$40 Billion Is Being Wasted by Companies without Product Information Management Strategies-How Is Yours Coming Along?
Written By: Bob Gallagher
Published On: May 23 2005
Information errors are costing retailers and manufacturers a lot of money. In fact, a 2002 study from A.T. Kearney estimated that $40 billion dollars (USD) per year are wasted because of invoice errors caused by bad data.
Most agree that eliminating product information errors will save money, but many of those same believers are not rushing to solve the problem. Why?
A variety of excuses are given, including evolving data exchange standards and lack of budget, but the dirty little secret behind this problem is that product data has often been managed so poorly that the fix seems insurmountable. Many IT managers would choose a root canal over tackling this problem. In reality there is no quick fix, but a well conceived product information management strategy will provide a solid foundation for a successful future.
The aforementioned A.T. Kearney study, performed on behalf of the Grocery Manufacturer's Association, also highlights the following facts about product information:
- 3.5 percent of total sales are lost each year due to supply chain information inefficiencies
- 30 percent of the item information found in retailer's catalogs is incorrect and each error costs $60 to $80 (USD)
- 25 minutes per SKU is spent each year to cleanse product information
- 60 percent of all invoices contain errors
- 43 percent of all invoice errors result in deductions paid by the manufacturers
- Because the process of rolling out new product information is so slow, it takes an average of four weeks for retailers to update their systems with it
A business manager for a large consumer products manufacturer told us that "the information for each product is created by numerous individuals within the company, stored locally on their PCs, and no single person is accountable for its integrity."
Wal-Mart, ACE, The Home Depot, Wegmen's, Shaws, and other large retailers around the world, need this information in order effectively sell the products created by manufacturers. These Global retailers handle thousands—perhaps millions—of SKU's, of which 35 percent are changed annually. This is a critical product information management issue and a hindrance to global supply chain optimization.
The organization for European Article Numbering (EAN) and North America's Uniform Code Council (UCCnet) are working to overcome this problem and have put a joint stake in the ground to solve it by January 1, 2005. This deadline mandates that by Sunrise 2005, all retailers and manufacturers, regardless of country, will start using the new 14-digit global product identification number (GTIN) and synchronize data via EAN/UCCnet standards.
There is a huge ground swell of support for Sunrise 2005 and GTIN because of their potential to take costs out of their supply chains, better manage introduction of new products and promotions, and support the integration of global supply chains.
As manufacturers prepare to comply with the retailer's requests, they have become aware that data synchronization is just the tip of the iceberg, and that a long-term solution requires product information management.
Product Information Management
A typical consumer product has hundreds of attributes that describe it. Some of this information is created by marketing, some by logistics, some by the engineering and other groups. Most of the time, no single person or group consolidates this data and manages the process of keeping it current. If a manufacturer has hundreds or thousands of products, the job of ensuring the quality of product information can quickly become enormous.
Product information management (PIM) is the label applied to the group of processes that enable the company's information creators to enter and modify that information, then use it to optimize the selling of their products.
A PIM solution should be the system of record for management of all post-production product information and it should be integrated with all the systems that hold a portion of that information. It should contain the following high-level functional components:
- A single-interface that enables all product information owners to enter, modify, and retire product-related data and promotions
- Workflow that ensures that each step of the approval process is fully executed
- Business rules that automate the process of workflow approvals and kick out data exceptions
- A mechanism to synchronize product information through all distribution channels all the way to the consumer
About the Author
Bob Gallagher is the president of RW Gallagher & Associates LLC, a strategic marketing consulting firm specializing in technology-related businesses. He has worked closely with many companies, including Intuit, Sybase, PC Week (now eWeek), QAD, HAHT Commerce, and DataEase International.
He can be reached at firstname.lastname@example.org.