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IBM digs its heels into supply chain management

As IBM's software group forges into vertical markets, supply chain management becomes a particular pet project for Big Blue.

IBM continues to strengthen its standing within vertical markets and is making aggressive moves particularly in supply chain management (SCM).

In recent weeks, the company has released tools designed to help suppliers meet new industry standards and regulations.

IBM has done a lot to it and has planned a lot for it; this is one central repository for all product data. 
Kara Romanow
reserach directorAMR

SCM is the management of materials as it moves from supplier to manufacturer, wholesaler to retailer, and finally to the consumer. The ultimate goal of a SCM system is to reduce inventory, but with the expectation that products are available when needed, according to experts.

Price check, North America

In 1997, the Uniform Code Council Inc. (UCC) established the Sunrise 2005 Date, which requires all U.S. and Canadian retailers to have scanning and processing capability with EAN symbols by Jan. 1. EAN symbols are equivalent to UPC, and are used worldwide outside of North America.

Today, retailers outside the U.S. and Canada must re-label their products with UPC so they can be recognized by scanners and accommodate U.S. and Canadian firms. This ultimately results in additional product costs, service problems for consumers and an inability to share standardized information with trading partners.

IBM said its Legacy Transformation Services suite is assisting retailers to update the UPC bar code. The suite offers a combination of consulting methods and software tools geared toward updating legacy UPC to the new EAN-recognized Global Trade Item Number (GTIN) standard. The GTIN is a unique identification number given to a product under EAN system.

Ray Tromba, director of retail application management systems for IBM Global Services, said retailers are adopting the new standards at different rates, depending on size. Smaller retailers, with smaller inventory, have been slower to adopt standards than larger retailers (big players like Wal-Mart are already ready). Regardless of size, however, compliance with Sunrise is necessary if retailers don't want headaches in 2005.

"From the consumer perspective, if at point-of-sale the reader does not recognize a [GTIN] code, the store must go online to do the generic 'price check,'" Tromba said.

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Additionally, Tromba said a non-compliant retailer has the choice of not putting a UPC item on the shelf or re-labeling it. However, that's a manual, costly activity.

Even if a retailer does not directly conduct a majority of its business overseas, Tromba said it is shortsighted of U.S. companies not to adopt Sunrise standards. He explained that companies would still create dual inventory by dealing with businesses that ship overseas and have adopted GTIN.

A further hindrance is the fact that retailers that do not comply will find it next to impossible to adopt radio frequency identification (RFID). RFID technology has an electronic product code (ePC) that uses GTIN structures to convey information, said Scott Langdoc, vice president of research at Boston-based AMR Research Inc..

Most importantly, there are heavy incentives for retailers who can quickly adopt Sunrise 2005 standards. In September 2003, AMR released data showing GTIN compliance would take an estimated 1% to 2% out of the supply chain, or $40 billion in annual savings.

WebSphere and Trigo

WebSphere Product Center 5.0 is another component of IBM's continued push into the supply chain, and came just 90 days after the acquisition of Trigo Technologies Inc., a product information management company.

"IBM has done a lot to it and has planned a lot for it; this is one central repository for all product data," said AMR research director Kara Romanow.

The acquisition filled the void, so to speak, in IBM's expanding middleware portfolio. And IBM's commitment to UCCnet and RFID means better solutions for iSeries customers.

"IBM has been very involved with consulting, and now they have their own software," Romanow said.

According to IBM, 5.0 enables customers to manage and link product, trading partner, location, organization, pricing and promotion information. Large global businesses can use WebSphere Product Center to consolidate information about millions of products from multiple legacy systems, improving how information is handled throughout an organization.

Many retailers have taken short cuts to become UCCnet compliant and did not cleanse data, normalize data, or put it into one centralized place, Romanow said.

"As more retailers jump on the bandwagon and as more companies collaborate, the reality that you need one version of the truth has really come to the forefront, and that's where IBM has been able to provide a solid product," Romanow said.

Romanow said IBM's vision of a consumer-driven supply chain is very much in line with AMR['s point of view]. "They are absolutely headed in the right direction," she said.

Let us know what you think about the story; e-mail: Jack Loftus, News Writer

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