Synchronization: A Cure for Bad Data

Inaccurate, incomplete, and inconsistent data is derailing supply chain improvement efforts and costing companies huge amounts in manual reconciliation activities. But there is an answer to the bad data syndrome: participation in the global data-synchronization initiative of UCCnet.

By Gurram Gopal and Eric McMillian -- Supply Chain Management Review, 5/1/2005

It's an all-too-common problem: Companies incurring large costs for "bad data" in various parts of their operations. One of the most common causes is data that is out-of-sync. That is, pieces of information related to the same product or service differ between supply chain partners or between systems within the same company. According to a report prepared for the grocery industry by consultants A.T. Kearney, bad data leads to a host of problems:¹

• Companies lose approximately $40 billion, or 3.5 percent of sales, each year because of supply chain information inefficiencies.
• 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.

One answer to the bad-data problem is global data synchronization, also known as GDS. Data synchronization means achieving consistent information values for items or products within and between organizations. Put another way, it means that everyone is working off the same data page. These so-called "target information values" typically include part numbers, units of measure, release dates, UPCs, hazardous-material codes, weights, descriptions, tariff codes, pricing, and so forth. Oftentimes, this information is organized and stored in item master files. Global data synchronization is executed in two steps, internal synchronization and external synchronization.

Internal Synchronization

Internal synchronization involves a company's assessing its own information management processes to ensure that the target information values for any given item are identical across the company. Often this synchronization needs to be done across many disparate systems. The goal of internal synchronization is to ensure that the information used is consistent throughout the organization.

It is not easy to develop internal processes to manage the activities that are necessary to ensure data consistency throughout the organization. Many companies have done this successfully by deploying a single enterprise resource planning (ERP) system across their organization. The ERP system can be a significant enabler of internal synchronization among an organization's various plants, divisions, and offices. Many companies with a single ERP system might have other systems that manage their customer-service or product-development activities. Thus, a company running SAP, for instance, might have to integrate this ERP system with their customer relationship management system, which might be from a different vendor. Middleware solutions make this task a lot easier than it used to be. Once a company achieves internal synchronization, the focus can shift to external synchronization.

External Synchronization

External synchronization refers to the process of linking two or more separate and independent companies so that they can readily share consistent and accurate product information. Today, many small and even mid-sized businesses do not have the means to synchronize data with customers other than through the old spreadsheet method of filling out a template for a customer. The manual keystrokes and multiple hand-offs inherent in this process are prone to errors that hinder data consistency and effectively prevent synchronization. This problem typically manifests itself in customer orders. The customer thinks that she is buying one item but, in fact, has ordered something completely different. This results in a return, which creates extra shipping, freight, receiving, quality inspection, and put-away in the warehouse.

How can a company synchronize its data with its customers and vendors in a way that ensures data integrity with all partners? Put another way, how can they achieve global data synchronization? One answer is to register with UCCnet.

UCCnet (www.uccnet.org) is a tool developed by UCC.EAN, a not-for-profit organization created to implement and maintain global standards for business information and communication. The objectives of UCCnet are twofold. First, to provide a global registry service that acts as a central repository of core item-related information and company information across all users. Called the GS1 Global Registry, this service is a single location where corporations can register standards-compliant data. The registry also identifies the owner of the information (by company name and, in some cases, by individual or title) and validates that the information is accurate. UCCnet's second objective is to act as a source for the ongoing synchronization efforts between buyers (known as "the subscriber" in the UCCnet terminology) and sellers (or "publishers"). UCCnet charges registered users an annual subscription fee, which is based on annual company sales.

The following case study illustrates how one small company effectively synchronized its data via the UCCnet GS1 Global Registry. It's a real company, but its name has been changed to "Sync'd Up Inc." for confidentiality reasons. Sync'd Up is a $90-million manufacturer of professional tools that are sold through major retailers like Home Depot. It initially signed up with UCCnet on the organization's Web site. Sync'd Up's registration fee came to $7,500 for the first year, based on annual sales falling in the $75 million to $100 million range.

The company began the process by entering its product data into the GS1 Global Registry. In the initial pass that product data included the company's internal part number, the UPC, its catalog part number, the units of measure, standard quantity (or size), list price, Harmonized Tariff Schedule (HTS) code , product-revision level, and the date that the product was approved for manufacturing. When the data were received into the database, UCCnet validated the data to its standards. Once validated, the item data are considered "registered." Next, Sync'd Up had to determine which trading partners would receive the data. The company decided to proceed in stages, initially sending the information to its primary customers, such as large retail customers like Home Depot. The data were sent via a service from UCCnet called Sync Utility. (Exhibit 1 gives an overview of the process.)

