Three industry organizations warned suppliers and retailers that the ballyhooed efficiencies obtained by using electronic codes (EPCs) and RFID technology to track goods can’t be achieved without data synchronization on the back end. A plan, released Thursday, calls on retail and consumer goods product companies to continue to drive implementation of data standards, item registry and data synchronization.
The plan, Connect the Dots: Harnessing Collaborative Technologies to Deliver Better Value to Consumers, was commissioned by the Grocery Manufacturers of America (GMA), the Food Marketing Institute (FMI) and the National Association of Chain Drug stores (NACDS). A.T. Kearney and Kurt Salmon Associates developed the plan.
“Global data synchronization is the underlying foundation for EPC implementation,” said Mark Baum, executive vice president of the Grocery Manufacturers of America. “If the data isn’t right, you’ll only expedite the transmittal of bad data.”
The report says that RFID tracking of products at the pallet-and-case level will be widespread within three years. But to maximize the benefits the industry must move forward on global data synchronization (GDS) efforts, because GDS is a foundation for EPC.
To achieve GDS, businesses must first adopt standard data formats, classification schemas and information-exchange protocols. The next step is sharing a single item registry, which provides a unique identification for each electronically traded product. Finally, they should move to interoperable, linked catalogs, so that when one partner alters or updates information, all partners immediately have access to the new information.
Nucleus Research analyst Kathy Quirk said that having a uniform way of describing different products lets information be more easily shared by different companies along the supply chain. For example, a potato chip manufacturer may want to drop off a shipment of a new brand of potato chips to a major retailer, but the retailer couldn’t accept it because its purchase order shows a different product number. “Ultimately, this benefits everybody along the supply chain,” she said, “because they’re all talking about the same thing.”
Once partners share common data standards, a single item registry and item synchronization — the elements of GDS — they can begin to collaborate on transaction management, supply chain management, sales and promotions, and even product development.
“Ultimately, you’ll get into a much more interactive, collaborative, transparent business development mode,” Baum said.
Baum said that some technical standards have been developed, and there’s a global standards management process in place. The Uniform Code Council in the U.S. and EAN in Europe oversee the process, while the Global Commerce Initiative recommends standards.
According to the report, manufacturers and retailers who have pioneered information sharing saw benefits including a 3 to 5 percent reduction in out-of-stock situations, a two-week reduction in getting new products to market, and reductions in inventory of from 0.5 to 1 percent.
The report advises businesses not to wait for standards, but to begin internal and business development preparations for when they emerge. Consumer packaged goods companies are advised to cleanse their product data, and then work with trading partners on exchanging data. Meanwhile, it says, they should create business cases for use of EPC and start pilot programs.
While suppliers and retailers work from inside their firewalls to synchronize data, standards organizations are progressing in creating the infrastructure for the Internet of things. EPCglobal tapped VeriSign to handle creating the network of IP unique addresses for products that will let manufacturers, shippers and retailers someday know how far down the supply chain every Mach 3 or can of Pringles has made it.
But giving each item an electronic product code, or EPC, won’t be of much use if suppliers can’t relate the EPC to product descriptions in their internal databases, let alone those of their partners.
“Tagging to collect data is great,” said Kathy Quirk, an analyst with Nucleus Research. “The question is, what do you do with the data and how do you get it into your corporate data stream? That’s the biggest piece of the RFID challenge for companies. Think of all the data companies currently have that they can’t get into.”
Neither will integrating RFID data with corporate systems come easily, according to research firm ABI. While enterprise software and systems giants including IBM, Oracle, SAP, and Sun are working on building RFID into their existing suite offerings, the firm expects spending on integrating information from RFID systems into the enterprise to surpass spending on RFID products by 2007.