Passing product information around the grocery supply chain is like Chinese Whispers, with inconsistent data held by retailers and suppliers in four out of five instances. It also turns out that the industry is losing out as a result: to the tune of £700m in eroded profits and £300m in lost sales over the next five years.
The Data Crunch Report from supply chain standards body GS1 highlighted the scale of the problem using research carried out with data from the major supermarkets and some of their biggest suppliers. Wholesalers and foodservice companies are also affected.
"We looked at between 17 and 18,000 branded products and compared the same product attributes held by different organisations. There was an 80% average level of data inconsistency," says Robert Besford, solutions manager for GS1 UK.
So what sort of data are we talking about? It starts with the most basic product attributes such as the weight and size of packs. It also includes availability (such as when the '10% extra free' promotional packs will be reaching the market and when the offer ends) and consumer information such as nutritional values, allergy warnings and recycling instructions. In fact, the number of separate attributes that the retailers need to know is growing all the time.
The average is 66 for each product, but that is expected to rise to around 250 as a combination of regulation, consumer pressure and traceability needs demand to know more about what's hitting the shelves.
The direct costs of inconsistent product data fall into several areas: shrinkage, workaround processes and lost sales through products being out of stock.
Theft accounts for some of the discrepancies as products pass through links in the supply chain, but around a quarter of all shrinkage is believed to be caused by systemic failures. The GS1 research concluded that inaccurate data accounts for up to £95M of shrinkage annually.
Mismatched invoices, rejected deliveries, repeated shipments between suppliers and recipients, not to mention all the people in different departments inputting the same data again and again, all add up to a £47M cost for workaround processes.
The good news is that everyone's been working with inconsistent data for years and that means that there's a huge opportunity for food manufacturers and retailers to save money if they can match up their data more effectively. Supply chains in countries such as the US, Australia, Canada, the Netherlands and Germany have already gone a lot further than the UK towards solving the problem, using a standards-based approach called Global Data Synchronisation (GDS).
GDS relies on swapping information between supply chain members using standard product attributes defined by GS1. Put simply, without GDS a manufacturer might have to describe product dimensions in millimetres for one customer and in centimetres for another before sending the information via fax, email or phone. Using such ad hoc systems for each customer obviously creates extra work and introduces opportunities for error.
"It's the simple things that catch people out," says Besford. "You do things nine times one way and don't notice it's different for the tenth customer." With GDS, everyone transfers data in the same format via a shared electronic directory or data pool, so the supplier only needs to input the information once and it is consistent across all their customers.
The GS1 standards include over 200 possible product attributes, although most retailers only require a fraction of this and many attributes will only be relevant to certain products. Each product has a unique Global Trade Item Number (GTIN), and any changes that a participating supplier makes to an item with a particular GTIN are automatically 'pushed' to the company's trading partners.
What happens then depends on the recipient. Larger operations may have an automated Product Information Management tool that will flag up any changes to the relevant departments within the organisation. Smaller companies may take a more manual approach.
There is similar flexibility at the supplier end, where a simple web interface enables smaller suppliers to key-in data, while larger operations can upload data en masse. In either case, the information will flow through to their trading partners automatically.
If it sounds like a simple idea, that's because it is, according to Ian Piddock, marketing manager for Europe at Lansa, which helps companies achieve GS1-compliant GDS using its DataSync Direct software.
However, he says the UK grocery chain has been slow to embrace GDS: "You'd think it would be a no brainer with so much to gain, but the UK grocery retailers are resisting adoption because they're too busy competing and don't have time to look at GDS. In the US, Walmart mandated that all its suppliers must use a GS1-compliant data pool. If one major did the same in the UK, the rest would follow."
Signs are emerging that the majors are at last starting to move. Sainsbury recently completed a pilot with 60 suppliers, as reported on www.foodmanufacture.co.uk, and Asda is currently carrying out its own trial. "I think this is very exciting news for the GDS market in the UK," says Piddock.
"We have all been waiting for one of the big four to announce either a trial or adoption of the GDS system. Whether this is enough to kick-start the initiative on a grander scale I don't know, but this is very encouraging news."
British companies lagging
While British food companies are dipping their toes in the water, the rest of the world is getting on with it. GS1 currently licenses 28 data pools that are operated by independent providers around the world. Together they form the GDS Network (GDSN).
"The data pools provide a secure, encrypted way of swapping information," says Besford. "They all connect to the GS1 Global Registry that acts as a sort of telephone exchange that turns the data pools from all the different solution providers into a global network."
That's not to say the GDSN is the only game in town. Most notably, Inovis in the US has its own well-established product data catalogue that is dominated by non-food products for retailers such as department stores.
While the catalogue conforms with the GS1 standards for data pools, it does not link into the GDSN. Stephen Jeffries is responsible for Inovis's DataSync service in the UK, where some big-name non-food retailers including House of Fraser and Harrods have already been getting on board.
He says that GS1-compliant data synchronisation is an accepted part of doing business in the US: "Around 92% of non-food retailers in the US use GDS from Inovis."
Yet the fact remains that GDS has so far failed to reach critical mass among British food retailers and suppliers. "We've been saying that next year is going to be the year of GDS for five years now. When Makro signed up it caused a flurry of interest, but they didn't make it compulsory for suppliers. And even if they did they're just not big enough. It needs the likes of Asda or Tesco to do it before it'll really take off," says Piddock.
There are signs that GDS could be finally about to take hold, according to Besford: "As a standards body we're here to support firms so we tend to get sight of everything that's happening in the market. We're very optimistic about progress, especially with the two majors conducting successful pilots."
Despite the generally slow progress, some UK companies are already getting ahead of the game with GDS. For example, Brakes and 3663 have signed up in addition to Makro, while Premier Foods is one of the most high-profile participants on the supplier side. Premier says that GDSN helped it boost customer service levels by 43% to 98% and get new products on the shelves in just 48 hours.
On the customer side, Mitchells & Butlers operates 2,000 pubs and pub restaurants and has already got all its drinks suppliers on board with GDS. Food suppliers are set to follow this year, with a pilot of 14 suppliers scheduled for May/June. "If all goes according to plan we should be in a position to commence receipt of all new food products listing via GDS from July," says supply chain development manager Concepta Lowry.
"In the main [suppliers] have been very supportive regarding what we are doing. Some did struggle a little when getting started on coding, or publishing, their data, but the GS1 service delivery team have been extremely helpful in such instances."
One of the main benefits already being realised with the drinks suppliers has been the elimination of the complex translation tables that Mitchells & Butlers previously needed to process information about the 900 different drinks product lines it carries. All drinks are identified accurately using just their GTIN, making it easy to access any necessary data.
Key contacts:
- GS1 UK 020 7092 3500
- Inovis UK 01483 547900
- Lansa UK 01727 790300
- Mitchells & Butlers 0870 609 3000
- Premier Foods 01727 815850