Moving Toward CPFR

Retailers and manufacturers have long believed that the Internet will be an important component in supply chain management. But before information can be widely traded electronically and automatically, that information must be standardized. Until now, though, there was no critical mass to drive implementation.

But last month, a retail industry group representing major merchants and manufacturers endorsed UCCnet’s GlobalRegistry, a web-based data registry system, with expectations of improving how data is handled in supply chains. UCCnet is a not-for-profit organization that provides a platform for collaborative commerce services.

Retailers and manufacturers alike say the widespread use of UCCnet services will provide significant savings of time and money in the finding and ordering of products for stocking retail shelves, as well as for maintaining current information on product specifications. Moreover, they say it will lay an important building block for widespread use of CPFR, or collaborative planning, forecasting and replenishment. “In our overall e-commerce strategy, item data synchronization is foundational,” says Mike Merulla, e-commerce manager for Rochester, N.Y.-based Wegmans Food Markets Inc., one of the early users of UCCnet. “With good data comes the ability to do higher-order initiatives like CPFR.”

At long last

The board of directors of the Voluntary Interindustry Commerce Standards Association, or VICS, last month endorsed the GlobalRegistry and related data synchronization services as a way to overcome problems stemming from early attempts at collaboration among trading partners. Problems such as inconsistent product descriptions, for example, often lead to inaccurate purchase orders and invoices that can create cost overruns and shipping delays. Participation in UCCnet streamlines and automates much of the process of channeling product information from manufacturers to retailers. “At long last, we can shorten new item set-up from weeks to minutes and remove millions and millions of dollars in expenses associated with data integrity problems,” VICS Chairman Ron Griffin, who is also executive vice president of The Fleming Cos. Inc., a supplier of consumer packaged goods, and former CIO of The Home Depot, said in a statement that accompanied the announcement of the endorsement.

It’s still unclear how many retailers and manufacturers will actually sign onto the UCCnet GlobalRegistry, though more than 165 companies already subscribe to it. Retailer subscribers today include large merchants such as Wal-Mart Stores Inc. and grocers, such as Wegmans Food Markets Inc. The endorsement of VICS, an organization of some 200 retailers that promotes supply chain collaboration and created the concept of CPFR, could help win support for UCCnet among merchants of various sizes. By the end of this year, UCCnet expects to have 800 companies signed up as trading partners.

To go along with its endorsement of UCCnet, VICS also recently signed a statement produced in April by the Food Marketing Institute and the Grocery Manufacturers Association that calls on the entire consumer products industry to adopt UCCnet’s global data registry as the North American standard for the sharing of electronic data in an effort to “make errorless data synchronization between trading partners a reality.” Companies signing the letter include The Great Atlantic & Pacific Tea Co., Shaw’s Supermarkets, Supervalu Inc., Wal-Mart, Wegmans and more than a dozen consumer products manufacturers.

Streamlining

“We are disappointed with the pace of progress on the electronic exchange of data between our companies,” the FMI/GMA statement says. “We urge everyone in our industry to act now” to support data synchronization efforts. The statement adds that UCCnet’s global data registry “enables retailers to locate the product data they want regardless of where the manufacturer has published it.”

Without UCCnet, manufacturers and retailers typically engage in what for some is a cumbersome online process of loading, searching for and retrieving reams of product data, such as price, size, weight and package size, that a retailer needs to know before placing goods on shelves or in warehouses. After manufacturers load this data into their electronic catalogs, retailers may have to search on the Internet for the right catalog, find the right product within the catalog and then download the pertinent information into their own catalog systems.

UCCnet streamlines this process by storing key product data in its Internet-based Globalregistry, providing retailers a single point of entry for finding the right e-catalog and the particular products it wants to purchase. UCCnet checks that product information entered in its registry meets data standards, such as being in compliance with global trading identification numbers, or GTINs. UCCnet also checks that descriptions in the registry are unique to each product.

A 14-digit standard

The retail industry is expected to be standardized on GTINs by January 2005, which means converting current UPC codes, and for many that’s where UCCnet becomes most helpful. Large stores can have 100,000 or more stock keeping units from several thousand suppliers and each SKU has its own UPC bar code that will have to be converted to a GTIN. “Converting that data into a 14-digit GTIN is a daunting task,” says Merulla of Wegmans. “UCCnet lets us receive that GTIN data and automatically synchronize on it. That gives us a huge head-start on getting GTIN data accumulated.”

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In addition to the registry, UCCnet provides a data synchronization engine, which is designed to automatically update the Globalregistry with any manufacturer changes to product data. Alerts to these changes are automatically forwarded to retailers’ own catalogs, after which the retailers can download the new information from the manufacturer’s catalog.

The VICS endorsement of UCCnet cited a study on e-collaboration by consultants A.T. Kearney, which estimated that the retail industry loses $40 billion each year to inefficient handling of supply chain information. The study, commissioned by the FMI and the GMA, indicated that 30% of item data in retail catalogs have errors, each costing between $60 and $80 to find and correct and consuming 25 minutes of manual data cleansing per stock keeping unit.

The Kearney study, which included information from several studies in the United States and Canada, also found that 60% of all invoices included errors and 43% resulted inaccurately in price reductions. The study concluded that a single item-registry and synchronization system was required to move e-collaboration forward, according to VICS.

Simon Bell, A.T. Kearney consultant who worked on the study, says the study supports the argument that a move away from traditional paper catalogs and invoices and manual input of data would lead to higher rates of accuracy. He notes that even when invoices are handled through electronic data interchange, they are often subject to mistakes made during data input.

Confusion

Bell adds that traditional means of communicating and sending invoices often lead to situations where a combination of revised product lists and delayed invoices can lead to discrepancies and inaccuracies in pricing. “One would hope that when e-catalog systems are properly integrated with other systems, many of these problems would go away,” he says.

Merulla, noting that improved information flow through UCCnet “absolutely” leads to more accurate invoicing, adds that it can also provide for far more efficient shipping. With better data on the actual number and size of containers, shippers can more efficiently load vehicles.

Tom Coles, a VICS board member and the chairman of Federated Logistics and Operations, the distribution arm of Federated Department Stores, could not elaborate on his company’s intentions regarding UCCnet, since Federated has not signed a contract with UCCnet. But he adds that, as a member of VICS, he believes the trade group’s endorsement of UCCnet “does an excellent job of outlining the objectives for the retail industry.” Among other things, the VICS endorsement notes that “UCCnet users are able to considerably reduce errant purchase orders, returned shipments, reductions, logistics systems errors and associated costs throughout the supply chain. UCCnet services help retailers ensure they have the right products at the right retail locations at the right time, and enable suppliers to decrease deductions and improve speed to market for new products.”

The sooner the better

UCCnet is the only provider of both the online registry and the data synchronization engine for the retail industry, though it has about 30 alliance partners who can provide the technology and services required to integrate their product catalogs with UCCnet. Other organizations, such as Transora, the Chicago-based online trading exchange service, are also developing synchronization engines—a move seen as positive by UCCnet’s supporters. “That will give manufacturers and retailers different options to synchronize data and keep costs down,” says Pamela Stegeman, vice president of industry affairs for the GMA.

At Wegmans, only a small percentage of its 5,000 suppliers are up and running with UCCnet. That’s partly because it can take time to get data “scrubbed” and updated to meet the latest standards. But Merulla says universal compliance is on course. “Eventually all of our suppliers will be up on this,” he says, adding: “The sooner the better.”

paul@verticalwebmedia.com