Imperfect product data has plagued CPG companies for decades, but the issue has recently come to a head in the face of item synchronization initiatives, the acceptance of UCCnet/GS1 standards, the growing use of trading pools such as Transora and WWRE, and Electronic Product Code (EPC) and related radio frequency identification mandates. These efforts to streamline the supply chain have highlighted a fundamental problem: Companies cannot effectively share product information with their trading partners until they put their own house in order.
Exchanging item information with key trading partners in the proper format is an exercise in futility if the data itself is faulty. Yet by some estimates, more than 50 percent of the items in company systems contain errors. This is partly because product data typically remains scattered in multiple enterprise systems ranging from sales, service, financial, manufacturing, logistics and marketing databases to Word documents and Excel spreadsheets on individual desktops. One system may call a product scarlet; another, maroon. Product specs that changed a month ago in one database may not have changed elsewhere. And so on.
The missing link in this scenario is product information management (PIM)-that is, a strategy to ensure that everyone in an organization has an identical and accurate view of a given product at any given time.
PIM software makes this possible by aggregating all product information into a central repository, resolving discrepancies, and updating information to internal systems and external partners on a continuous basis through automated business processes and intelligent workflow. The result is a single version of product truth that can eliminate many of the data hiccups that turn customer relationships sour, not to mention adding the expense of retailer chargebacks, penalties and exception handling.
PIM, in fact, is a cornerstone of better supply chain execution. If item synchronization, EPC/RFID and trading pools form three legs of the proverbial stool, then PIM functions as the fourth. Without the precise product information supplied by PIM, the stool cannot stand. RFID tags that lack accurate data will be of little help in tracking products, for example. Wrong item information sent to Wal-Mart, Target or Home Depot will backfire.
With 151 core UCCnet attributes and potentially hundreds more for any given product, a single error anywhere in the item definition can reverberate throughout the supply chain. PIM systems are like data quality police. They maintain the standards required to support the quest for perfect item information that underlies all of today's supply chain initiatives.
At the same time, the reasons for investing in a PIM solution go far beyond the pressure to satisfy the mandates of the big-box retailers. PIM can drive critical business process improvements in the supply chain operation and elsewhere that can not only reduce administrative headaches but also yield top-line growth.
In a recent Yankee Group study titled The Cost of Waiting: Building the ROI Case to Implement Product Information Management Now, a survey of 350 IT and business executives at CPG companies that have implemented PIM systems reported operational improvements of 21 to 27 percent in 11 key categories. These ranged from fewer purchase order and invoice errors to fewer product returns, fewer inventory inaccuracies, fewer call center questions related to basic item information, and fewer product promotion discrepancies.
These kinds of efficiency gains offer significant cost-cutting and business-building opportunities. For suppliers, implementing PIM technology can help:
• Drive reductions in out-of-stocks, resulting in fewer lost sales related to inventory shortages and a less risk of consumer brand switching.
• Increase sales related to new product introductions by giving retailers greater and more accurate visibility of information.
• Reduce labor costs related to time spent reconciling invoices, processing incorrect shipments and returns, and relaying basic product information to customers.
• Lower direct expenses such as wasted dollars from invoice deductions, chargebacks and other penalties.
• Reduce inventory levels and yield associated savings through better execution of phasing in and out of promotional, season or rollover SKUs.
• Reduce logistics costs through better replenishment planning.
• Improve customer service and satisfaction by eliminating errors and speeding response to information requests.
Retailers can derive similar significant benefits, ranging from fewer lost sales caused by out-of-stocks to less time dealing with invoice disputes, rescanning and tagging items, and reconciling product promotion discrepancies.
These benefits can help increase profit margins and drive top-line growth for suppliers and retailers alike. PIM software therefore serves as a strategic investment for the entire enterprise, not just for collaborative supply chain efforts.
Bad Data, Bad Consequences
At the top level, though, PIM is a linchpin in improving supply chain collaboration. Anyone who has encountered the problem of conflicting, outdated or incomplete item information can understand why. The impact of these data deficiencies on the relationship between manufacturer and retailer can be severe.
If you're a logistics manager charged with ordering special Christmas packaging, for example, the wrong product dimensions will yield the wrong box, missed sales opportunities, and retailers without product to fill their shelves. If a data discrepancy leaves you with enough dolls to fill your holiday orders but the wrong accessories, you'll have to face customers with useless planograms and less interest in doing business with you the next time around. If you're shipping overseas and there's a conflict between the weight listed on your bill of lading and the actual weight of the container, the shipment may be rejected at the dock and leave your global trading partners in the lurch.
Each mistake that requires manual intervention or results in lost sales shaves points off already-thin profit margins. Some industry estimates put the cost of bad product data in the CPG and retail industries at $40bn to $50bn a year in invoice, purchase order and product delivery errors and related repercussions.
One company that has implemented PIM technology to aid both internal operations and external supply chain collaboration is frozen foods giant McCain Foods Ltd., a Canadian-based firm that produces one-third of the world's French fries and other packaged food products sold in 110 countries. Several years ago, McCain was faced with having to comply with ECCnet data standardization requirements in order to participate in online commerce with its Canadian grocery, foodservice and pharmacy customers.
With ECCnet as the catalyst, the company decided to adopt a commercial PIM solution to centralize its product information, beginning with its 11-facility Canadian operation. Product data was pulled together from multiple applications and departments, including up to 300 attributes for each product. The data was aggregated, cleansed, normalized and synchronized. The PIM repository then became the system of record moving forward.
All information is now fed into the PIM system automatically, updated through automated workflow, and output in the format required to populate an online catalog accessed by McCain's retail customers. This has significantly lowered labor costs associated with catalog production by automating processes that used to be manual.
Equally important, the solution has eliminated extra work in fulfilling information requests that used to require tracking down different data from the company's various databases. Now the complete data set is centrally maintained for fast and easy access.
How To PIM
While early PIM systems required costly in-house development, many of today's commercial PIM software packages offer equivalent or greater functionality that supports the intricacies of the CPG industry, including unique item and transaction definitions, attributes and product relationships. The best systems provide automated import and syndication products and processes while also supporting the different product information imperatives of each channel partner, with the ability to customize information for virtually any format or system ranging from UCCnet/GS1 to WWRE. Equally important, they provide crucial workflow and application integration capabilities that ensure the 24x7x365 availability of accurate, auditable and up-to-date item information.
Analysts are urging PIM adoption sooner rather than later. According to the Yankee Group mentioned earlier, "The time to act is now. No longer are just the leading innovative retailers taking charge. Suppliers recognize the impact of PIM and will use their PIM IT strategy to differentiate themselves as preferred partners that can showcase impressive supply chain success."
Indeed, PIM seems destined to become as essential to CPG organizations as market research, product design, or buying raw materials at the right price. Once again, necessity has proven to be the mother of invention.
Phil Friedman is executive vice president of sales and marketing for FullTilt Solutions (www.fulltilt.com). The Wayne, Pa.-based company is the developer of the Perfect Product Suite of PIM solutions. Friedman previously served as vice president of Oracle's consumer products industry business unit and senior technology officer for Philip Morris International.
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