Distributors and their suppliers want to improve efficiencies, save time and money, and reduce errors. One way to do this is to improve and standardize the way they use and send data. This article is the first of a series of MDM articles on current trends in doing business electronically.
By Lindsay Konzak
About five years ago, PTDA member Baldwin Supply Co., Minneapolis, MN-based distributor of mechanical power transmission and electrical control products, adopted the association’s recommended format for receiving product data changes from its suppliers.
“It used to take us a month to update a price increase with some of our bigger manufacturers. Now we can do it in an hour or so,” says Baldwin Supply President Ron Herem, the Power Transmission Distributors Association board liaison to the Industry Relations Committee, which in collaboration with other associations developed the Product and Price Information Format.
“(PPIF) drastically reduced the time it took to do a pricing update. We used to have 2 and a half people – and that was pretty much all they did, and it was done manually.”
Baldwin’s experience is just one example of the impact of one of many data standardization initiatives taking place right now in distribution.
The challenge that distributors and manufacturers across diverse sectors are trying to address is the data piece of the EDI pie: How can they improve and standardize the way they communicate data from one business system to another? Each organization taking on the challenge hopes their solutions result in time and cost savings, and decreased error rates.
The Bottom Line
Improving the transmission and management of data between supplier and distributor can have big returns for both parties, says Bill Millinczek, IT manager, IT eBusiness Gateway & Integration Services at 3M, St. Paul, MN.
Millinczek served on the Industrial Supply Association’s eBusiness committee for five years, which developed EDI transmission sets for transactions such as purchase orders, acknowledgements, and item master.
“Everything is directed to reduce the cost of doing business,” Millinczek says. “We’ve got to reduce costs, and these are some of the best tools we have out there to do that. Processing orders manually is a non-value-add. There’s no benefit to it.”
The PTDA Industry Relations committee researched the savings from implementing the PPIF: “If you have to update prices on 50,000 items, or 250 hours, each time you make an update it will cost you $5,000. That can happen two to three times a year (with each manufacturer),” says committee chairman Jeff Lunn of Kinecor, an industrial distributor based in Lachine, QC, Canada.
“The savings in uploading in 5 minutes versus 250 hours is huge.”
In another sector, 55 foodservice manufacturers, distributors and operators recently announced they would be undertaking the Foodservice GS1 US Standards Initiative, aimed at adopting a timeline for implementation of GS1 Global Standards for company and item identification, as well as product description.
The goal is to not only to drive inefficiencies out of the foodservice supply chain, but also to improve food safety and traceability with more accurate company and product information.
Connecting these improvements more closely with the bottom line is what needs to happen to increase adoption of these initiatives in the distribution channel, says Denise Keating, president of DATAgility, which works with companies and their channel partners to improve the quality of their data.
“I think that when CEOs or CFOs are looking at financial results they don’t always make the connection that returns, errors and pricing discrepancies are directly related to the quality of the data,” Keating says.
Hurdles to Adoption
Despite the intended benefits, adoption remains a big challenge for standards-setters. And success depends in large part on the adoption rate. The more companies that adopt, the more valuable these initiatives are to all companies.
Lunn said adoption is in large part dependent on marketing: “It’s about getting that message out, that there’s potential savings for a distributor or manufacturer, and really being able to document that value,” he says.
But he says he understands why some companies have moved forward and others have not. “Companies have a lot of priorities,” he says. “A decision to use a tool like this has to be a priority. There is work to setting this up. It’s a project.”
Another challenge is that while associations lead the charge they can’t necessarily implement standards. “All they can do is promote them,” 3M’s Millinczek says. “They can establish guidelines and say ‘If we are going to do business together, these are the guidelines in which we’ll fall.’”
ISA recognized that it would be a challenge to get everyone on-board, especially for some of the smaller companies that might feel the cost of setting their systems up for the recommended formats was prohibitive. “There is cost involved, but that cost can be recovered,” Millinczek says. “There are benefits and savings.”
IDEA, co-founded by the National Electrical Manufacturers Association (NEMA) and the National Association of Electrical Distributors (NAED) to support standards-setting, data synchronization and eCommerce initiatives in the electrical supply chain, found that allowing more than one data format for its business-to-business communications and Industry Data Warehouse (IDW) standards was another way of getting past some of the resistance for adoption, according to Phil Barrios, electrical manufacturer Hubbell’s senior director for corporate marketing & eBusiness, IDEA board member and chairman of the IDEA Industry Standards Committee.
Although most of the original B2B standards were EDI-based, IDEA developed alternate XML and preset Flat File (delimited text file) standards to be employed for certain IDW and B2B communications.
These options empower non-EDI proficient companies to utilize industry-developed standards, expanding the pool of potential eCommerce-capable trading partners. “We were trying to provide as much flexibility as possible, yet remain within a set of globally harmonized and industry-developed standards,” Barrios says. “This helps address some of the headwinds of adoption within the industry.”
