Info Tech Express: Building a strong e-commerce foundation
As we enter the second of many stages in the evolution of business-to-business e-commerce, critical concepts such as product data management, synchronization and standardization are just now starting to get the attention they deserve.
From the Uniform Code Council - the folks that manage bar-code standards and implementation worldwide - come these words of wisdom: "The integration of industry standards and synchronization are widely recognized components that are vital to realizing the true bottom-line benefits of electronic commerce in today's business environment. Once trading partners are using synchronized information, they can begin having successful item information dialogue with trading partners and collaborating over the Internet."
In existing trading relationships, which, according to analysts, will account for more than 85% of all B2B e-commerce transactions, e-commerce only works if the business systems "talking" to each other understand each other. That, in a nutshell, is synchronization.
The root of the problemManufacturers and distributors, for various reasons, rarely use the same name, number or format to "electronically" categorize the same products in their business systems. Therein lies the problem. If the end game of e-commerce is automating transactions, removing people from certain parts of the transactions and eliminating the inefficiencies of doing business the old fashioned way, then the seller's system must "understand" what the buyer's system is asking for when an order is placed. Otherwise, errors occur - costly errors.
The reality is that very few distributors have an up-to-date, complete file of their manufacturers' product data - the foundation upon which synchronization should be built. What's more, the data is not standardized in its structure and content.
In a nonelectronic trading environment, these discrepancies are reconciled through back and forth phone calls and faxes, and other manual, labor-intensive processes. Discrepancies in case or pack level quantities, for example, can lead to delivery errors that result in a customer not getting enough of what they needed, resulting in rush orders, or distributors receiving more than what they thought they ordered, resulting in excess inventory and the associated carrying or return costs. Likewise, even small pricing discrepancies, which can often be overridden by those who manage purchase orders and invoicing, can have a serious bottom-line impact on profitability when multiplied over thousands of transactions in a month or year.
HVACR industry takes the plungeSynchronization works best when a large distributor organization drives the process with its own supplier base or when a group of companies - buyers and sellers - come together usually under the umbrella of a trade association data warehouse or consortia-led Internet marketplace.
For example, under Profile System's auspices, an industry data warehouse pilot project is underway within the HVACR/PHCP industry, which originated out of the Logistics and Distribution Committee of the Northamerican Heating, Refrigeration and Airconditioning Wholesalers Association and involves a number of leading manufacturers and distributors.
Like IDWs in other industries, an initial step in the project was formulating and agreeing on a basic data template or set of Product Information Exchange Standards. This template first defines which basic fields of information are most critical within that particular industry, which are necessary for efficient online buying and selling and which need to be matched up. From one industry to the next, what is most critical can be quite different.
Many industries have some type of unique classification code or product identifier. At the same time, certain fields of information, such as UPC, UPN and UN/SPSC codes have cross-industry applicability and typically need to be included in a PIES data template.
Once a PIES document or data template has been established, the process of data matching can be streamlined with synchronization and other product data management software or web-based solutions, such as Profile's MasterDepot. This process typically involves analysis of manufacturer and distributor data - sent in a variety of existing file formats - and the identification of where the data is not aligned. This data matching typically will unearth a number of problems including, but not limited to:
- Distributor parts not in the manufacturer's catalog;
- Manufacturer has buyer part numbers that don't match distributor's;
- Distributor data has characters that seller's system doesn't recognize;
- Distributor has duplicate part numbers or multiple part numbers for the same item;
- Incorrect units of measure (order in "feet" but receive in "rolls");
- Minimum order quantities aren't recognized or met;
- Truncated item descriptions;
- UPC codes don't exist or do not match; and
- Pricing does not match.
Many of the discrepancies are easily corrected, and there are tools and programming tricks that can streamline the process and minimize the resources that already overburdened IT departments have to commit to the initiative.
Validating the processA critical part of synchronization involves validating the supplier data against expectations and incorporating some portion of that data into the business system of the buying organization. In other words, the data has to be usable and viewable. Thus, it is critical that distributor business system providers be involved in synchronization.
Downstream, the ongoing process of product data updates and distribution must be managed with the use of tools that can recognize changes that occur in a manufacturer's product master data file, gather that information and export it in the proper format and to the points of distribution.
The end result of synchronization and product data management for trading partners is having a high degree of confidence in the integrity of the data they are exchanging. This allows for significant savings from reduced errors and paper administration to improve purchase order and invoice quality.
The marketplace has discovered there is no button that you push or secret decoder ring that magically aligns disparate business systems and data formats. We still see a very strong commitment to e-commerce, but organizations seem to be avoiding the quick fix and are taking a longer view of how this fits into their future. Like building a house that will stand the rigors of time, with e-commerce, building your foundation - and that of your suppliers - is that critical first step.