A recent US industry study carried out by AT Kearney estimated that $40bn, or 3.5 per cent, of total sales lost each year are due to supply chain information inefficiencies. The study showed that 30 per cent of item data in retail catalogues contains mistakes, which cost between $60 and $80 each to put right and consume 25 minutes of manual cleaning for each stock keeping unit.
Overall, there are errors in the documentation associated with 40 per cent of all items that pass through the supply chain according to Robin Howe, chief executive of UDEX, a company that sells services for checking product data.
‘Software stops the transmission and someone has to re-key it,’ explains Howe. ‘As a result that item is stalled and is carrying more cost than was expected. Some 12 per cent of errors pertain to pallet and case diversions, so warehouse management systems’ space allocation can’t work properly. In the same way, planogram systems in stores can’t be used either.’
Around 30 per cent of problems come from weight and volume errors which impacts shipping, claims Howe. The same proportion of errors involves inaccurate descriptions of products. For example, packets with an extra 10 per cent contents may have a bar code that refers to the standard pack size. So, systems can’t differentiate the sales of promotional items from those of ordinary packages.
Data gets out of kilter when manufacturers and retailers don’t use the same product descriptions or item numbers, or when there is no centralised way of updating product listings or adding new products. It is just too big a task for each business partner to synchronise data individually with one another. Currently, manufacturers have to provide multiple versions of the same information about their product lines.
So big companies such as Wal-Mart and Procter & Gamble and have decided to try and cut down on the waste by ensuring that everyone refers to products and their attributes in the same way. They are backing an initiative called the Global Data Synchronisation Network (GDSN), created by the EAN-UCC standards body.
GDSN involves creating a single registry of product data backed up by a series of local data pools around the world. Manufacturers post detailed information to the pools. Retailers query the central registry and are directed to a pool to download the information via the Internet to their back office systems.
One of these data pools, called UCCNet has already been set up in the US and the UK’s e-centre expects to have the first standard pool in Europe up and running with an initial 2,500 suppliers on board by the end of the year.
However, suppliers have been slow to join UCCNet. One of the reasons for this is that getting accurate data posted in the pools involves a lot of hard work. Information has to be collected from different parts of a manufacturing organisation, individual products must be weighed and measured. Details of up to 151 attributes must be entered into the system and checked for accuracy.
Retailers have been cracking the whip with deadlines for their suppliers to get their data posted but there are good reasons why the GDSN will catch on. Proponents point to significant savings. UDEX, for example, says that price synchronisation alone can increase the first time pass rate on invoices from 48 per cent to 80 per cent with suppliers getting
The growing popularity of online trade also demands more efficient fulfilment which is only possible with well-synchronised data.
In addition, the expected shift to radio frequency identification over the next few years will trigger a need for accurate, easily-accessed product information. RFID’s electronic product code (EPC) uses the same product identification standards as GDSN.
The benefits of data synchronisation may need some hard graft to realise, but over the past year the calls to action from retailers have turned synchronisation into a no-brainer for many manufacturers. The realisation of the financial benefits of sharing common data may take a little longer, but there is no doubt of its importance to e-commerce and to taking Sod’s Law off the statute book.