"A better way to do business." (uniform communications standards and grocery trade)
In contrast to the visibility and controversy that marked the introduction of scanning and the Universal Product Code, UCS has attracted little attention while becoming a reality in a elatively short time.
Gerry Peck, executive director of the National-American Wholesale Grocers' Association, says, "Every company should be interested in UCS regardless of size and type of operation. Exchanging data electroncially is faster, cheaper and less error-prone that traditional methods. It is simply a better way to do business."
Paul Kelly, coordinator of the program for the Grocery Manufacturers of America, says, "It's working, it's proven, it's growing. The potential has hardly been scratched at this point."
For the supermarket industry the UCS had its beginnings in 1976 when six major trade associations formed a joint industry committee with Leonard Lieberman, president of Supermarkets General, and Arthur Woelfle, president of Kraft, at the helm. Now more than 70 companies, including Safeway, Super Valu, Certified Grocers of California, Procter & Gamble and General Foods, are active in UCS.
"For these companies and ours, UCS is bringing real hard-dollar savings to the bottom line," says Kenneth Hite, manager of systems for Ralphs, a pioneering company in both scanning and UCS. The 118-store chain, headquartered in Los Angeles, has 16 manufacturer and broker "partners" exchanging purchase order and invoice information daily.
About 18% of the merchandise moved through the warehouse is covered by the UCS system. Doing this, says Hite, reduces clerical labor, improves accuracy of the data, shortens lead times on orders, permits lower safety stock levels and even helps merchandising decisions, by allowing buyers and merchandisers to spend less time on routine tasks, like picking up orders and correcting errors.
"It is our belief that eventually UCS will represent a savings to Ralphs equivalent to 0.1% of sales," he says. This translates to about $1.5 million a year, using the company's current sales rate. "UCS represents a competitive advantage. We must control our costs and this is one way to do that," he says. The Message Glut
UCS attacks an industrywide problem: the veritable flood of messages that flows between buyer and seller. Buyers--or sometimes their computers--issue 15 million purchase orders each year, in turn triggering 15 million bills of lading and another 15 million invoices. En route, there are order adjustments, payment advices and invoice adjustments, preceded or followed by assorted announcements on new item additions, deals and allowances and other information. The result is that about 100 million messages crisscross among 2,000 distributor headquarters, 5,000 manufacturers and 2,000 brokers.
In its 1980 study of the feasibility of UCS, Arthur D. Little Inc. calculated that using electronics to reduce this stream by half would save between $196 and $324 million for warehoused products alone. And even greater savings would be realized on direct store delivered merchandise, which generates more than 10 times as many messages.
Hal Juckett, vice president of the Uniform Product Code Council (UPCC) of Dayton, Ohio, which oversees the UPC and which recently took over administration of UCS, says, "The goal of reducing conventional messages by half is achievable. As with most industries, the 20-80 rule applies to ours: 20% of the companies do 80% of the business. In fact, GMA estimates that if only the top 50 grocers and manufacturers get behind UCS, the 50% goal will be met."
"But," he adds, "you don't have to be a billion dollar company to play. The UCS industry committees that have guided UCS made it clear from the beginning that the standards must benefit everyone, regardless of size or type of operation. This has been accomplished."
Other advantages are cited by UPCC as well:
* Flexibility: Participants can provide their own electronic mailbox--where messages are stored until required--or hire the service bureau of their choice. Both types of standards are openended: message standards and communications standards do not favor any specific equipment or computer manufacturer.
* Technology: UCS uses available tecnology and is designed to readily accommodate more advanced communications technology as it becomes available.
* Proprietary Control: No individual company directly operates the system or any one key element of it, eliminating the danger of one company gaining proprietary control.
* Security: The system is designed to be no more vulnerable to interecption and alteration of messages than equivalent conventional methods. The only data retention that takes place is in the mailboxes during the brief period between message transmission and pickup. These mailboxes are, moreover, distributed so that message content cannot be tapped at a single point. Passwords between senders and receivers are effective.
* Innovation and Competition: Participants are free to make their own arrangments for alternate communications carriers, service bureaus, equipment makers and software companies, all of whom can compete in introducing innovations.
* Buyer/Seller Relationships: UCS is not meant to bypass salesmen and brokers or to impede the relationships between them and buyers. Because less time is spent correcting clerical and key punch errors, experience shows that sales calls can be more productive.
* Industry Management: Unlike some industries--hardware, for example--the grocery industry need not manage a contract operator of a communications network or central switch. Operation Upgrade
"The UPCC will serve as a focal point for implementing UCS and as a "secretariat' for the three major groups involved, that is, the Advisory Committee, Standards Maintenance Committee and the UCS Users Group, who share their experiences for the benefit of all," says Juckett.