Trade Service Company, a nearly 80-year-old data firm that serves industrial, electrical, plumbing/HVAC, office supplies and automotive after parts distribution companies and their customers, inputs data from manufacturers and delivers it to distributors in the format they need.
“In order for distributors to make viable use of the data, it has to come in a way his business system accepts,” says John Henry, director of business development and 35-year veteran of the firm.
Trade Service sees both sides of the coin. Illustrating some of the delay in some sectors to adopting these services, Henry says that some of Trade Service’s customers still prefer printed price directories, or prefer the data delivered on CD. Those distributors are usually smaller and family-owned and have not yet updated their computers to accommodate data delivered directly to their business systems.
Quality of Data
Preparing data to maximize the benefits of standardized formats and transmission channels can be another hurdle to adoption. To get over this, Trade Service says it does a lot of the “heavy lifting” helping suppliers and distributors clean and prepare the data for usage in its system.
That is a challenge, Henry says, because data in a manufacturer’s system does not always match the data that a distributor has on the same product: “The goal is to establish a reliable content platform upon which all industry segments may effectively communicate and conduct business,” Henry says. “One proven way to achieve data synchronization between trading partners is to apply a precise blend of specialized data handling technology and close visual examination by industry-trained content experts.”
DATAgility’s Keating says one of the first steps to better and more efficient data management is clarifying how the industry defines “quality data.” The problem? Distributors tell manufacturers they need “quality data”; manufacturers think they are already providing “quality data.” There’s often a disconnect.
“When you ask them to define what quality means to them, they all have different ideas,” Keating says. “Here is our definition: ‘Data quality is about being timely, complete, accurate, standardized, synchronized, consistent and easy-to-use.’ If you’re failing on any of those aspects, you’re not fulfilling what distributors need in the marketplace.”
She says many common data problems can keep distributors from gaining the greatest ROI from selling online, or utilizing any basic eBusiness transactions. Some of the more common areas where companies will find mistakes or deficiencies with their data, according to Keating:
Synchronization: For example, “If you’re a manufacturer and have 100 parts, and a distributor who sells those 100 parts, it’s not a good assumption that the part information is the same in both systems.” Synchronization problems often occur as a result of mergers and acquisitions. It can also be attributed to the lack of formal data governance and the way much of the data got into systems in the first place: manually. This can increase the likelihood of errors.
Lifecycle Management: One of the most complex issues facing manufacturers and distributors is the management and sharing of a product’s lifecycle from birth to obsolescence.
Taxonomy: The application of an industry taxonomy is one that many struggle to adopt. Keating says a taxonomy provides a structure to normalize product categories across companies. When a taxonomy is linked to product-specific attributes it aids in selecting the right products.
Descriptions: The primary description that feeds distributor business systems is often 40 characters, but there is also a need for 20-, 30- and 80-character descriptions, as well as an “extended description,” depending on the use of that data, Keating says. Suppliers often believe by creating a single description they are fulfilling their distributors’ need for quality descriptions. The reality is that product descriptions provided for display on a Web site, for example, are very often different than those required in a distributor’s internal systems.”
Big Hammer Data Vice President of Marketing John Sullivan provided an example of the importance of consistent data in serving a distributor’s or retailer’s marketing needs: Suppliers use alternative words for colors – such as “midnight” or “ebony” instead of “black.” But if someone is searching on a Web site for a product that is “black,” and the product is labeled as “midnight,” that person will not find that manufacturer’s product among the products that appear in search results.
Making Data a Priority
It’s no secret that many distribution sectors are a few years behind retail channels when it comes to the adoption of technology and standardized data. So what’s the impetus to change?
“You can’t approach it from a data perspective,” Keating says. “Do you want to build brand loyalty? Increase market share? Accelerate revenue? Decrease the time it takes to introduce new products in the marketplace? When you present it this way, they’re able to get excited about data.” In other words, the challenge is getting companies to view better data management as a business function, and not just an IT function, Keating says.
John Teipen, director of eBusiness for electrical, networking and security product distributor Graybar, says it’s important to integrate doing business electronically into a company’s overall strategy.
“That’s an important differentiator for Graybar,” says Teipen. “I report to the Senior Vice Presidents for Sales and Marketing. We look at eBusiness as a service to our customers and suppliers. It’s a tool – it’s not just about technology.”
Working together as a channel to push the industry forward on improving data management is key to success, says Teipen, who will start a stint on the board of directors of IDEA in May. “We can do better as a group than we can individually,” he says.
Herem of Baldwin Supply says that the process is ongoing, and despite its challenges, is necessary: “The way we do business is changing, and the exchange of information is getting faster and faster. We need to keep pace with that and not fall behind.”