Retail: General Merchandising:<br>Retailers Tighten Up The Supply ChainRetail: General Merchandising:<br>Retailers Tighten Up The Supply Chain

Innovation in the fiercely competitive retail market is driven by pure survival instincts. That's why companies are working to overcome longstanding barriers to information sharing and collaboration needed for closer relationships with suppliers. While supply-chain collaboration isn't a new idea, what has changed is the growing number of retailers that are spending money on such projects instead of just thinking about them, Gartner retail analyst Jeff Roster says. The Web has led to the democratization of technology, allowing companies of all sizes to establish tighter links with one another without breaking the bank.

Errors and misinformation cost retailers and their consumer-goods suppliers an estimated $40 billion a year, according to management-consulting firm A.T. Kearney. That's why companies are digitizing more of the information they share along the supply chain for placing orders, reducing errors caused by relying on outdated printed catalogs, for example. A step in that direction has been wider adoption of the UCCnet Global Registry, an electronic system for listing data such as product description, number, and package sizes that makes it easier for buyers and sellers to have the same information. Two major retail online trading platforms, Transora and the WorldWide Retail Exchange, adopted the standard this year.

Sears, Roebuck and Co. is testing a way in which the retailer and its suppliers work off the same forecasting and inventory system to avoid running out of a hot-selling product. The pilot, which began in November, created a collaborative planning, forecasting, and replenishment system using software from Manugistics Group Inc. and online retail exchange GlobalNetXchange. The system lets people view information through the Web in a spreadsheet, which is customized to display only information for specific product areas. It sends an E-mail notification if distribution-center forecasts or projected supplier availability fall below established levels. That's a key part of making supply-chain collaboration effective, since people still need to make decisions on what to do about the data. "There may be a perception in the industry that it's automatic and you don't need anybody around looking after it," says Don Zimmerman, Sears' acting CIO.

The experiment is working. Sears and its pilot supplier have cut inventory and improved in-stock performance, so Sears wants to add two suppliers by year's end.