Jan 12, 2003
BOCA RATON, FL — January 12, 2003 — Six pioneering food retail and manufacturing companies have saved millions of dollars and significantly increased operating efficiencies by implementing data synchronization, according to case studies presented today to leading industry executives. The studies, prepared by consulting firm A.T. Kearney, were revealed to a joint board meeting of the Food Marketing Institute (FMI) and Grocery Manufacturers of America (GMA) during FMI’s 2003 Midwinter Executive Conference.

Companies participating in the case studies were Ahold USA, Kraft Foods, Procter & Gamble, Nestle Purina, Shaw’s Supermarkets and Wegmans Food Markets.

"Data synchronization is a foundational work process for efficient and effective e-commerce, and the proof of concept for this critical process has been validated with these case studies,” noted FMI President and CEO Tim Hammonds. “The financial benefits are substantial, but critical mass is a business imperative. The industry needs to close ranks and begin implementation now.”

“These very important case studies show why nearly 300 manufacturers and retailers have made a commitment to streamlining their supply chain operations with data synchronization,” said GMA President and CEO C. Manly Molpus. “It is time for other companies to sign on; otherwise, they will be left behind.”

Retailer Results

The retail company subjects reported a minimum benefit of $700,000 to $1 million in earnings before interest and taxes (EBIT) for every $1 billion in packaged goods sales. A.T. Kearney projects savings at this percentage to companies of all sizes. Functional areas that were examined include:

  • Category Management: Item introduction; item updates.
  • Buying: Purchase order generation.
  • Inbound logistics: Fleet utilization; extra shipments.
  • Warehouse operations: Scheduling; receiving; handling.
  • Outbound logistics: Fleet utilization; extra shipments.
  • Direct Store Delivery (DSD) Receiving: Receiving; handling.
  • Store Operations: Shelf tag audits; Item/coupon scanning.
  • Accounting: Invoice reconciliation.

Retail companies reported impressive top-line results, such as a 4 percent reduction in out-of-stocks, resulting in fewer lost sales and a decrease in customer defections; a reduction of approximately two weeks in the speed to market for new items; and a significant reduction in store personnel time — and customer irritation — in dealing with shelf tag and scanning errors.

Transaction benefits included a 5 percent to 10 percent reduction in merchandising time associated with item data issues, and a similar decrease in finance time and audit fees and the reconciliation of invoices.

Supply-chain benefits included a 1 percent reduction in warehouse and DSD-handling costs, a nearly 1 percent reduction in inventory, and more than 1 percent reduction in DSD-receiving shrink.

Manufacturer Results

Manufacturers participating in the study reported a minimum benefit of $800,000 to $1.2 million EBIT for every $1 billion in sales. Functional areas that were examined include:

  • Product Management: Item classification/GTIN assignment.
  • Sales/Account Management: Item introduction; item updates.
  • Customer Service/Supply Chain: Purchase order receipt/processing.
  • Outbound Logistics: Fleet utilization; extra shipments.
  • Warehouse Delivery: Deliveries; returned shipments.
  • DSD Delivery: Deliveries; returned shipments.
  • Accounting: Invoice reconciliation.

Top-line benefits reported by manufacturers include as much as a 4 percent reduction in out-of-stocks and nearly two weeks less time required in speed to market for new items.

Transaction benefits include a 5 percent reduction in salesforce time dealing with item data issues; a 5 percent reduction in customer service time dealing with purchase order discrepancies, shipment reconfiguration and related issues; and a 5 percent to 10 percent reducation in finance time dealing with invoice reconciliation.

Supply-chain benefits include more than a 1 percent reduction in logistics costs, inventory and DSD-receiving shrink.

A.T. Kearney notes that each company involved in the case studies made an up-front investment of approximately $100,000 per $1 billion in sales. However, the largest cost component was internal management and IT time.

A formal report based on the six case studies is expected to be released within the next month.