In Search of E-Leadership

Iam becoming increasingly concerned that the food industry is missing the opportunities afforded by e-commerce. There is no industry leadership, no industry effort to guide the uncommitted, precious little sharing of experience to guide the followers, and no regular forum where the involved and the curious can exchange ideas.

The industry is currently divided into three or four factions. There are those who have already joined an exchange (WWRE, GNX, Transora) and those sitting on the sidelines waiting and watching. Each faction is focused on its own priorities. As a result, I believe we are losing momentum and the impact of the bottom-line benefits that are already readily available. Further, I believe we are defaulting on our responsibilities to our companies and the industry by not taking an activist role in deploying today's solutions that will influence and shape tomorrow's standards and structure for the way our companies will conduct e-business.

Are you aware that several of the top 20 chains are already aggressively involved in the synchronization of data that enables exciting applications like collaborative planning, forecasting, and replenishment (CPFR) and scan-based trading? There is very little in the trade press about these activities, so unless your company is part of a share group you may not be aware. The dearth of information is because some of these companies consider this effort the first step in developing a competitive edge in their market area. I have seen reports of the chain-wide rollout of a complex process like SBT in only 12 weeks from the first dialogue to full implementation. While this is an incredibly fast time frame, it only demonstrates the results that can be achieved when there is a commitment from both retailer and vendor to move forward.

Many of you may be thinking you need to wait for global standards to be adopted and published. Let's test your knowledge of what's really happening in the area of global e-business standards. Do any of you know about the Global Commerce Initiative (GCI)? This international committee is busy developing standards for e-commerce worldwide. Its recommendations are submitted to the UCC and EAN for formal adoption, implementation, and enforcement. This is consistent with the way all our standards have been developed. A committee develops and recommends a process or standard. The UCC coordinates its activity and then publishes and maintains the document that supports that effort for the U.S., and the EAN organization follows a similar process for Europe and elsewhere. Both UCC and EAN support the GCI initiative.

GCI has some 40 members, representing both manufacturers and retailers. It is chaired by the chairmen of Marks and Spencer and the Personal Products Group of Johnson & Johnson. Ahold is the only true food retailer with any operations in the U.S. that is participating. Eight trade associations are involved in more of an oversight role. The major exchanges are voting participants in this standards-definition process and are viewed as representing their constituents. In addition, some important software companies participate in an advisory role, but cannot vote on issues. Those of you whose companies have decided to invest in an exchange may feel that the full-time management of your exchange is representing your interests. However, I find it sad that we show so little interest in this activity that we don't have more voting members.

I am not urging all my readers to try to join the GCI committee process. Rather, I am suggesting that we take an industry focus to this effort. On electronic payment system issues, such a process exists with a retailer member of FMI's EPS Committee attending every important national EPS meeting to listen and represent the food retailer's point of view. They meet regularly as a committee to share progress on both banking industry issues and their own FMI projects, which are designed to provide leadership and information to the industry. Aren't these e-business standards important enough that we should at least have members of one or more trade associations' standing committees attending these meeting?

Version 1.0

So far, GCI has only just finished the first series of standards documents. Version 1.0 of the global voluntary standards for the exchange of electronic business documents using Extensible Markup Language (XML) within the EAN, UCC System. The EAN, UCC System, created by the Uniform Code Council with EAN International, includes the specifications, standards, and guidelines for e-commerce. This document includes the syntax and technology for the following information: core party, core item, FMCG item extension, core order, request for payment, allowance-charge extension, terms extension, simple dispatch advice, party banking information, party pallet system, simple invoice extension, and relationship-dependent data. In essence, it provides the basic standards for conducting business on the Internet.

This is only version 1.0 and as with all standards they will evolve and change over time. The crucial issue for you and your company is to make sure any companies you partner with or whose services you use are absolutely committed to supporting the GCI standards now and as they evolve. This brings us to the crucial discussion of how to ensure that actions we take today are or will be GCI-compliant and able to be leveraged in the future. In terms of data synchronization, which is widely accepted as foundational to e-commerce, the answer may be found by understanding the concept and functionality associated with the components of the GCI architecture for global data synchronization. Simply put, these include: a logical registry, data pools, and exchanges.

Conceptually, a logical registry is an entity (or series of entities operating under a common set of standards) where basic information about an item is checked for compliance with the specific definition of the data that is required and then stored and maintained. Information such as item description, Global Trading Identification Number (GTIN, which is to replace the UPC as the item identification by 2005), GTIN owner, category, pack, and size are examples of data found in the logical registry. Multiple physical registries that are either emerging, including UCCnet, or planned, such as EAN International, will inter-operate to form a single logical registry It is fair to think of the logical registry as a global directory of base-item information that can be used to find out where more robust item information, like that required to execute commerce, can be found. This more robust information, which is trading-partner-specific, is stored and maintained by data pools.

Pools of Data

A great number of data pools already exist, each offering some similar as well as significantly different capabilities. An individual company could create and maintain its own data pool capability or outsource it to a third-party solution provider or have it managed by an exchange. A data pool, while often containing all or part of the information in a registry, also has some or all of the additional data required for the many e-business transactions. Data pools are where the relationship-dependent data is held, for example. A data pool could provide services that link data from suppliers to retailers or distributors. An example would be viaLink Co.'s syncLink synchronization service.

In theory, exchanges are interconnected to the logical registry and can serve as data pools or draw data from specified service providers that operate as data pools. Consequently, the exchanges will be drawing data from multiple sources to affect their business activities. Some individual members of an exchange will choose to serve as their own data pools, because they will not direct all of their e-commerce activities exclusively through the exchange.

Exchanges not Required

There is no question that the use of exchanges can facilitate your e-commerce activities, but it is in no way a requirement. There are certainly some activities like auctions, or perhaps CPFR, where the exchanges can eventually provide members with both the technology and expertise.

However, there are many major retailers already aggressively implementing e-commerce and establishing the foundation for major future initiatives. Retailers like Wal-Mart and Target are moving aggressively to implement the concepts of e-business while we wait and observe. The problem is that most food companies operate as followers rather than leaders. These companies want to know any investment they make is conservative and has a demonstrated return commensurate with the investment. This is not a valid excuse, as many deployed solutions have industry-quantified ROIs.

I don't think any retailer can afford to let competition get the edge, particularly in an area that will be a fundamental component of the way we do business for years to come. As an industry, we must make the first-step investment, confident that GCI-like efforts will ensure that standards will evolve from our actions. What's your opinion?

Technology editor Richard Shulman is president of Dix Hills, N.Y.-based Industry Systems Development Corp. He can be reached at ISD@worldnet.att.net.