Retail Data Collaboration Still Doesn't Sell

Data-synchronization efforts among retailers and suppliers have been under way for years, but few companies have pulled it off. What's the trouble?

Laurie Sullivan, Contributor

June 7, 2004

5 Min Read

About 80% of the information required to synchronize data with its retailers resides in Magla's ERP system; the rest is found in Excel spreadsheets and other desktop applications. In April, nearly two years after starting on the project, Magla published its first certified data to Ace Hardware, which Brendle says is one of the few retailers to have completed its data-synchronization project. To date, Magla is only about 30% finished with its data-synchronization work and has spent more than $10,000 just on TR2's services and a subscription to UCCnet. The company may have to hire a full-time employee to manage the UCCnet effort, Brendle says.

Magla isn't alone in its data-accuracy troubles. According to the Universal Descriptor Exchange, a data- quality-management service provider, erroneous product data is endemic to the industry. In a study monitoring 413 suppliers that submitted information on 4,034 new consumer products to retailers in November and December 2003, there were 2,784 errors, including mistakes in product dimensions, quantities, and branding. Forty-four suppliers were identified as having erroneous data that could have caused major problems in the supply chain.

chart"Marketing, procurement, sales, and engineering might all have varied descriptions for the identical item," says Richard Long, senior VP at Universal Descriptor Exchange. "Poor data quality internally has made manufacturers aware they are sending inaccurate information to retailers."

Companies are hiring outside firms for help with the technical challenges of their data-synchronization efforts, tapping a growing industry of hosting services such as TR2's that help manufacturers cleanse their data, validate it, and then publish it to the UCCnet Registry. Both Church & Dwight and Magla use TR2's services, but they aren't the only ones. TR2's growing customer list includes Black & Decker, L'Oreal, and Ocean Spray. "A year ago, the hosted-services business didn't exist, and today we have between 650 and 700 customers," says Tomas Rauh, VP of the retail practice at Sterling Commerce.

Omar Hijazi, a principal at consulting firm A.T. Kearney, estimates the software and services market for data-quality management, certification, validation, and synchronization will generate $350 million to $500 million this year.

With the help of those services firms, the retail and consumer-goods industry is knocking down some of the obstacles. One of the holdups--incompatibility and confusion among myriad international product-data cataloging standards--is easing. Standards body EAN International and the Uniform Code Council are creating the Global Data Synchronization Network, which will feature a hub that acts as a directory service for data pools around the world, including UCCnet. The first generation of the hub will launch next month. Ultimately, retailers will be able to query the global hub concerning suppliers and goods, and it will reply with product notations and information on which pool to go to for additional data.

Similarly, two competing online trading exchanges have tightened their relationships. In late May, the WorldWide Retail Exchange LLC and Transora, a manufacturer-founded exchange, disclosed that they have integrated their global data-synchronization software and services. Both exchanges can certify and upload data to the Global Data Synchronization Network and regional data pools, such as UCCnet. The two also unveiled an interoperability pilot test to share item-level information between their platforms using EAN International and UCC standards. Nine retailers and 12 manufacturers from Belgium, France, Italy, the Netherlands, Spain, and the United States are participating in the pilot.

Still, the multiyear battle to complete a companywide data-synchronization and collaboration project may be too much for some companies to bear in the near term. Especially, say some analysts, since returns on investments are unclear. "Everyone quotes the $40 billion savings in purchase-order errors, and I think there's some truth to that figure, but getting there isn't going to be easy," says Aberdeen's Rosenblum, referring to an A.T Kearney study.

Rosenblum contends that's because data synchronization is likely to cut administrative and other overhead costs but not create new revenue. "The consumer doesn't get much from data synchronization, and I don't think retailers are going to necessarily sell more," she says. "Until we get back to a hyperhot economy, I don't know if data synchronization is going to be where people put their money."

Nonetheless, the increasing number of letters from retailers calling for data synchronization have gotten manufacturers' attention, and retailers aren't giving in. For companies like Church & Dwight, data synchronization is simply a fact of life. "Most manufacturers look at this as a cost of doing business," Bonura says. "But just having clean item data is a benefit to us."

-- with Beth Bacheldor

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