Extraordinary benefits are made possible by identifying, capturing and sharing information among manufacturers, suppliers and customers. The irony is that as IT revolutionizes those business process connections, the penalties for bad or non-synchronized data are magnified, notes John L. Stelzer, director of industry development, Sterling Commerce Inc., Dublin, Ohio. (He is a founder of the education and consulting arm of the business integration solution provider.) Consider some findings of an A.T. Kearney study of the retail consumer products supply chain:
- About $40 billion or 3.5% of sales are lost each year due to supply chain information inefficiencies.
- Approximately 30% of item data in catalogs used by manufacturers and retailers for replenishment of stock is in error. And each of those errors costs $60 to $80 to address.
- It takes an average of four weeks to roll out a new product -- in large part due to the inefficient and error-prone approaches for the exchange and updating of new item information in buyer and seller systems.
- Companies invest an average of 25 minutes per stock keeping unit per year manually cleansing out-of-sync item information.
Wonder how severely you're affected? Stelzer suggests a quick way to assess the size of just the tip of the iceberg: "ask the heads of order processing and accounts payable what percentage of your orders and/or invoices kick out with just bad pricing or item number discrepancies. "Then multiply the number of physical orders or invoices processed a year. To get the bigger picture, expand the scope to include the litany of other information types used within your company and with business partners." Stelzer says, "while the penalties of not addressing data synchronization are relatively self-evident, the benefits from implementing global data synchronization are frequently underestimated. To begin with, they are not limited to the immediate, significant and intuitively obvious positives that come from reducing order and invoice content exceptions. Instead they go on to generate improvements in any part of the organization that is dependent on accurate item and trading partner information to perform business functions effectively." Stelzer says the benefits don't even stop there. "Many of today's companies are launching substantial process reengineering efforts to further drive redundancy, inefficiency and cost out of distribution channels. What they've found is that failure to first address data synchronization directly undermines the ROI from automation initiatives." His examples: vendor managed inventory, automated product receipt and check-in, evaluated receipt settlement, electronic funds transfer, scan-based trading and collaborative planning, forecast and replenishment programs.