A report just published by independent market analyst Datamonitor (DTM.L) in conjunction with e.center finds that over 80% of suppliers, and over 60% of manufacturers and retailers still rely on paper-based manual processes, and the re-keying of information, with unstructured formats such as email and fax predominant, to communicate with trading partners. The report, 'The future of EDI - trends in electronic communication.' says these methods of communication, crucial in ensuring consumer loyalty in today's competitive market, tend not to promote efficiencies and cost savings throughout the supply chain. They can ultimately result in delayed stock notifications, the filling of shelves and poor customer service, especially true closer to the Christmas period. Datamonitor warns there are many dangers ahead if organizations within the supply chain fail to collaborate. The report says education is vital in the success of any integration or standards-led initiative, and advises retailers and manufacturers to assist smaller trading partners in their quest for automation and cost reduction.

A dire need for education, not only on the cost benefits / advantages, but also on the business and technical efficiencies

In order to maintain competitive advantage, retailers need to reduce the costs associated with dealing with multiple suppliers, so that the service delivered to the customer is as slick as possible, and that the shelves are filled with the necessary products. This requires integration throughout the supply chain and cooperation by the majority of members. However, this is not always possible due to the size, financial and technical capabilities of the smaller suppliers.

Key issues include the adoption of standards, integration technologies and education from the retailer to the smaller members on the business and technical benefits of such standards. For example, there are key issues surrounding AS2* and the costs involved for the supplier. We have seen in the past that muscle (from the larger trading partner) does help when trying to achieve mass adoption of technologies and methodologies, but we have also witnessed push back from less technically able suppliers. This will mean that the major retailers and manufacturing hubs will have to tread carefully when pushing the use of standards. Most members of the UK FMCG supply chain realize that customer service can be enhanced and efficiencies gained through technology investment and standards adoption, but realistically, this will take time.

According to Datamonitor, there is a dire need for education, not only on the cost benefits / advantages, but also on the business and technical efficiencies that all parties can experience. Retailers and manufacturers must look to assist smaller trading partners in their quest for automation and cost reduction.

Datamonitor expects that over the next 18-24 months there will be a substantial growth in global data synchronization efforts (over 85% for both retailers and manufacturers) and the use of RFID (radio frequency identification) technologies (around 50% of retailers and manufacturers) by the major retailers and their major suppliers in the value chain. This will promote visibility and efficiency to the majority of members. There have already been moves by Wal-Mart, Asda and Marks and Spencer to introduce RFID technologies. However, there are a variety of privacy issues that will need to be overcome, such as tracking the consumer and their purchases. If initial usage of RFID is restricted to the supply chain, there is likely to be great uptake as the benefits are realized. Efficiency gains are not the only benefits that can be achieved, cost savings through reduced errors, wastage, etc. can also be experienced. However, significant investment will also be required upfront before the long-term benefits can be realized.

It is evident that standards are key for collaboration. Collaboration will demand greater use of standard communications and messaging to ensure its success. Global data synchronization will become fundamental, and for many organizations this will lead to a review of existing business-to-business infrastructures, and their eBusiness strategies.

Tony Hart, Enterprise Applications managing analyst at Datamonitor comments:

"There are many dangers ahead if organizations within the supply chain fail to collaborate. Poor service to suppliers, manufacturers, retailers and the end consumer, reduced performance levels, loss of sales, imbalances between demand and supply, excess stock levels and increased conflict will all increase costs in the supply chain and reduce business profitability. The increase in collaborative techniques will help organizations get the right product to the right location, at the right time, and at the right price. This is crucial in ensuring consumer loyalty in today's competitive market."


Notes for Editors:

*AS2 - Applicability Statement (AS) 2- a protocol developed by the IETF to implement secure and reliable messaging over HTTP (hypertext transfer protocol)

Datamonitor's report, "The Future of EDI: Trends in electronic communication," commissioned by e.centre and its Electronic Business Network group (EBN), provides a comprehensive overview of the trends and readiness of suppliers, manufacturers and retailers on current and future B2B standards and technology adoption. Accurate and detailed, it incorporates 92 primary interviews with 17 manufacturers, 170 suppliers and 5 leading retailers in the UK FMCG sector. The report highlights the drivers and inhibitors impacting the usage of B2B standards and electronic mechanisms and gives strategic and tactical recommendations to better target solution offerings.

Tony Hart, managing analyst, Enterprise Applications, is available for comment. To arrange an interview or for further information please contact:

Krishna Rao - Tel: (+44) 20 7675 ---- Email: krao@datamonitor.com

Datamonitor plc (DTM.L) is a premium business information company specializing in industry analysis. We help our clients, 5000 of the world's leading companies, to address complex strategic issues. Through our proprietary databases and wealth of expertise, we provide clients with unbiased expert analysis and in-depth forecasts for six industry sectors: Automotive, Consumer Markets, Energy, Financial Services, Healthcare, Technology. Datamonitor maintains its headquarters in London and has regional offices in New York, Frankfurt, and Hong Kong.

e.centre is the trading name of the Association for Standards and Practices in Electronic Trade - EAN UK Ltd. It was launched in 1998 on the merger of the Article Number Association and the Electronic Commerce Association. The Association aims to promote UK excellence in electronic commerce by exploiting value from the business data standards from EAN International and the information exchange standards driven by the market.

Published on: 12:00AM on 19th December 2003