Mega-retailers Wal-Mart and The Home Depot have ignited an industry-wide effort to create a master catalog of retail product data targeted at slashing billions of dollars in supply chain costs and triggering a new generation of sophisticated e-commerce tools.
The two giants are members and advocates of UCCnet, a global registry of product data, such as item number, that lets retailers and their supplier partners build a master catalog of products they buy and sell. In essence, it is like a telephone directory for every product available and guarantees, for instance, that when a store orders a case of paper towels that is what it gets. UCCnet also is dynamic and if suppliers change any of the 151 possible attributes describing a product in UCCnet’s GLOBALregistry, retailers are notified in near real time, eliminating many supply chain hiccups.
Companies today suffer through expensive errors in invoicing, purchase orders, product delivery and scanning accuracy because product data is obsolete or inaccurate.
UCCnet aims to change that by teaming two standards, the Global Trade Item Number, a globally unique product number, and the Global Location Number, which identifies shipping and receiving points.
The combination will not only streamline product data synchronization but also create a foundation for more significant e-commerce tools such as scan-based trading, where suppliers don’t get paid until a product is scanned and purchased by a customer, and collaborative planning, forecasting and replenishment.
“Today we have many people matching paper, matching invoices, matching purchase orders, and all that goes away or the majority goes away,” says Mark Healy, senior director of merchandising operations for The Home Depot. The company signed up late last month after nearly a yearlong evaluation process to ensure UCCnet could scale and was secure. “UCCnet is the root of everything we need to do to make our stores run more efficiently,” Healy says.
That efficiency means more accuracy between a retailer’s order and what the supplier delivers; reduction in stock shortfalls in retail outlets; and greater efficiencies throughout the supply chain from distribution, warehousing, store operation, merchandising, shelf and space management, and accounting.
Healy says The Home Depot lost approximately 3.5% of its $58.2 billion in 2002 sales because of supply chain inefficiencies. Those numbers are in line with the entire retail industry, which loses $40 billion, or 3.5 %, of total sales each year to supply chain information problems, according to research firm A.T. Kearney. The research firm adds that 30% of items in retail catalogs have data errors, each costing between $60 and $80 to fix and consuming 25 minutes of manual correction.
The rewards of UCCnet’s registry are becoming too big to ignore, and membership has risen 144% among suppliers and 100% among retailers in the past 12 months to a total of 670 members, according to Rhonda Horn, vice president of business development for UCCnet. Enrollment is growing at 60 members per month.
The Home Depot is requiring its 10,000 suppliers to join by year-end and implement the service by June 2004 or lose their relationship with 1,500 stores.
“Home Depot joining is close to the tipping point [for critical mass] for UCCnet,” says Andrew White, an analyst with Gartner.
Ace Hardware is requiring its suppliers to comply by October and Lowe’s target is the end of the year. Wal-Mart triggered the avalanche in January with a memo to suppliers stating the company would only accept item data electronically after January 2004.
“Once Wal-Mart joined up, we knew we were where we had to be,” says Jim Goorhouse, director of IT for Novartis Consumer Health, which is using its Gerber baby food division as a test pilot for UCCnet.
Others funneling suppliers to UCCnet include Ahold USA, Food Lion, Shaw’s Supermarkets, Supervalu, Albertsons, The Great A&P Company and Wegmans Food Markets.
The challenges
But the effort faces challenges. UCCnet is a public registry for synchronizing data that doesn’t address all areas of complex, often private, transactions. Electronic data interchange also provided data synchronization, but it began to get expensive and complex when other data was traded electronically.
White says retailers and suppliers still must figure out how to exchange other information, including price and promotions. Interest in XML as a data-formatting technology likely will provide a boost.
In addition, UCCnet and registries in Canada, France, the U.K. and other countries have been talking for more than a year to no avail about integrating efforts. And there are questions as to whether the UCCnet model can be replicated across industries. Today UCCnet serves grocery, apparel and hardline (or home improvement) items. The automotive, chemical and high-tech industries are absent.
“Who knows what this looks like in five years, but it is safe to say that product data synchronization is here to stay,” White says.
That is indeed true, industry observers agree. So retailers and suppliers face the task of cleaning up their product data internally and ensuring those systems can support electronic supply chain processes.
“Data cleanup requires considerable manual effort and resource from the business,” says Nick White, vice president of information architecture at UCCnet member Unilever, which has 50 instances of SAP with incompatible product data. “It’s not a task that can simply be given to IT. It requires definition of business rules, attribute normalization, recoding and [extraction/transformation/loading] and reconciling tools.”
To aid in that task, Unilever is using software from Trigo Technologies called Product Center, which provides an authoritative source for product data that Unilever uses to update its enterprise system and feed the UCCnet registry. The system eventually will be used to support future adoption of radio frequency identification.
Companies such as Novartis are using data-pooling services such as ViaLink to clean up and publish data to UCCnet.
ViaLink charges between $1,500 and $100,000 to implement its service, including product data cleanup, and a $100 to $2,000 monthly service fee.
“ViaLink is certified with UCCnet and they manage the relationship,” Novartis’ Goorhouse says. “It was easier to go through them than to get certified ourselves.”
ViaLink also helps to manage relationships with suppliers such as price and promotions.
“The big bang, the big benefit, will come when UCCnet figures out how to do that,” Goorhouse says. “Salespeople can get creative with the deals they put together and that makes it hard to communicate those deals electronically.”
Bridging that gap is part of UCCnet’s plan, but for now the industry is excited by the process of putting product data into a single authoritative source.
“If you can’t describe what a product is, you can’t order it and you can’t buy it,” says Betsy Hill, director of marketing for ViaLink. “If you don’t synchronize product data you can’t do anything else because you can’t trust the data.”
