January 4, 2007
Wal-Mart Wants Vendors to Get in Synch
Wal-Mart wants to use data to move products through the supply chain more quickly than previously achieved. That’s why it strongly urged (i.e. required) manufacturers taking part in its radio frequency identification (RFID) program to begin using GS1’s Global Data Synchronization Network (GDSN) on Jan. 1.
According to a Computerworld report, Wal-Mart sent a letter to suppliers in October to make them aware that the retailer viewed GDSN not as a “bleeding edge” technology but as “a mature solution providing tangible benefits for retailers and suppliers.”
Wal-Mart asserted in the letter that GDSN would improve purchase order accuracy, cut down on administrative errors, get products on shelves more quickly and significantly improve in-stock positions.
Discussion Questions: Has the Global Data Synchronization Network (GDSN) reached the stage of maturity as declared by Wal-Mart? What do you see as the benefits of participating in the GDSN? Why are some in the industry wary of the GDSN?
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When asked to hold forth on the future of the internet, Motorola’s chief technology officer, Padmasree Warrior opined that the internet is still in phase two and that “Phase three will be about making it pervasive, where everybody in the world has access to it.” Throw the word “supplier” in there, apply the pervasiveness standard, and both RFID and GDSN end up immature indeed.
Global Data Synchronization has huge benefits, and is almost required to truly integrate supply chains between retailers and manufacturers.
Is it “mature”? I am not even sure what that means in this context. I suppose the tools are a little better than they were a few years ago, but I think they worked just fine back then too.
The issue is that it’s just awfully hard, and can take years and lots of people to do it well. And the payback isn’t now, but down the road, and sometimes not always clear — the benefits are soft/indirect.
Wal-Mart may mean (really) that the business necessity of Data Synch is becoming more urgent. That I would agree with. But it will take a decade….
Scale grants you the luxury of creating self-fulfilling prophesies. What Wal-Mart mandates has an interesting way of becoming standard industry practice. I’m not sure GDSN is a “mature” (whatever that means) technology either. In fact, I’m not at all sure that you (especially if you are Wal-Mart) want mature technologies. What Wal-Mart has done, and done well, is to keep pushing the retail technology envelope over and over again, dragging the rest of the supply chain (and often large sections of the competition) kicking and screaming along. I think the jury is still out on RFID as a universally applied, fully scaled non-test technology. And, before I get hate comments back — let’s be honest, we don’t have a workable (fully scaled) model to point to one way or the other. But I do know that Wal-Mart has been well served by thinking of technology in the same way Napoleon thought of bayonets. He once said, “You can do anything you want with a bayonet, except sit on it.”
As my fellow panelist Dan Gilmore argues, Global Data Synchronization payback is probably more long term. I posit that perhaps the ultimate benefits are yet to be discovered. In a way RFID/GDSN are a little like Ronald Reagan’s Star Wars…a BHAG (Big Hairy Audacious Goal). Had President Reagan not drawn a line in the sand to create this BHAG, many of the technologies which either directly and indirectly benefit our country’s military and populace would not exist today.
When the dust settles, Wal-Mart may ultimately be recognized as being right to be among those who drew a line in the sand and proclaim the BHAG a success. However as Dan Gilmore states, it may take a decade or more before the real applied benefits are realized.
GSDN fits Wal-Mart’s business model: it drives costs down. Wal-Mart wants to squeeze every bit of waste out of its supply chain. When you sell low price merchandise, every penny counts. Every error costs money. Every delay costs money. Every extra motion costs money.
Ryan beat me to the punch this morning, and I think he hit the nail on the head.
Whether the GDSN technology is “mature” or not is irrelevant. The point is that once Wal-Mart requires it, it will get “mature” — fast! Wal-Mart has historically used this technique to persuade vendors and third parties to invest in the capabilities necessary to facilitate improved Wal-Mart efficiency.
Since the Napoleon quote is taken already, I’ll go with Mel Brooks as Louis XVI in “The History of the World – Part 1 — “It’s good to be king….”
Individual tests have certainly demonstrated success in specific areas. However, a chicken and egg situation remains to be solved before determining maturity or success.
Until Wal-Mart has enough distribution centers and individual stores equipped to use RFID technology, it is not cost effective for suppliers to make a major switch in their processes.
Who makes the first move? Does Wal-Mart make a major effort to get RFID technology into every distribution center worldwide or pick a region and get RFID technology into every distribution center and every store in a specific region?
Do manufacturers continue to test different technologies and versions or ways of implementing RFID technology while waiting for enough retailers or enough systems of one retailer to make a shift for it to be cost effective? Do manufacturers choose a technology and make a commitment to convert everything to one RFID technology and then work with a retailer or many retailers to find ways to use the technology and recoup costs? Do manufacturers do tests one a few specific products, a few specific ways of implementation, or in a few locations?
Is the use of RFID technology in a mature state? I think not.
The RFID industry could enjoy a 30-fold growth rate over the next half decade if certain issues are settled. The first is cost: widespread adoption will not occur until the current cost of about 20 cents per tag comes down to around 5 cents. Privacy concerns are another potential drag on market penetration (where there is consumer interface), but are unlikely to slow deployment in inventory logistics and shipping.
