Synchronization: A Cure for Bad Data
Inaccurate, incomplete, and inconsistent data is derailing supply chain improvement efforts.
By Gurram Gopal and Eric McMillan -- Supply Chain Management Review, 5/1/2005
*Nearly 30 percent of the item data in catalogs used by retailers and manufacturers is incorrect. Correcting those errors costs between $60 and $80 each.
*Companies spend an average of 25 minutes per SKU per year manually cleansing out-of-sync item information.
*Nearly 60 percent of all invoices generated have errors; each invoice error costs $40 to $400 to reconcile.
*Forty-three percent of all invoices result in some form of deduction.
*New-product rollouts take an average of four weeks—in large part because of the inefficient and error-prone approaches for exchanging and updating the new item’s information in the buyer and seller systems. Inaccurate data drives exceptions to the normal processes. These exceptions, in turn, require manual intervention to investigate and reconcile them—activities that can cost a company plenty in terms of lost time and lower productivity. Even worse, if the information or the process is never cleaned, the problem will continue to fester, costing the company even more year after year. There are many examples of business processes that are hampered by the lack of consistent, good data between a company and its customers. One commonly experienced problem revolves around “short pays”—invoices that are underpaid because of information discrepancies. Customer service typically expends a huge amount of time and energy reconciling these underpaid invoices. The errors that led to the information discrepancies typically can be traced to the following:
*Buyers are ordering manually from catalogs that are riddled with errors. These errors can include typographical mistakes, incorrect part numbers, inaccurate descriptions, wrong Universal Product Codes (UPCs), and so on.
*The order management department receives the order via fax, and they cross-reference the requested parts or products using catalogs that contain errors. Or they incorrectly interpret or simply guess at what the customer is asking for.
*The company’s sales people and the buyers are working off different sources of information regarding the current price for the item(s) in question.
*For items newly introduced to a retail customer in particular, there’s typically a lot of up front work, such as manually collecting data for spreadsheets, communicating that material to the customer for their input, and then reviewing and editing the material after it’s received from the customer. In addition to taking weeks to complete, this process invites data errors because of all the human touch points. For the full potential of collaboration to be realized, product or service data must be accurate across all participants in the supply chain as well as be consistent internally. Technology certainly can help here. But short pays and invoice discrepancies still plague even those companies that have invested in electronic data interchange (EDI) systems or other interfaces to allow customers to communicate digitally without human intervention. The reason: The data between the company and its customers are not synchronized; EDI and the newer technologies on the market are merely enabling the bad data to move faster to more people. How much is this bad data costing corporations? According to Mike Haas, CIO for Johnson & Johnson, problems with item synchronization cost manufacturers .5 percent of sales annually.2 That means a billion-dollar corporation is incurring bad-data costs of roughly $5 million per year. Even assuming a more conservative percentage, the cost of bad data represents a significant drain on a company’s financial performance. Continued...
View All Blogs
