It has taken several years, with plenty of setbacks and confusion along the way, but an ambitious data-collaboration effort among the makers and sellers of consumer goods is finally showing signs of success.
UCCnet, a nonprofit division of the Uniform Code Council standards organization, was formed five years ago to provide a global online registry of product information that participants provide using the group's standards. In the past year, the number of manufacturers and retailers that have joined UCCnet has jumped from 70 to 600, ranging from early adopters such as Procter & Gamble Co. to new converts such as Home Depot Inc. and Kroger Co.
Not surprisingly, Wal-Mart Stores Inc. is a powerful force behind UCCnet. The retailer has asked that all its suppliers--tens of thousands of companies--comply with UCCnet by year's end. "We're a huge advocate of data synchronization using UCCnet," Wal-Mart CIO Linda Dillman said at the Retail Systems conference last week. Having the largest retailers and manufacturers behind the effort is likely to convince laggards they need to move quickly. "We're achieving a momentum in the tech industry that's relatively uncommon," says Glenn DuBois, UCCnet's chief operating officer.
The cooperation stems from UCCnet's potential to help solve one of the retail industry's most-expensive problems: inaccurate and inconsistent product descriptions, which drive up supply-chain costs, complicate buying and selling transactions, and impede new-product launches. Campbell Soup Co. sees UCCnet as so essential to retailer relationships that it didn't take the time to do a complex return-on-investment calculation. "It's the only project in my 14-year career at Campbell where we didn't need an ROI," says Mark Engle, director of IT. "What we needed was a return on the relationship."
Some 80 IT vendors have become UCCnet partners. About half of them, including Microsoft and IBM, have become certified by UCCnet in areas such as data retrieval and cleansing; dynamic online catalogs based on the standards; integration of legacy systems that hold the data with catalogs and other front-end systems; and linking companies with the UCCnet global registry and online trading exchanges such as GlobalNetXchange, Transora, and the WorldWide Retail Exchange.
Getting data clean is important because bad data can get passed along to trading partners, Procter & Gamble CIO David says.
During its data-cleansing process last year, P&G found thousands of redundancies in product-description information, as well as data on products it doesn't sell anymore. Cleaning up data in one product-image database alone saved $1 million in fees related to maintaining those images, David says.
That's just the beginning. A handful of early adopters have already cleaned and standardized their data and are now syncing it with retail partners through services provided by UCCnet and online trading platforms. P&G has moved beyond the pilot stage and is forging data-sync partnerships with customers such as Wal-Mart and food and retail conglomerate Ahold USA. Retailer returns and refusals cost P&G nearly $50 million a year, David says. He expects about half of those costs to disappear over the next few years because of improved communications about product information. Furthermore, data that's been standardized and synchronized brings trading partners closer to the goal of collaborative planning, forecasting, and replenishment (known in the industry as CPFR), as well as to adoption of emerging technologies such as radio-frequency identification tagging.
Only the early adopters have passed through the data-cleansing stage, while hundreds more are just starting the process. Campbell's Engle says manufacturers will be surprised at how much time it takes to clean up data--a job the company started in October and which is now about 90% finished. "There's a lot of work that needs to be done on the manufacturers' side and the retailers' side," he says, including retailers' ability to accept data updates.
Campbell, which also owns the Pepperidge Farm and Godiva brands, got involved in UCCnet after a mandate from CEO Doug Conant in January 2001 to improve product quality and customer relationships, Engle says. It tapped a small vendor called Velosel Corp. to build its product catalog and handle connectivity with UCCnet and the WorldWide Retail Exchange. IBM built the infrastructure, but to reduce external costs of the project, Campbell moved the deployment of the system and development of the new business process over to its internal staff after six weeks.
The company is live with seven retailers on product-item synchronization and is doing product-price synchronization with two of them. While item synchronization can help the company do a better job of communicating on the height, width, and weight of its products for shipping purposes, price synchronization can go far in eliminating charge-backs, Engle says.
Besides data cleansing, there have been other obstacles. At times, it's been unclear whether UCCnet and the online exchanges work together or against each other, and at one point Transora and the WorldWide Retail Exchange talked about merging, which created confusion in the consumer-goods community. The merger didn't happen, "but it didn't do anyone any good to wait for five months to see if it would," Engle says.
What's more, for very large companies such as Procter & Gamble, data synchronization can't happen on a grand scale without buy-in from the international community. P&G has just 16,000 of its products cataloged with UCCnet, because most of the rest of about 40,000 products are sold only outside the United States. Many countries have their own product-data cataloging standards, so the Uniform Code Council and European standards body EAN International will publish the EAN*UCC data standards in July in an attempt to bring all countries into a global data-standardization effort. Strides are being made in many countries--including Belgium, France, Italy, Japan, Korea, the Netherlands, and Sweden--to adopt the standards and create interoperability among country catalogs. But companies will have to add new identifiers to their product descriptions. "It's very complex," Engle says.
Companies must also ensure they've done the necessary business-process reengineering to see the benefits of data synchronization. Consulting firm A.T. Kearney recently completed a pro bono study requested by the Grocery Manufacturers Association of six early adopters of UCCnet: Ahold USA, Kraft Foods, Nestlé Purina, P&G, Shaw's Supermarkets, and Wegmen's Food Markets. The key finding: Companies can expect to achieve $1 million in benefits for every $1 billion in sales through data synchronization.
Getting to that number required looking at all the areas that benefit, including merchandising, data entry, supply chain, inventory, and even store checkout lines, A.T. Kearney consultant Simon Bell says. And companies can't expect to see benefits unless they've adapted the entire business. "Many companies are worried about the cost of the technology," he says. "Our analysis of the fees and technology is that it's a tiny portion. The real cost is change management and the time it takes to adjust."
But buy-in from big retailers is moving the process along. "We were live with our solution at the end of March, nine months in advance of Wal-Mart's mandate to the industry," says George Spanos, director of applications at Hershey Foods Corp. "Wal-Mart is our No. 1 customer and probably the No. 1 customer of most suppliers out there."
Hershey has published about 500 of its 1,800 products with UCCnet and has formed data-sync links with Wal-Mart and Wegmen's. It has its sights set on another 15 customers who've signed up for UCCnet. "We looked at data synchronization as a foundation for almost anything electronically we want to do with our customers," Spanos says.
The crucial steps that manufacturers and retailers have made toward sharing common data in the past year are providing a strong foundation for E-commerce in the future. Challenges remain, but most companies are willing to bet their efforts will change the industry forever.
Illustration by Craig LaRotonda
Photo of David by Sacha Lecca