I suspect that 2007 will be a watershed year. Wal-Mart and its subsidiaries will be reviewing the flow of goods to all stores in 2007. Which means they are going to force the issue.
However, Wal-Mart also has a good attitude about this by noting that when the product doesn’t get in front of the consumer everyone loses money. There have been continual refinements to its Retail Link system and there is no doubt it is of the most effective collaborative tools in the industry. 40,000 companies worldwide use it. This is not something in its infancy but neither is it a mature technology.
Through Retail Link, Wal-Mart will tell vendors anything they want to know about product movement. The caveat is that vendors must adhere to Wal-Mart’s EDI standards.
Keep an eye on what Tesco does in the U.S. with inventory control and multiple replenishment of their stores on a daily basis. We may be seeing the beginnings of a new standard.
I believe all Suppliers should be looking into Data Synchronization. Why? Here are the benefits.
-Corporate Management
Simplify corporate reporting
Expand geographic retailer base
Eliminate IT system redundancy
Create an opportunity for shared services
Maximize retail exposure/product posting
Reduce time spent on complaints/disputes
-Category/Promotion Management
Improve visibility/stock level planning
Simplify and enhance category reporting
Reduce product introduction lead time
Reduce product promotion lead time
-Administrative Data Handling
Eliminate need for cross-reference tables
Reduce invoice disputes
Streamline the accounts receivable process
Encounter fewer sales order defects
-Logistics
Simplify order tracking
Increase percentage of accurate orders
Reduce return shipments
Encounter fewer emergency orders
Improve picking accuracy
Optimize short-term planning
Maximize truckloads
The major question is why not? We all should consider this as a mature solution rather then just an initiative taken by Wal-Mart.
Keep in mind this is a global action plan that compromises various data pools throughout the world with a central synchronized global registry.
I strongly believe if major retailers take action towards implementing GDSN not only forcing their suppliers but benefiting them with reduction in invoice disputes and help them improve their stock planning. The list goes on, which will benefit the whole supply chain.
First and foremost, for those who have made comments re: RFID, RFID and Data Synchronization are not the same. RFID is yet another Data Collection Technology that accesses “back-end” data. That having been said, has anyone seen the Item Attribute Starter Kit published by GS1-US (formerly known as the UCC)? Close to two hundred product attributes, and counting. Most of the smaller CPG firms can barely maintain fifty attributes, let alone three times that amount. Given that “GDSN” relies on ALL of attributes being completed, and–of course–clean data, I’m not sure how Wal-Mart intends on “enforcing” this. While it’s a laudable goal, as one of your Brain Trust noted, I’m not sure it’s an achievable goal. Or perhaps, just as “Slap and Ship” became the work-around for RFID Compliance, something else will take the place as a work-around to Data Synchronization for Wal-Mart. However, from what I’ve seen, as a provider of U.P.C. Data (including the GS1 Elements), I’m not sure that–aside from a select few–anyone is “there” yet.
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When asked to hold forth on the future of the internet, Motorola’s chief technology officer, Padmasree Warrior opined that the internet is still in phase two and that “Phase three will be about making it pervasive, where everybody in the world has access to it.” Throw the word “supplier” in there, apply the pervasiveness standard, and both RFID and GDSN end up immature indeed.
Global Data Synchronization has huge benefits, and is almost required to truly integrate supply chains between retailers and manufacturers.
Is it “mature”? I am not even sure what that means in this context. I suppose the tools are a little better than they were a few years ago, but I think they worked just fine back then too.
The issue is that it’s just awfully hard, and can take years and lots of people to do it well. And the payback isn’t now, but down the road, and sometimes not always clear — the benefits are soft/indirect.
Wal-Mart may mean (really) that the business necessity of Data Synch is becoming more urgent. That I would agree with. But it will take a decade….
Scale grants you the luxury of creating self-fulfilling prophesies. What Wal-Mart mandates has an interesting way of becoming standard industry practice. I’m not sure GDSN is a “mature” (whatever that means) technology either. In fact, I’m not at all sure that you (especially if you are Wal-Mart) want mature technologies. What Wal-Mart has done, and done well, is to keep pushing the retail technology envelope over and over again, dragging the rest of the supply chain (and often large sections of the competition) kicking and screaming along. I think the jury is still out on RFID as a universally applied, fully scaled non-test technology. And, before I get hate comments back — let’s be honest, we don’t have a workable (fully scaled) model to point to one way or the other. But I do know that Wal-Mart has been well served by thinking of technology in the same way Napoleon thought of bayonets. He once said, “You can do anything you want with a bayonet, except sit on it.”
As my fellow panelist Dan Gilmore argues, Global Data Synchronization payback is probably more long term. I posit that perhaps the ultimate benefits are yet to be discovered. In a way RFID/GDSN are a little like Ronald Reagan’s Star Wars…a BHAG (Big Hairy Audacious Goal). Had President Reagan not drawn a line in the sand to create this BHAG, many of the technologies which either directly and indirectly benefit our country’s military and populace would not exist today.
