business news in context, analysis with attitude

The Grocery Manufacturers of America (GMA) and the Food Marketing Institute (FMI) released the following joint statement:

    A one-time investment of $1 to $2 million can save food retailers and consumer products companies several million dollars annually, according to a new action plan from the GMA-FMI Trading Partner Alliance (TPA) and global consulting firm A.T. Kearney. Examples of potential company cost savings include the elimination of up to 50,000 hours per year in unnecessary transcription work, the reduction of out of stocks by 10 percent and the reduction of new product speed-to-shelf time by 80 percent.

    The Action Plan to Accelerate Trading Partner Electronic Collaboration is a call-to-action to manufacturers and retailers that reveals the escalating price of industry inaction on electronic collaboration initiatives such as item synchronization and UCCnet’s GLOBALregistry™ services. Electronic collaboration is the continuous, global connection of consumer products companies through UCCnet’s data registry service.

    “This work is an action plan designed to focus executives and their companies on how to respond to opportunities associated with electronic trading between manufacturers and retailers,” said Patrick Walsh, director of industry relations, FMI. “Endorsed by industry CEOs as a top priority, our e-collaboration initiative is transformational in nature and will fundamentally change the buyer/seller relationship once implemented.”

    GMA and FMI believe the industry must take immediate action and begin electronic collaboration based on an independent assessment of the infrastructure and business case for data synchronization. Results of this assessment include:

    The infrastructure for data synchronization is in place – EAN.UCC has published the necessary infrastructure for global data synchronization and includes agreements by the Uniform Code Council, EAN international and the Global Commerce Initiative that UCCnet will be recognized as the single Global Registry.

    The benefits are significant and have been demonstrated – Studies and pilot cases have shown that data synchronization will save time and money for consumer products companies.

    The costs of inaction are increasing – The industry has already invested in this technology and to not move forward now would mean facing higher costs in the supply chain while the rest of the world advances toward data synchronization solutions.

    The trade associations together maintain that the industry must act now to reap the full benefits of the technology. The estimated $25-$50 billion cost of incorrect information in the supply chain can be virtually eliminated if manufacturers and retailers implement electronic collaboration. Companies should immediately begin the process by subscribing to UCCnet, and preparing their data for registration and synchronization.

To get an expanded sense of what all this means, MNB conducted an exclusive e-interview with Patrick Walsh, FMI’s director of industry relations, and Pamela Stegeman, GMA’s vice president of industry affairs. Excerpts follow:

While it is clear that you believe that the infrastructure that will allow electronic collaboration is in place, what is your sense of its acceptance and usage within the retailer, wholesaler and manufacturer communities? Are there specific percentages of usage that you can share to illustrate the level of acceptance? How far does the industry have to go to get to the mass acceptance that makes e-collaboration viable?

Since the GMA-FMI Trading Partner Alliance meeting during the CEO/President's Forum at GMA's Executive Conference in June, 139 companies have subscribed to UCCnet's Data Registry. And, although we believe this demonstrates a good level of industry commitment, we also believe more must be done for the industry to reap the full benefits of electronic collaboration. The initiative continues to gain momentum among manufacturers and retailers. With the endorsement by EAN International of UCCnet's Registry we believe acceptance of the system will greatly increase over the next year.

Is there any resistance to laying the foundation for e-collaboration because the foundation isn't where the ROI is? Isn't the money to be made/saved later on, when you actually have collaboration?

Manufacturers and retailers can expect to see real savings - such as a decrease in paperwork, less employee hours and reduced out of stock products - almost immediately after implementation. Of course, the best part is that there is no end to the savings - the benefits increase year after year. The company's financial investment is based on the annual sales of that company and can be anywhere from $1,500 to $400,000 a year to subscribe to UCCnet's data registry services.

What is the role of the trading exchanges in making all this happen? Are they all on board?

Trading exchanges are on board and each can offer a platform for interacting with UCCnet. Their role can be to help companies move quickly to take advantage of the savings.

How does the 2005 expansion of the UPC code play into the e-collaboration model?

Sunrise 2005 will help ensure that the e-collaboration initiative becomes global.

You say a "one time investment of $1-2 million" is required. Is that regardless of whether a company is big or small, a retailer or a manufacturer?

No. The investment is based on company size, type and current infrastructure. The $1 to $2 million is an estimate based on current company experience.

Are there individual/large companies that already have this kind of e-collaboration infrastructure in place, therefore putting pressure on smaller companies to get up to speed or be totally left behind?

The companies already using this technology understand the benefits and know that the industry-wide benefits are extraordinary. These companies also understand that if industry inaction continues, significant investments could be lost. More important still is the potential loss of industry-wide advancement. Electronic collaboration is the crucial next step for the food and consumer products industry and trading partners must take that step together.

Our understanding is that there are just 200 subscribers to UCCNet...and yet, there are thousands of potential subscribers both on the retailer and manufacturer side. Is that understanding correct? If so, and all this e-collaboration planning makes sense, how come more companies aren't UCCNet subscribers?

There are approximately 220 UCCnet subscribers currently. Most of the subscribers are some of the largest companies in the world. Like many new technologies, data synchronization will gain greater momentum as larger, "first-to-move" companies prove the value and effectiveness of the technology. The danger comes in when companies are not "fast-to-follow" in situations like this. At a certain point, and we are quickly getting to this point, companies are at risk of falling too far behind in a technology that enables efficiency and thus becoming uncompetitive.
KC's View: