Collaboration — in those heady days in the run up to Year 2k — was a must have: collaborative planning, forecasting and replenishment (CPFR); public exchanges, efficient consumer response (ECR); vendor-managed inventory (VMI) were all paraded as ideal solutions guaranteed to improve profitability and enhance performance. The vision was of a brave new world peopled by trading partners co-operating fully and openly for the greater good.
Fast forward to a couple of years back and collaboration had become a weasel word, replaced by ‘supplier relationship management’ and private portals. Today collaboration is once more in vogue for two very significant reasons. The first is global data synchronisation — hardly a topic to set hearts fluttering with excitement, but a vital stepping stone to widespread use of RFID. Item level RFID may well be five or 10 years away, but its success will be dependent on uniform product information attributes agreed and shared between global trading partners.
A second and rather more exciting driver is global sourcing: as production has moved from near- to off-shore to — as now — mostly in China, supply chain risks, lead-times and complexity have multiplied and slick IT systems are proving invaluable for product development and planning.
The many flavours of collaboration
Collaboration, of course, comes in many flavours. In the global sourcing area comes own label product development. Then, in the putative CPFR category, there are those insights provided for suppliers into day-to-day store performance. At its simplest it may be little more than a straightforward electronic exchange of orders and delivery data to streamline supply chains.
Eqos, which focuses on the more complex end of the spectrum, launched its Collaborator platform seven years ago: ‘In those days collaboration really was a hot topic,’ says co-founder and chief technical officer, Chris Foulkes.
Eqos made its name initially in the promotions planning space but while retailers and suppliers gained significant benefit from sharing forecasts and monitoring performance, the effort was difficult to justify in terms of improved profits.
‘Collaboration has always been about working more closely with trading partners and integrating processes,’ says Foulkes, ‘but that is a very difficult operation and in the past it has been hard to find business applications that could deliver sufficient benefits for the effort needed. Now global sourcing is top of the agenda and suddenly there is a reason for the integration and there are very real benefits.’
Eqos customers, such as Best Buy, have implemented the Collaborator platform to handle the complexities of sourcing and developing own label products from China; sharing information on such things as designs, delivery dates and workflow to ensure that the goods really do arrive in the stores at the optimum moment to maximise sales.
Best Buy has opened a buying office in Shanghai and the Eqos system is used to manage workflow and planning during the product development stages.
‘Managing, for example, the development of a new DVD and ensuring that it will hit the shops exactly on the first day of the planned promotion on Boxing Day is a very complex process,’ adds Foulkes. ‘You can’t do that with a simple off the shelf application package, the platform has to be built precisely to meet the needs of the trading partners involved and be flexible enough to develop as those needs change.’
‘Global sourcing is hard work,’ adds Eqos business development and marketing director Mark McDonnell, ‘and companies are not looking to build the close relationships needed with a large number of suppliers but to develop long-term partnerships with a very few.’
Other Eqos customer such as Wickes, have used the platform to meet different needs — such as supplier performance monitoring — as well as streamlining day-to-day interactions in the forecasting and planning arena.
Retek, long established in the supply chain systems space, is also focusing on more complex collaborative developments following its purchase last November of Syncra systems, an established CPFR player in the US. It is now integrating this with its own supply chain products to create three collaborative modules: promotions planning, co-managed inventory and the Retek Syncra Exchange (RSE). These modules will link directly to established systems such as Retek Demand Forecasting, used within the enterprise, to enhance collaborative activity. Early European users include Tesco, Auchan, Delhaize and Carrefour.
‘CPFR has never been quite so applicable in Europe as the US as supply chains are shorter,’ says Richard Downs, director of collaborative systems at Retek. ‘Concepts like vendor managed inventory (VMI) have never been strong in the UK although they have gained acceptance in other parts of Europe. With global data synchronisation, however, one of the fundamental building blocks of CPFR is coming into place.’
Syncra had previously sold its collaborative tools to the WorldWide Retail Exchange (WWRE) — one of a handful of surviving public exchanges from those heady days of the dot-com boom. WWRE members, including Tesco, have been using the promotional planning module to replace cumbersome spreadsheets while Carrefour has separately adopted the co-managed inventory tool.
In its pre-Retek guise, RSE had been largely adopted by CPG companies such as Proctor and Gamble to create a private trading hub linking retailers for exchanging stock, sales and forecast information.
But while Syncra and Eqos have concentrated on complex integration issues and one-to-a-select-few relationships, rather than one-to-many, others believe there is room for the wider model. ‘During the dot-com boom people spent a lot of money on collaborative projects with not a whole lot of results,’ says Jeff Baum, senior vp for international operations at Manhattan Associates. ‘Basically, people really didn’t want to co-operate with the competition. We’re now seeing a revival of interest in collaborative projects as companies realise they need to revamp the entire supply chain and improve links not just with a handful of major partners but with the entire supplier base.’
As a result Manhattan is focusing on trading partner management (TPM) — a hub-like solution designed to allow real-time links and data exchange between hundreds of companies. ‘We believe this to be one of the hottest spaces right now,’ says Baum, ‘and the payback is generally quite huge.’
Baum, too, sees global sourcing as a driver: ‘Companies are sourcing in China, forwarding in Hong Kong, cross-docking in other parts of Asia and using 3PLs in various ports. There are too many potential points of failure and a large number of players — hence the need for real-time, online TPM.’
The Manhattan system includes logistics hub management that supports shipment consolidation from multiple suppliers and manages outbound distribution.
Also focusing on the many-to-many model are the various EDI [electronic data interchange]specialists and VAN [value added network]providers who have built shared information platforms — such as TIE (originally an acronym for Tesco Information Exchange) developed by GXS for Tesco’s trading community but now more widely available as a generic platform.
‘We’ve seen a lot of soul searching in the collaborative area, but there have been enormous practical problems in areas of harmonisation,’ says Brian Morgan, director at Global Exchange Services (GXS), ‘but technologies like TIE are still alive and well. For many larger businesses, traditional EDI is still important and there is resistance to moving to newer technologies because of the additional infrastructure cost and management needs. The approach tends to be: “if it ain’t broke don’t fix it”.’
Going the XML/AS2 route
As Morgan points out, anyone wanting to move into e-commerce today would go the XML/AS2 route but for established operations with legacy systems changing to newer technology is a low priority. Wal-Mart is one that has mandated its suppliers to use AS2 (a newer EDI-like platform) but it is an issue for smaller suppliers as in-house IT staff are needed to manage firewalls and other security needs since the confidential data exchanges basically travel on the common Internet.
Last year GXS launched Trading Grid as a development for the SME sector building on its basic TIE model. Trading Grid has simplified user interfaces and will soon be extended with a variety of third party services such as web-based ordering and integration to common SME back office tools like Sage accounting packages. The emphasis is on basic collaborative services such as promotional activity or shared business processes, for the entire trading community rather than in-depth one-to-one links.
Looking to the future GXS is focusing on Product Information Management (PIM) which research organisation The Yankee Group describes as ‘an optimised toolset for the development of product information for either publication or exchange’. It is closely linked with global data synchronisation development and is seen as a vital building block for RFID.
Kewill, too, is focusing on a hub approach with its Trade system and since not all trading partners in any community may be high-tech users, it also provides a bureau service which will convert electronic orders and other exchanges into faxes or telephone messages for the less savvy. ‘The system will support business processes and create a workflow or “critical path” model highlighting key dates to meet specific performance indicators,’ says Evan Puzey, Kewill’s vp for product management and marketing. ‘More and more companies are trying to gain control and insight into where things go wrong and that needs high visibility and collaboration’
Kewill’s users include Bhs and Littlewoods in the UK as well as C&A and Toy’R’Us across Europe. Bhs, for example, is currently exchanging information with 280 suppliers: ‘The system is extending supply chain visibility for Bhs to the entire supplier base,’ says
Kewill COO, Jacquie Boast.
While these types of developments could, potentially, handle collaboration between a large number of partners most projects are still quite limited. UK supermarket chain, Iceland — part of the Baugur Group — has used JDA applications to share forecasts and sales data with suppliers. Benefits have been significant for both branded suppliers and the retail chains with fewer stockouts and thus less brand-switching by consumers. However, the number of suppliers involved remains modest: starting with five, the figure rose to 18 last year with a target of 48 by the end of 2005/early 2006.
‘Payback has been quick and every supplier involved tells us that trading relationships have improved dramatically,’ says James Hulse, Iceland’s supplier development manager. ‘There are soft benefits, too, such as being able to plan promotions more effectively and working more efficiently together.’
Despite such enthusiasm the scheme is still confined to a very small number of Iceland’s many hundreds of suppliers. This was where the public exchanges were expected to come into play making it easy for large numbers of companies to collaborate cost effectively. In practice the exchanges tended to concentrate initially on commodity activities like auctions and more recently on building product catalogues and data synchronisation.
Over the past few years numerous commercially managed product catalogues have appeared both from exchanges and organisations like WWRE, UCCNet, GXS, Click Commerce or Sinfos.
GS1 — the new name for the mishmash of global EAN-UCC bodies — is now devoting significant effort to achieving global data pools with perfectly structured product information files. GXS and UDEX will be providing GS1 UK with the country’s first standard data pool. It is projected to contain product information from more than 3,000 suppliers covering 300,000 items by the end of this year. Its arrival is being broadly welcomed by retailers: ‘The launch of the UK data pool presents a major opportunity for our UK suppliers to have a “one stop shop” for supplying data to ourselves and their other retail partners in accordance with both global and UK industry requirements,’ says Tesco IT director, Colin Cobain.
As these new standardised global data pools develop, GS1 sees a gradual rationalisation in their number. ‘Over the next five or ten years we would expect the number to fall,’ says Jean-Marc d’Hooghe, group manager for global data synchronisation network (GDSN) implementation support with GS1 in Brussels. ‘There will be commercial issues involved in the mergers but I would expect that eventually we will just have one global data pool for each product sector.’
The standard definitions used by the GS1 approved data pools currently list some 152 different product attributes which suppliers submit and their trading partners can access and examine in their search for new lines and sources.
A long way from reality
While these systems are rapidly coming into place, the standards they promise are still a long way from reality in many businesses. Typically the proportion of ‘clean data’ in an organisation can be as low as 25-30 per cent — and that is holding back many from implementing new collaborative technologies that can improve supply chain visibility. ‘We want to work more closely with our suppliers,’ says Bill Grize, president and ceo of supermarket chain Ahold USA, ‘but you need clean data and after that you need data synchronisation and then real-time communications. We want to share more information with our suppliers but without clean data we’re just scratching the surface. We have miles to go on CPFR.’
While many of these collaborative offerings purport to revamp the supply chain, that is just the start. Sterling Commerce argues the case for a total change in computer infrastructure with a shift to ‘multi-enterprise computing’ and emphasis on MESA — multi-enterprise services architecture — which sees business intelligence, applications and integration as servicing multiple communities rather than being confined to a single enterprise.
These developments may, says Chris Hayes, solutions manager EMEA at Sterling, be driven by a powerful company mandating compliance from its trading partners, or could be mutual developments with third parties providing independent services for a complex trading community.
Rather than seeing this as simply another spin on hosted services – or even a variant on public exchanges – the MESA model is described as more flexible, enabling a range of capabilities which users can select as they wish to meet their precise needs.
‘We’re already seeing interest in the approach from our retail CPG customers and also in high-tech manufacturing,’ he says. ‘Products such as Sterling Integrator can be decomposed into their constituent parts which may then be selected and deployed between multiple enterprises to meet each partners needs.’
Fujitsu Services, however, is quite happy to see such ideas in terms of hosted networks. ‘It doesn’t make sense for companies to buy these applications as all the economies come from sharing resources,’ says Dr Mark Dorgan, European retail partner. ‘The supply chain is a comparatively new area for us, but our strength is in hosting and network management and collaborative technologies are maturing.’
Fujitsu has started offering the One Network Enterprises solution in the UK. This was launched around two years ago and is now used in the USA by such supermarket chains as Kroger and Safeway. The system is built around a real-time planning engine but enables a raft of information exchanges – even down to the minutiae of booking time at a warehouse docking door – by using flexible process templates.
Collaborative technologies may have had their ups and downs over the past few years, but as RFID and global sourcing transform supply chains, so working more closely with suppliers and developing global data pools of product information become not just futurist dreams, but everyday reality.
Here’s to a connected future.