When the dust settles, Wal-Mart may ultimately be recognized as being right to be among those who drew a line in the sand and proclaim the BHAG a success. However as Dan Gilmore states, it may take a decade or more before the real applied benefits are realized.
GSDN fits Wal-Mart’s business model: it drives costs down. Wal-Mart wants to squeeze every bit of waste out of its supply chain. When you sell low price merchandise, every penny counts. Every error costs money. Every delay costs money. Every extra motion costs money.
Ryan beat me to the punch this morning, and I think he hit the nail on the head.
Whether the GDSN technology is “mature” or not is irrelevant. The point is that once Wal-Mart requires it, it will get “mature” — fast! Wal-Mart has historically used this technique to persuade vendors and third parties to invest in the capabilities necessary to facilitate improved Wal-Mart efficiency.
Since the Napoleon quote is taken already, I’ll go with Mel Brooks as Louis XVI in “The History of the World – Part 1 — “It’s good to be king….”
Individual tests have certainly demonstrated success in specific areas. However, a chicken and egg situation remains to be solved before determining maturity or success.
Until Wal-Mart has enough distribution centers and individual stores equipped to use RFID technology, it is not cost effective for suppliers to make a major switch in their processes.
Who makes the first move? Does Wal-Mart make a major effort to get RFID technology into every distribution center worldwide or pick a region and get RFID technology into every distribution center and every store in a specific region?
Do manufacturers continue to test different technologies and versions or ways of implementing RFID technology while waiting for enough retailers or enough systems of one retailer to make a shift for it to be cost effective? Do manufacturers choose a technology and make a commitment to convert everything to one RFID technology and then work with a retailer or many retailers to find ways to use the technology and recoup costs? Do manufacturers do tests one a few specific products, a few specific ways of implementation, or in a few locations?
Is the use of RFID technology in a mature state? I think not.
The RFID industry could enjoy a 30-fold growth rate over the next half decade if certain issues are settled. The first is cost: widespread adoption will not occur until the current cost of about 20 cents per tag comes down to around 5 cents. Privacy concerns are another potential drag on market penetration (where there is consumer interface), but are unlikely to slow deployment in inventory logistics and shipping.
I suspect that 2007 will be a watershed year. Wal-Mart and its subsidiaries will be reviewing the flow of goods to all stores in 2007. Which means they are going to force the issue.
However, Wal-Mart also has a good attitude about this by noting that when the product doesn’t get in front of the consumer everyone loses money. There have been continual refinements to its Retail Link system and there is no doubt it is of the most effective collaborative tools in the industry. 40,000 companies worldwide use it. This is not something in its infancy but neither is it a mature technology.
Through Retail Link, Wal-Mart will tell vendors anything they want to know about product movement. The caveat is that vendors must adhere to Wal-Mart’s EDI standards.
Keep an eye on what Tesco does in the U.S. with inventory control and multiple replenishment of their stores on a daily basis. We may be seeing the beginnings of a new standard.
I believe all Suppliers should be looking into Data Synchronization. Why? Here are the benefits.
-Corporate Management
Simplify corporate reporting
Expand geographic retailer base
Eliminate IT system redundancy
Create an opportunity for shared services
Maximize retail exposure/product posting
Reduce time spent on complaints/disputes
-Category/Promotion Management
Improve visibility/stock level planning
Simplify and enhance category reporting
Reduce product introduction lead time
Reduce product promotion lead time
-Administrative Data Handling
Eliminate need for cross-reference tables
Reduce invoice disputes
Streamline the accounts receivable process
Encounter fewer sales order defects
-Logistics
Simplify order tracking
Increase percentage of accurate orders
Reduce return shipments
Encounter fewer emergency orders
Improve picking accuracy
Optimize short-term planning
Maximize truckloads
The major question is why not? We all should consider this as a mature solution rather then just an initiative taken by Wal-Mart.
Keep in mind this is a global action plan that compromises various data pools throughout the world with a central synchronized global registry.
I strongly believe if major retailers take action towards implementing GDSN not only forcing their suppliers but benefiting them with reduction in invoice disputes and help them improve their stock planning. The list goes on, which will benefit the whole supply chain.
First and foremost, for those who have made comments re: RFID, RFID and Data Synchronization are not the same. RFID is yet another Data Collection Technology that accesses “back-end” data. That having been said, has anyone seen the Item Attribute Starter Kit published by GS1-US (formerly known as the UCC)? Close to two hundred product attributes, and counting. Most of the smaller CPG firms can barely maintain fifty attributes, let alone three times that amount. Given that “GDSN” relies on ALL of attributes being completed, and–of course–clean data, I’m not sure how Wal-Mart intends on “enforcing” this. While it’s a laudable goal, as one of your Brain Trust noted, I’m not sure it’s an achievable goal. Or perhaps, just as “Slap and Ship” became the work-around for RFID Compliance, something else will take the place as a work-around to Data Synchronization for Wal-Mart. However, from what I’ve seen, as a provider of U.P.C. Data (including the GS1 Elements), I’m not sure that–aside from a select few–anyone is “there” yet.