supplier.

But data synchronization doesn’t just support access to product data through central registries like UCCnet, Sheehan says. Having synchronized data makes it easier to research all products for various purposes, such as reports on how well they have sold in different markets or seasons. “What it comes down to is that the world becomes a virtual database,” Sheehan says.

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Getting small suppliers on board

It’s one thing for a retailer to communicate over the web through synchronized product data with large suppliers who have integrated their data with UCCnet, which serves as a data registry. But it’s another thing to communicate with small suppliers who haven’t integrated with UCCnet.

To get the small suppliers on board, Shaw’s Supermarkets Inc. connects with them through VistaKiosk from JDA Software Group Inc., which is designed to let these suppliers follow a simple set of instructions to enter data using the same attributes used by UCCnet, where the information is then accessible by the retailer through VistaRetail.

No training is necessary, which can be important in getting many small suppliers up on the system, JDA says. “A mid-sized retailer could have 2,000 suppliers, and each supplier could have two users of VistaKiosk, so the application needs to be very easy to use,” says Milan Vacval, senior director at JDA.

VistaKiosk is also designed to deal with inconsistency in the way small suppliers define product packaging. “The most difficult problem we have to overcome is to make it easy for the smaller supplier to define packaging levels,” Vacval says. “The typical small supplier doesn’t associate information about a product’s case or palette, its weight or size; they just put it as one level.”

Many retailers, meanwhile, don’t organize their back-end records to account for multiple packaging levels of the same product. “A can of Coke can be sold individually, but it can be packaged in many different ways in different cases,” Vacval says. “If you’re suddenly getting shipments from different suppliers, each can package the same product in a different way.”

That can force the retailer to take extra steps to clarify the size of a received order, unless the supplier has assigned a unique code identifier to the packaging as well as the product—a task supported by VistaKiosk, which lets suppliers electronically enter global trade identification numbers, or GTINs, on packaging as well as products according to UCCnet standards.

Data synch deadlines to meet

If all goes according to plan, most companies will have synchronized their product data with global trade identification numbers, or GTINs, this time next year under the Sunrise 2005 plan outlined by the data standards organization Uniform Code Council and its cross-Atlantic counterpart, EAN International.

“Everybody’s system should be able to process 14-digit numbers to accommodate global trade identification numbers,” says Milan Vacval, senior director at JDA Software Group Inc.

The move is also being pushed by Wal-Mart Stores Inc., which wants its suppliers’ product data synchronized under the Sunrise 2005 schedule. But not all companies should feel pressured into meeting the 2005 deadline, says Gene Alvarez, vice president of technology research services at research and consulting firm Meta Group. “That’s a very ambitious schedule,” he says, adding that difficulty in getting all retailers and their suppliers on board could push back the 2005 deadline.

“If you’re a supplier facing compliance dates by Wal-Mart, you’ll want to put more money and resources into this,” he says. “If you’re a retailer competing with Wal-Mart, 2005 is not a drop-dead date, but you should be concerned about performance in communicating with suppliers.”

Alvarez suggests, however, that companies not pressed by particular deadlines at least begin to prepare for data synchronization. “You should at least spend 2004 evaluating your readiness, then if you start in 2005 you’ll be up and running in 2006 or 2007.”

By then, he adds, a large number of retailers and suppliers will have followed Wal-Mart’s lead in synchronizing data and electronically sharing product and pricing information. “If you push it much beyond 2007, you raise the risk of falling too far behind,” he says.