Coming to life

Guide to E-Commerce Technology

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.

Reluctant sharers

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.

International deals

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.

UCC and EAN will officially join in January as the newly named GS1, a global organization that will oversee the GDSN and the Global Registry. UCCnet, in turn, is becoming a separate data synchronization pool that will compete with WWRE, Transora and others for data synch customers. A data synchronization pool is a mix of software and data standards experts who review a company`s product data, poring over spreadsheets and other documents, to make sure that product descriptions are uniform, meet GS1 standards and coincide with the descriptions used by the company`s trading partners.

As a sign of the growing interest in this market, WWRE, Transora and GXS face competition for data synch services from the likes of software companies Click Commerce Inc. and QRS Corp.

The pricing controversy

To stand out in the market, each exchange touts its unique set of value-added services supported by data synchronization. Their hope is to provide services that will lock in the most clients long-term, building loyalty even after the GDSN further develops and supports, at least theoretically, interoperability among all industry data pools worldwide.

Global eXchange Services, which has a history offering EDI VAN services, serves about 1,500 companies in the U.S., offering data synchronization services as well as a recently launched web-enabled Trading Grid that provides real-time messaging between trading partners and integration with back-end ERP systems.

Transora, which has more than 12 manufacturers and more than 10 retailers from six countries in data synchronization projects (including Kroger Co., Wakefern Food Corp., Schnuck Markets Inc. and Publix Super Markets in the U.S.), is taking what some analysts say is the most aggressive approach to offering value-added services supported by data synchronization.

Most of its participating retailers are planning to use Transora`s direct store delivery pricing service, which sends pricing and promotional data from a Transora server to all of a retailer`s stores. Transora reasons that since pricing is part of the product data, there`s no reason pricing shouldn`t be one of the elements that Transora provides.

Transora is the first to offer the direct pricing service, a move that has brought critical comments from its competitors, who contend that GS1 has yet to set industry-wide DSD data standards. "Transora is mismanaging expectations in that regard," WWRE`s Parnaby says.

Sprieser counters that Transora is responding to several of its retailer clients. "Companies told us they didn`t want to wait for standards," she says.

Moreover, she says, Transora`s early move into DSD, a service that analysts say appeals to many retailers, gives her organization the opportunity to work more directly with the DSD standards-setting process. "By going live with the application early, we`ll know what works and what doesn`t," Sprieser says.

Analysts say Transora`s aggressive approach will benefit the retail industry by helping to develop and test an effective DSD system as well as give it an early market lead. "DSD was a nice coup for Transora," says Kara Romanow, an analyst with AMR Research.

Co-opetition

Adds AMR analyst Garf, who recently wrote a report on GS1: "Transora`s strategy for staying more involved in developing the DSD standard is the same approach many software vendors are doing relative to RFID prior to having all the standards set. The industry needs leading retailers and software/service providers to push the envelope when it comes to standards, or we wouldn`t have the bar code today, for instance." RFID, or radio frequency identification, uses a system of radio frequency tags and Internet-connected readers to track products throughout the supply chain.

Transora is also offering price-and-promotion management and new-item management services that channel information between retailers and suppliers. The new-item management service is designed to include more retailer-specific product identifiers, such as the particular units per pack ordered, than is included in product definitions within basic data synchronization, Transora says.

WWRE is planning to introduce DSD and other services in the near future, but for now is focusing mostly on data synchronization in addition to services Transora no longer offers--auctions and procurement services.

The broader market reality, experts say, is that the exchanges are moving toward a market where they cooperate as well as compete in serving the same clients, experts say. "It`s co-opetition, we compete on value-added services," Parnaby says.

Publix, for instance, is a WWRE equity member that uses Transora for data synchronization but WWRE for auctions, Parnaby says. WWRE also partners with GXS, a competitor in data synchronization services, to offer a product information management tool that organizes a company`s back-end product data for integrating with WWRE`s data pool. GXS recently acquired product information management system provider Haht Commerce.

Inevitability of interoperability

Other internal data integration companies--including Velosel Corp., Cyclone Commerce, SeeBeyond, WebMethods, Microsoft Corp. and Trigo Technologies, a unit of IBM Corp.--are cooperating with the exchanges to prepare retailers` internal product data with the industry data pools offered by WWRE, Transora and UCCnet. "Retailers are looking at the interoperability between data pools and internal product management systems," Garf says.

GNX offers data synchronization services through Transora, but focuses its direct services on auctions, sourcing and supply chain collaboration services.

A retailer`s decision on which data synchronization service to choose depends on its near-term needs, such as getting connected with suppliers already involved with a particular exchange, experts say, noting that all data pools will eventually interoperate.

"If the bulk of your suppliers are attached to one exchange or the other, it could be quicker to get product updates through that exchange," says Langowski of BearingPoint.

Adds Garf: "The exchanges don`t care who you use as a data pool, they just want you to use one, because once they get a critical mass of companies adopting data synchronization, they`ll have more opportunities to sell these value-added services."

Ahold, a grocery company with nine branded operating units and $39.4 billion in 2003 retail sales, including $27 billion in the U.S., is one of the early adopters of data synchronization and related services, which it addresses through the WWRE.

90% participation

The grocer, whose U.S. brands include Stop & Shop, Giant, Tops and Peapod, expects to share product information through the WWRE with 80-90% of its thousands of suppliers within 18 months, van der Pluijm says. The grocer sees the WWRE and data synchronization as key elements of its strategy to improve supply chain efficiencies and in-store service, he adds.

"The major problem we`re having now is that our suppliers are giving us information that is not consistent among our nine operating companies," he says. "We want one version of the truth."

Ahold is using WWRE`s services to help set common business rules among its suppliers for checking the quality and consistency of product data, for example, keeping package sizes accurate to Ahold`s specifications.

Huge savings

The overall project is expensive, but will bring huge savings, van der Pluijm says. "It will require millions of dollars of investment, but we figure about eight times that investment in savings," he says. The savings will come from more accurate invoices, fewer chargebacks, more accurate pricing, less staff time fixing problems and more efficient warehouses--including robots that don`t require a programmer`s attention.

The importance of accurate, synchronized data will only increase, van der Pluijm says. He notes that Ahold currently works with about 40 to 80 data attributes per product, but will soon share information with suppliers on 80 to 120 attributes, ranging from package dimensions to a complete list of ingredients in processed food products.

That will not only help Ahold to receive and process received goods faster, but it will satisfy the growing consumer demand for more product information, he adds. "Now it can take a long time between the time we announce a product and get it on the shelf," he says. "But we`ll be able to get products on the shelf faster and also have more information on them faster."