Global Data Synchronization
Global Data Synchronization (GDS) was supposed to save the consumer goods (CG) industry billions of dollars. Do you remember the hype, all the research and the very high-profile retailer mandates? Well here we are, three years later, and while GDS adoption rates are still much lower than anticipated, those companies that have embarked on all-encompassing data synchronization initiatives have realized substantial benefits. While a myriad of reasons existed for the slow adoption of GDS, three stood out:
1. Difficulty building and measuring business cases
2. A lack of clear data standards
3. Non-GDS business priorities take precedence
All three have been or are currently being addressed. The business case is emerging through pilots that precisely capture, measure and publicize results; clear data standards now exist and are still being rolled out; and companies are realizing that clean, synchronized data is necessary for many new business processes to be successful, including collaborative initiatives and new technologies, like RFID.
New Research
A new report on GDS was recently released that validates original benefit projections from 2003, and identifies areas where manufacturers and retailers could capture even greater benefits. The study, sponsored by the Food Marketing Institute (FMI), the Grocery Manufacturers Association (GMA), Wegmans Food Markets and 1SYNC, and conducted by Accenture, is the most recent research on GDS to detail potential business value as industry leaders look to revitalize synchronization efforts.
The investigation also included participation by seven Wegman's suppliers: The Coca-Cola Company, General Mills, The Hershey Company, The J.M. Smucker Company, Nestle, PepsiCo Inc. and Procter & Gamble. Most of these suppliers have been involved in GDS since the beginning and are actively encouraging other companies to accelerate their own GDS implementations.
These GDS early adopters identified many best practices, particularly around data quality, where accuracy, timeliness, completeness and consistency has to be addressed from the outset. They were also able to recognize that GDS improved business processes across many functions and operations, and that it was "not just another IT project." Consequently, they broadened efforts from item data synchronization to business process improvement by:
Focusing on the highest priority trading partner relationships to ensure key processes and transactions reflect GDS best practices
Educating and motivating employees and partners to work more collaboratively
Collaborating on the introduction of new items through automated workflow and processes
Aligning master data projects with business processes across the enterprise
Performing data quality audits consistently, underscoring the commitment to treating accurate data as a critical asset
Quantitative Benefits
The most exciting result of this study, however, is the quantifiable value the participants realized. Figure 1 depicts how the benefits were categorized, either as reducing costs and thereby improving margins, or as increasing revenue and thereby growing the business. Cost reduction benefits were further divided into impacting the value chain or administration, and revenue increasing benefits were related either to new product introduction, customer service or sales.
For manufacturers, the most significant benefits were associated with new product introduction and productivity gains. Wegmans used GDS in conjunction with its WRetail program to improve speed to shelf by seven days -- a 23 percent improvement. That improvement accelerated the sales of thousands of new items per year, and one manufacturer reduced its speed to shelf from four to eight weeks to two weeks -- which represents a 67 percent improvement.
The productivity gains were in order administration and within distribution networks. Improved item data information has streamlined administrative activities such that one manufacturer decreased from three to one day the time needed to have visibility to new items through its continuous replenishment program (CRP).
At another company, shaving five minutes off the order inspection process yields an annual savings of 59,000 hours, or 2 percent of total customer service time for the year. Another manufacturer was able to avoid the cost of hiring additional full time employees to process new items -- saving 33 percent in administrative costs. On the distribution network side, one manufacturer was able to condense a five to six day, spreadsheet-based process used to align product information with its distributors into 48 hours -- a 64 percent improvement -- using automation and GDS.
Transportation savings were another source of benefit. Manufacturers will capture 2 percent to 8 percent in annual inbound and outbound transportation cost savings because of improved accuracy of weights and measures, which has directly increased the speed and efficiency at which participating companies can move products. Instead of transactions slowing down for necessary data corrections at various points, products flowed faster and transportation costs dropped. In fact, one manufacturer corrected a weight error on one item and saved $2.2 million in annual transportation costs.
The main message from this study is both simple and compelling: Accurate data synchronization directly, and in some cases, dramatically improves a company's overall financial and operational performance, increasing profitability by reducing costs and increasing revenue.
As benefits of GDS become better understood and industry adoption gains momentum, the benefits are anticipated to multiply.