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Mainstream Enterprise Vendors Begin to Grasp Content Management Part Two: Background & Lessons Learned

Written By: Predrag Jakovljevic
Published On: November 12 2004

Background

For years, consumer packaged goods (CPG) firms have sent inaccurate (inadvertently or not) product data to retailers, but now they are under notice to fix the problem or pay penalties and even lose out at the end of the day. Nowadays, therefore, they will have to analyze their priorities and develop a product information management (PIM) or global data synchronization (GDS) action plan that delivers semantically reconciled data compliance with the above mighty retailers' demands. Moreover, these suppliers could even offer their customers new relationship-enhancing value-added services once they have implemented cleansed and synchronized product information repositories.

As a help, the Uniform Code Council (UCC) has established standards for product information and transactions known as UCCnet to which suppliers are mandated to subscribe. With this opportunity resonating, many catalog management and publishing providers like former A2i have lately jumped into more lucrative PIM/GDS space. Further, depending on the market and geography segments, the global trade item number (GTIN), uniform product code (UPC) and European article number (EAN) data formats allow for the consistent identification of merchandise throughout the supply chain process, from product design to the point of sale (POS). The use of GTIN, UPC, and EAN data promises to greatly increase the efficiency with which retailers and manufacturers can mark, track, and exchange detailed product information. As a result of these standards and technologies, many retailers, vendors, suppliers, and brand manufacturers have been able to reduce the cost of financial operations, mismatches between purchase orders and invoices, inaccurate product shipments, and stock-outs.

From hindsight, the concept behind a business-to-business (B2B) exchange and marketplace—to bring together (aggregate) multiple buyers and sellers via the Internet to save money, expand markets, improve supply chain efficiency, and what not to all the parties—had seemed painfully straightforward and too good to be true. However, it has turned out to be much more painful to achieve. The grandiose promises have far outweighed the actually provided benefits so far. Namely, creating the technology to operate such a marketplace has turned out to be far more difficult than originally envisioned, while suppliers remained hesitant if not even resentful to compete for business on-line and watch their margins erode within the cutthroat bidding process.

Hence, with the failure of most public exchanges and the frustration of many corporate e-procurement or private exchange (PTX) projects attributed to a lack of supplier participation, PCM has come to the forefront as a crucial function for e-commerce. Initially, it had seemed a simple matter of getting suppliers to compile and submit their product information. But buyers and vendors have grossly underestimated the suppliers' financial and technical burden of creating, managing, and maintaining product content, as well as their reluctance to hand over the content. In view of that, they have overestimated the suppliers' zeal to participate.

This is part two of a three-part note.

Part one defined PCM system attributes.

Part three will address challenges.

Lessons Learned From Internet Exchanges

Joining an Internet-based trading exchange requires integration not only between a company's own systems and applications, but between those of its trading partners and community members, which has largely made system integrators (SI) the only profit-making benefactors from B2B exchanges so far. Many early enthusiasts have also initially failed to realize the complexity of the above undertaking, which was maybe affordable to a Fortune 500 company, but prohibitively expensive for small and midsize companies and their suppliers. On the other hand, the initial idea of saving buyers money by enabling them to aggregate their purchasing and select the least expensive supplier at a given moment has hardly impressed anyone—while suppliers hated to be hammered upon with heavy discounts expectations during their bidding rat races, buyers have also come to a conclusion that the phone and fax have been still as good business enablers as these elusive exchanges, if not even better for their inexpensiveness.

It had, at some stage, dawned on many that these Internet exchanges had to move not only from procuring indirect materials to include direct ones, but also to move from mere commodity procurement into product design, financial settlement, fulfillment, resellers and channel management, logistics, and many other value-adding collaborative trading functions, and to integrate all that functionality into a corporation's back-office systems, which could be the most value-adding proposition.

