Most companies in the fast moving consumer goods (FMCG) market still rely on paper-based manual processes and re-keying of information over e-mail and fax to communicate with trading partners, a new report has revealed.
The research, released today by analyst firm Datamonitor and UK supply chain standards body e.center, found that more than 80% of suppliers and over 60% of manufacturers and retailers in the FMCG market are still using these forms of communication, shunning collaborative technologies such as EDI (electronic data interchange).
FMCG refers to cheap everyday items that can be used up quickly, such as washing powder and toiletries.
The report, "The future of EDI – trends in electronic communication", warned that there is a “dire need for education, not only on the cost benefits and advantages but also on the business and technical efficiencies” of using collaborative technology.
It said relying on manual processes can, ultimately, result in delayed stock notifications, the filling of shelves and poor customer service.
Tony Hart, managing analyst at Datamonitor and report author, said, “There are many dangers ahead if organisations 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 technologies, such as EDI, AS2 – a protocol to implement secure and reliable messaging over HTTP – and RFID, will help organisations get the right product to the right location, at the right time, and at the right price, Hart said. “This is crucial in ensuring consumer loyalty in today’s competitive market.”
Key issues for collaborative technology 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, the report said.
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,” Hart said.
“This will mean that the major retailers and manufacturing hubs will have to tread carefully when pushing the use of standards.”