May 10, 2005

Data is the key link in the supply chain

When manufacturers and distributors work together to move product through the supply chain, they’re moving more than product. They also exchange certain data elements such as UPC, name, description, pricing, commodity code, weight, dimensions, pack size and other information needed for the buy and sell-side companies to effectively communicate.

Channel partners communicate this information and make changes and updates in a variety of ways, including via manufacturer Web marketplaces, CD-ROMs, hard-copy catalogs, Industry Data Warehouses and third-party data content providers.

Errors inevitably occur throughout the data creation and delivery process. In the electrical industry, for example, purchase order error rates can be as high as 30 percent because of a lack of data integrity, system interface issues or human error.

When errors reside in key business data in the distributor’s business system, the incorrect information gets passed back to the manufacturer through orders that also contain incorrect or outdated information. As Figure 1 shows, bad data in turn delays order processing and causes shipment delays.

Unless corrected, bad data causes subsequent spillover impact on invoices and shipment notices, resulting in incorrect shipments, delays and costly deductions. In addition, when products are not in stock, distributors lose selling opportunities and may miss out on jobs and contracts.

Fixing the system

Effective data synchronization between manufacturers and distributors first involves understanding the distributor’s data requirements and system capabilities. Second, the manufacturer must provide the information necessary to meet those requirements based on a common protocol or standard. Without data standards, confusion and multiple format process requirements will reign, which drives up costs. Remember, the goal is have the supply information and business processes in sync so business information is exactly the same on both the sell and buy side of the equation. When we achieve that objective, the purchase-to-payment cycle looks like Figure 2.

Synchronizing product information between manufacturers and distributors is a key to eliminating costly inefficiencies caused by inconsistent, missing and outdated information. It is the prerequisite to the perfect order and to automating forecasting, replenishment and promotion management. It also results in less inventory and lower costs.

If this sounds so simple, why do industry verticals struggle with this issue? Many manufacturers want to do it their way and don’t follow industry guidelines and standards. Others don’t put enough attention and detail into their product data and often rely on content companies to normalize it for them. There are a myriad of other reasons we won’t list here.

Here’s the bottom line: if data synchronization between manufacturers and distributors was high on their respective priority lists, manufacturers and distributors could experience:

  • 75% reduction in deductions caused by invoice pricing and product delivery discrepancies
  • 30% improvement in the number of quality purchase orders
  • Up to 1,300 total hours saved in paper administration and data keying
  • 80% improvement in speed to wholesale for new items, price changes and promotions (the time required to communicate and execute changes can be reduced from up to 2 weeks to 2 days).

So, what is the best way to get your synchronized data to all trading partners? Based on experience, the most cost-effective way is through a centralized data repository like an Industry Data Warehouse because it is:

  • Standards based
  • Secure
  • Accessible via the Internet
  • Accessible 24×7
  • Manufacturersourced data
  • Enables manufacturers to control access to their data
  • Provides distributors one selfservice location to get all of their business information
  • Eliminates need to produce and format data CD-ROMs
  • Eliminates need for distributors to visit multiple manufacturer market places
  • Enables data synchronization between the sell and buy side.

Regardless of the delivery method between manufacturers and distributors, make sure information is formatted to be compatible with the distributor’s business system and the information is updated regularly. Examine all your delivery alternatives and select the one that is the most efficient for you and your trading partners. Your solution should give manufacturers data input/update, ownership and control and take cost out the equation.