The retail customers received the data from Sync'd Up and validated them against the data residing in their internal systems. Once confirmed, the data were considered in sync. In some cases, this exercise revealed many data discrepancies between the trading partners. With one primary customer, for example, 98 percent of all the item elements in Sync'd Up's system had to be changed or corrected as a result of the synchronized effort. This project took a year from inception to the external synchronization. The five key steps for successful UCCnet implementation based on this experience are shown in the accompanying sidebar, Five Steps to a Successful UCCnet Implementation, below.

Sync'd Up is seeing significant cost reductions across many areas thanks to the data synchronization (see Exhibit 2). The following are examples of key improvements:

• The time needed to set up new items in the company's systems and communicate the information to customers has decreased. The process has gone from taking up to 30 days to being done in a single day using UCCnet.
• Short pays have been dramatically reduced, thereby greatly enhancing the productivity of customer-service and accounts-payable personnel. UCCnet also makes it easier to identify and reconcile invoice discrepancies.
• Sales order cycle times have improved thanks to the elimination of time formerly spent cross-referencing part numbers between trading partners. Items are immediately identified as being in sync between the trading partners. Importantly, no other action is needed to interpret what parts or services are being ordered.
• Customer satisfaction has improved with the elimination of pricing discrepancies between partners using UCCnet.
• Productivity in receiving has increased because advanced shipping notices and data are now in sync.

Going forward, Sync'd Up expects to realize the additional benefits from increased revenues through the UCCnet implementation. For example, UCCnet allows the company to promote new items in the marketplace by submitting (or publishing) them to its buyer subscriber-base. This feature decreases the time to market and time to revenue for new products. In addition, UCCnet functionality allows Sync'd Up to quickly quote on bids or request for proofs while ensuring that the customer has the correct part and price information, thereby reducing review time from months to days. This functionality helps potential buyers save on purchases while enabling the publisher of the data—the seller—to more accurately and competitively price its product.

From a competitive standpoint, having the UCCnet tool and having data synchronized with multiple partners gives Sync'd Up an advantage from several different angles. For example, the company can aggressively compete against companies not using UCCnet and its features. At the same time, participation in the UCCnet effectively raises a barrier to entry against nonparticipating companies that may have designs on Sync'd Up's existing business.

In addition to the cost benefits and competitive benefits described above, Sync'd Up realized other advantages through the UCCnet implementation. For one, the exercise forced the company to develop a uniform process for creating a single data repository for all item information, replacing a fragmented, departmentally driven process. The implementation has compelled Sync'd Up to incorporate standards and functionality into its processes to manage any possible exceptions—effectively making the company more disciplined from a data-management standpoint. The tighter discipline, in turn, has made it easier to integrate new tools into the process to help content management and catalog creation. Thanks to the UCCnet implementation experience, Sync'd Up has developed procedures for managing and communicating data-element changes.

Costs and ROI

Sync'd Up spent a total of $167,000 on hardware, software, consulting services, and registration costs on the UCCnet project in one year. Each year going forward, it expects to pay $7,500 to $10,000 a year in subscription fees to UCCnet. The labor savings from the virtual elimination of short pays alone (not counting any of the other benefits enumerated above) delivered an ROI of eleven times the investment over a two-year period.

The real-life experiences of Sync'd Up show what can be done to clean up bad data with a relatively modest investment. It's important to understand, though, that as with any other technology initiative, UCCnet implementations can run into problems. The most common difficulty centers on having an overly aggressive timeline for implementation. To avoid this pitfall, the project plan needs to set realistic parameters around cost and timing. A good way to do this is to look at the implementation experiences of similar projects. The reality is that even some of the largest and best managed companies end up pushing back their "go live" dates as internal process changes become more difficult than originally expected.

To assist companies in the implementation process, UCCnet has certified external solution providers that can help with a UCCnet implementation. It's critical that the company (or the solution provider, if external providers are used) is certified and stays current on what version of UCCnet partners are using. Failure to do so can cause problems with partner-connectivity and data-synchronization efforts.

UCCnet is the building block of long-term data synchronization. And the resulting "good" data forms the underpinning of most supply chain improvement initiatives. The power in the UCCnet approach is that it's an industrywide movement in which suppliers, manufacturers, and retail customers are all working toward the same end: synchronized data that enables trading partners to work more efficiently and more cost effectively. In a very real sense, it's an example of successful collaboration in the supply chain.

Companies need to more aggressively adopt global data synchronization before bad data puts them in a competitive hole that they can't climb out of. In today's data-driven world, "Sync or Sink!" is the new battle cry.