UPCC will handle applications, issue identification numbers and collect fees. UCS fees are based on the latest annual domestic dollar sales in grocery, drug and mass merchandise or discount stores and are a one-time charge. Fees are divided into five tiers, with chains, wholesalers and manufacturers paying from $500 to $10,000 and brokers from $500 to $5,000. UPCC does not intend to make a profit, says Juckett.
An informative brochure, user directory, standards manual and bulletins for communicating within the UCS community are provided, as well as a toll-free users "hotline.c
To train companies in UCS, the UPCC sponsors three-day regioanl start-up seminars. The first three sessions attracted some 180 people from 52 companies. "Three more seminars are planned for this year," says Juckett, "and as you would expect, attendance keeps rising."
After training, Juckett says, companies usually go into a parallel test mode for several months with one or two partners, usig both UCS and conventional methods of communicating. When the necessary confidence level is achieved, partners go "live," with only UCS.
A recent mini-survey conducted by UPCC--to which 37 companies responded--showed that 23 companies were testing and 25 were live with purchase ordrs. (Most comapnies were doing both.) Fourteen companies were testing and 19 were live with invoices.
Eighteen companies said they were interested in expanding with new partners now, while 12 said the same, over the next six months, and 25 looked to expansion of partnerships next year. (There were multiple responses.) Talking the Same Language
One of the requirements of UCS is that participants' computers must be available to send or receive messages from 6 a.m. to midnight. But even large companies not wanting to adhere to such long hours of operation (and bear the cost of a direct connection), may turn to third-party service bureaus such as Tymeshare and Informatics Inc., operator of the network for the hardware industry.
In addition to mailboxing messages so they can be retrieved at the users' convenience, third parties serve as "translators," making the electronic language, format, and speed of transmission of one partner compatible with the needs of the other.
Super Valu, the nation's largest wholesaler with 18 divisions, uses this service. George Klima, accounting systems director, explains, "We have only one link with Tymeshare instead of 25 different vendors. Direct hookups require much more equipment and hous of operation at awkward times."
Super Valu communicates to the service bureau once a day and its communications with 10 vendors and brokers are completely paper-free. The system checks quantities and costs, assigns bills of lading numbers and truck routes, and can make electronic copies for the accounts payable department if appropriate.
Correspondence, such as acceptance and rejection notices, can also be generated.
UCS has enabled Super Valu to cut inventory carrying costs by as much as two or three days by reducing safety stock. "When purchase orders were sent by mail, buyers had to allow extra lead time for the mail to reach vendors," Klima says. "However, it's the responsibility of the sendor to make sure that the receiver has received the message. When I send a purchase order to a manufacturer, he has to send an electronic acknowledgement. With the mail you never knew if a message had arrived."
Cash flow has improved because Super Valu has better control over accounts payable. "Invoices were not always received on time using traditional communications," says Klima. "Claims can now be processed faster and we can stay on top of cash needs better."
The Minneapolis division had the equivalent of three to four full-time persons wo used to call in purchase orders. Now these employees, Klima notes, have been freed to do other tasks. Also, the accounts payable department can now operate with a smaller staff because there is less key entry and fewer discrepancies to handle. Anyone Can Play
Richard Brown, NAWGA's vice president of operations and prime mover of the association's drive to make UCS affordable to even the smallest wholesalers, says, "Any company, with or without technical data processing support, can reap the benefits of UCS--for about $10,000 if they don't have a microcomputer, and for less than $5,000 if they already own one."
NAWGA's pilot test program was conducted with Reeves, Parvin & Company, a Pennsylvania supplier of 35 supermarkets, and successfully communicated purchase orders to E.J. Brock & Sons on an IBM XT personal computer, using UCS software as a "front-end" translator for the wholesaler's IBM System 36.
The pilot was one of seven being developed and tested on various mainframe and microcomputers by EDI Inc., the system designer and owner of the software. It was transmitted by using Informatics Inc. as the mailbox. The system is presently ready for purchase by any company wanting to use the system on a stand-alone basis or as an interface for the IBM XT microcomputer with IBM mainframe hardware.
Brown says, "The system will run on almost any microcomputer, interfaces with almost any mainframe, and will work for those without a mainframe. Printouts of invoices and exception reports can be customized and the entire system updated as UCS improvements are added. Buyer and systems analysts intervention is not required, because this is a turn-key system."
Mike Christie, executive vice president of Reeves, Parvin, sees another side to UCS when electronic funds transfer is added. He believes that control of payment "float" will be a real benefit to both manufacturer and distributor. Says Christie, "The number of 'float days' currently is inconsistent under the normal check clearing system. With shortened check clearing times already on the horizon, being able to negotiate, to accurately pinpoint the day of funds transfer, is going to be important to both parties involved."
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|Author:||O'Neill, Robert E.|
|Date:||Aug 1, 1984|
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