Consider what life and business would be like were there no global standards underlying many common activities. Imagine having to first agree on common e-mail standards before you could send a message to a colleague or trading partner, or still needing telephone operators to switch between national networks.
In much the same way, the adoption and implementation of global standards, specifically GlobalSynchronization (GDS), can help the retail and consumer products industries achieve a more seamless global supply chain. Everyone recognizes, for example, the problem of invoice mismatches and the administrative overhead of catalog maintenance. GDS is a process designed to ensure that basic data such as item and party information stored by one company match the corresponding data in the systems of their business partners.
Global Commerce Initiative (GCI) was established in 1999. The organization of consumer products and retail companies determined that, to maximize efficiencies, there was an immediate need for a common system for the industry. During extensive work conducted by Cap Gemini Ernst & Young and the GCI, we identified processes in logistics, order management, catalog maintenance and category management as potential beneficiaries of global standards and GDS.
Global standard synchronization is equivalent to implementing a universal language. The basic building blocks of this consistent language, the Global Trade Item Number (GTIN) and Global Location Number (GLN), have been around for a number of years, whereas GDS is now being set in place. The GTIN is a unique number assigned to all products and services, so that everyone can easily and accurately identify these products and services. The GLN, meanwhile, provides businesses with a globally accepted method of identifying legal entities and locations, such as plants, offices, stores and any other shipping or receiving point.
Using these tools in GDS, manufacturers and retailers could input data about a product via a global data registry, and another member of the supply chain can access that information with the simple scan of a 14-digit bar code. It would be available in a form compatible with that party's method of electronically storing data, in that party's language and system of measurement.
To understand how this model of synchronization works and its advantages, take the example of fictional trading partners Retailer Sellsmart and Manufacturer Makegood. Retailer Sellsmart sources approximately 10 percent of its order volume with Manufacturer Makegood. In the case of new product introductions, it currently takes Retailer Sellsmart 90 minutes to collect, key in and validate all relevant item information for each new product. With a global registry in place, uploading and validating information, already provided by Manufacturer Makegood, will take no more than 10 minutes.
As this shows, synchronization will reduce inefficiencies in the supply chain, benefiting catalog maintenance, category and promotions and order management, order fulfillment and corporate management. For the manufacturer, the order accuracy streamlines the fulfillment process and reduces the manufacturer's costs for defective orders. The system also enables the manufacturer to work more efficiently with logistics service providers. For the retailer, improving the accuracy of data via GDS also improves the process of receiving shipments.
Currently, GDS is still under. The registry's categories of information, as well as the electronic code that both creates a universal language and translates data into it, needs to be developed, as does the global registry itself. When completed, businesses that choose to participate in synchronization would require in-house technology upgrades and data cleansing, which permit a company to communicate with the global registry.
Despite such startup expenses, the benefits would be great: Communication would be instantaneous, seamless and accurate. Compare that to what exists today — slow, expensive communication of information that's often partial, inaccurate and misinterpreted. Different languages create a barrier to communication while adding costs, delays caused by the need for corrections, plus information gaps and misunderstandings.
We estimate that by cutting vast amounts of waste, GDS will effect a 1 percent to 3 percent savings in supply chain costs. There is the potential to improve profit margins by 10 percent to 15 percent.
The long-term benefits of GDS are even greater because global standards can provide a platform for innovative collaboration and, consequently, competitive differentiation. The standards will allow retailers to shift more time and energy toward understanding and serving the needs of customers. In addition, GDS provides a solid foundation for scaleable deployment of collaborative business processes such as Collaborative Planning, Forecasting and Replenishment (CPFR).
Consumers will also benefit from improved product availability and assortment. In addition, the traceability of products will improve through better product identification and more accurate product information. This, in turn, will provide support for initiatives in fields such as food safety. There is also the potential improvement to customer service: Store employees who are not busy fixing errors will have more time to assist shoppers. And these standards will be of great value in developing new concepts such as home shopping and self-scanning.
Without global standards, increasing global trade will add complexity and cost. More retailers are sourcing on a global level and are looking to expand their sourcing opportunities. At the same time, suppliers are seeking a wider base of customers. These processes need the support of a consistent language that makes both regional and international trade easier and less prone to error.
The time to act is now, as it may be impossible to realize the full advantages of GDS once local or regional standards become entrenched. It's difficult to retrofit a global standard, as differences in many technologies that proceeded without global standards demonstrate.
The industry shouldn't let this opportunity pass. Similar lost opportunities abound: Consider the lack of a standardized global power plug or a consistent law about driving on the left or right side of the road. Think how much could be saved with a uniform standard in place. It's time for the industry to make global standards happen.
Who Michael D. Green
Vice president and retail leader, North America, of consulting firm Cap Gemini Ernst & Young.