UCCnet standard could squeeze small retail suppliers

Small US manufacturers and suppliers could feel the pressure as larger members of their industry adopt the UCCnet standard sought by several major retailers and grocers, including Wal-Mart Stores Inc., a pair of Meta Group Inc. analysts said this week.

UCCnet is a retail item registry and data synchronization hub that helps set e-commerce and collaboration standards through its parent corporation, Uniform Code Council Inc.

Wal-Mart, along with Ahold USA Inc. and grocers Shaw's Supermarkets and Star Market, both subsidiaries of London-based J. Sainsbury PLC, have told their suppliers that they expect them to adopt the UCCnet standards by the end of the year.

Additionally, more than 100 major grocer and retail suppliers, along with Wal-Mart, Ahold and Shaw's, have signed an open letter saying that it's time for the universal adoption of the UCCnet.

Toronto-based Meta analyst Joanne Friedman said that means companies that serve large suppliers will need to adopt UCCnet too -- a move that could cause problems.

She referred to the effect as "digital dominos," saying the companies may have to rebuild databases to conform with the UCCnet standards so they can communicate with their partners.

"This is more of a crucial event for suppliers who have not even begun to electronically talk to their partners," said Gene Alverez, an analyst at Meta's Stamford, Conn., headquarters. "There are a lot of small and medium suppliers who still do paper, fax and phone."

Larger suppliers have already started to prepare for the UCCnet changes.

Manufacturers such as Procter & Gamble Co., Kraft Foods Inc., and Hershey Foods Corp. -- all of which co-signed the UCCnet letter -- have formed their own data clearinghouse, Chicago-based Transora Inc., to function as a counterpart to UCCnet. Currently, Transora collects catalog data with up to 230 different attributes per product from its participating manufacturers and then sends it to UCCNet, which catalogs that data for the retailers.

Milan Turk Jr., director of customer e-business at Procter & Gamble, views the coming change as a ratification of the idea that service providers can synchronize data between manufacturers and retailers. It comes as the culmination of extensive in-house enterprise resource planning (ERP), supply chain and integration work.

"Our work plan for the past couple of years has been building so that we can be standards-compliant," Turk said. Procter & Gamble began passing data through Transora to UCCnet in April; Turk expressed confidence the system would be ready for the full changeover later this year.

Electronic data interchange (EDI) has been the main system large manufacturers and retailers use to conduct business. But Turk said the industry needs something better if companies truly wish to reduce inventories and deliver products in a quicker and cost-effective manner.

"As much as 50 percent of our EDI transactions have errors in them, and there are multiple EDI standards," he said.

Transora combines nine different applications to form its catalog and has established a workflow of 35 separate steps to manage the data it shares with UCCnet, according to Transora global business development executive Johan Sauer.

"The way it works is [manufacturers] get the data to us and we get it to the world," Sauer said.

He acknowledged that the UCCnet changes would be dramatic, both in the amount of data manufacturers need to provide and the speed with which the changes will hit the industry. He likened the IT work involved to a full-blown ERP installation but said that it might be a good thing in the long run.

"What [UCCnet] did was kick us all in the butt and make us move," Sauer said. "I give them credit for that."

Turk noted that four- to five-week business processes in place now could be trimmed to hours or even minutes once the industry gets comfortable with the new standards.

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