Indeed, PCM was missing from the dot-com generation of enterprise and web platforms, which has in a great part hindered their success and prevented them from delivering promised benefits. For example, content and application syndication was missing (i.e., the seller's site must be able to incorporate product catalog information with pictures and descriptions, while the exchange must be able to syndicate catalog content from multiple suppliers, apply the proper logic for formatting and pricing, and present the information in a consolidated fashion to buyers). For more information, see Differences in Complexity between B2C and B2B E-commerce.

PCM Need Recognized

Consequently, it has become clear that suppliers need a comprehensive system that lets them manage product content as efficiently as they manage products. Thus, the requirement for robust PCM is finally being recognized among chief information officers (CIO) and IT managers, who are looking to create and manage a centralized repository of rich product content, and also by many enterprise vendors of late. The still current manual, paper-based item authorization procedures at some sites continue to create unnecessary shipment lag times and also impede the future growth. This is particularly true when on average a grocery retailer may be required the collection and entry of hundreds of pieces of data to introduce one new product from one supplier into the network of thousands of trading partners.

Thus, some software vendors targeting the retail sector, such as QRS (soon to be merged with Inovis, after rescinding the merger with JDA Software, see Not All Acquisitions Happen: JDA and QRS) or General Exchange Services (GXS) (see GXS Acquires HAHT Commerce for More Synchronized Retail B2B Data) remain focused on enabling retail industry participants to connect with each other and transact business through the use of these automated communications and product identification standards. There are a number of other best-of-breed PIM players on the market, including FullTilt Solutions, Blue Martini, Cardonet, SAQQARA, Sterling Commerce, Comergent Technologies, CommercialWare, Flow Systems, Stibo, Liaison Technologies, and Velosel. Each has a number of customers using its solutions, but the PIM market is just now heating up and the lion share of the market is still up for grabs.

Nevertheless, hand in hand with the trend to conduct business transactions electronically via the Internet is an effort to clean up those transactions and reduce the occurrence of errors. Often enough, as already mentioned many times, the trouble with product attributes is that they do not match from one database to the next in the value chain. For every product under its brand umbrella, there are several product attributes, including definitions, specifications (product weights, measurements, calorie counts, etc.), images, naming conventions, marketing messages, and prices. As a result, something as bland as a can of food comes with arrays of data relating to pricing, description, promotion, and so on.

To make things worse, companies may have hundreds or thousands of products and multiple individuals may maintain each bit of product information, so the task of organizing and maintaining all this information is critical to the company, since bad data costs companies billions of dollars in incorrect purchase orders, subsequent returns, and the manual effort required to fix them (see $40 Billion Is Being Wasted by Companies without Product Information Management Strategies—How Is Yours Coming Along?).

Accordingly, PIM and GDS applications combined automate the process by which suppliers, manufacturers, and retailers share information relevant to issues like inventory status and product specifications. This technology might also be an important underpinning and enabler for emerging plans around the RFID technology, which is also high on these retailer giants' agenda. But, as mentioned earlier on, data synchronization would be a relatively simple task if the data were normalized, complete, and error-free.

Unfortunately, this is rarely the case, given product information is not created by a single department within the company and is usually not overseen by any single group. It is this lack of process within a manufacturer's business and around managing product information that facilitates errors. Yet, related systems such as logistics, invoice reconciliation, and POS also need the same product information. The retail sector, particularly food and grocery industry, would hence greatly benefit from some on-line industry coordination when it comes to managing catalogs and B2B trading communities, where UCC seems to be playing its part.

Like most software solutions, PIM has evolved along a path on which the most pressing needs are met first. For CPG companies, the highest-priority need is GDS, and when faced with mandates from their largest retail partners to synchronize product information via EAN/UCCnet, many CPG companies have thus quickly implemented solutions to upload information to the registry. However, they have also soon afterwards discovered that they did not have all the requested information or a process for keeping the registry information up-to-date. Therefore, a long-term PIM strategy requires integration with other systems, workflow, an information repository, and the ability to synchronize and syndicate information to a variety of destinations in multiple formats.

This concludes part two of a three-part note.

Part one defined PCM system attributes.

Part three will address challenges.

 
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