Some suppliers opt to pay fines rather than update systems - survey

By Joseph James Whitworth

- Last updated on GMT


Related tags European union Us

Many merchants and suppliers are unable to provide the level of transparency demanded by consumers, according to a survey.

1WorldSync found 78% of merchants said their product information systems can’t keep up with such demands.

The firm is jointly owned by the member organizations of GS1 Germany and GS1 US.

1WorldSync asked 400 merchants and suppliers​ from Europe and the US with more than $500m in annual revenue about experiences with multi-channel commerce.

Different region – different standard?

The survey found 41% of suppliers with a global commerce presence said a wide difference in regulatory standards is their top struggle to keep up with industry standards across country borders.

A total of 41% of suppliers believed it was more cost effective to pay penalties for non-compliance than to invest in product information system(s) updates compliant with changing regulations.

Rather than facing the problem head on many avoid the issue and pay the consequences. This is a poor long-term solution with minimal financial logic to support it, said 1WorldSync.

Although 90% of European suppliers report good product visibility across global channels, 58% of respondents still believe it is more cost effective to pay the penalties for non-compliance than to invest in product information system updates.

Ken Yontz, global VP of transformation management, said the survey was done between the end of Q4 2016 and Q1 2017.

“Some results were surprising but we are active in the market so some were responses we see every day. There was a difference between market leaders and the market in general, market leaders are companies that have 51% or more of sales online, in terms of gaps in knowledge,” ​he said.

“The regulatory side continues to grow and get complex, GS1 standards are at the root of our organisation. Product identifiers, content, nutritional values, allergy information needs to be standardised across countries as information moves with the product.

“Saying ‘I know it is a problem and a challenge but I am not going to fix the problem and just pay the fines’ points to short sighted business strategy and one challenge identified was a knowledge gap in industry, there is learning to be done to avoid not investing in infrastructure and just paying the fine.

“The issue is not going to go away, consumers expect to know what it is, where it comes from, how it was made, who made it and the younger generation are even more demanding. They want to know the background of the company, where it is located, is it sustainable, is the packaging biodegradable, do they treat employees well, there is no end to questions people start to ask.”

The firm found data exists in siloes with 64% of suppliers saying their organization's product information system does not enable sales, supply chain and IT teams to set up and exchange quality product content with trading partners through a single platform.

Dan Wilkinson, chief commercial officer, said changing compliance and regulatory standards are a challenge for merchants and suppliers looking to modernize multi-channel commerce capabilities.

"Manufacturers face a growing list of regulations, such as SmartLabel for consumer goods, Unique Device Identification (UDI) for medical devices and Classification, Labeling and Packaging (CLP) for hazardous chemicals in the European Union. In tandem with high demand for transparency, suppliers and merchants are left scrambling to curate and syndicate trusted product content that drives revenue."

Transparency investments and using third parties

85% of suppliers have made investments in product transparency in the past year.

Not only is this good for supplier-consumer relationships but increased product transparency reduces errors between retail trading partners and expedites a product’s time to market, said 1WorldSync.

A total of 71% of European respondents use a third-party content provider compared to 55% of US merchants and suppliers.

“This is undoubtedly one reason European merchants and suppliers report greater product visibility between trading partners,”​ said 1WorldSync.

Yontz said it was an evolving process which can sometimes take time.

“Companies have invested time, money and resources in legacy systems and information today is in a variety of systems or locations and moving to the cloud environment from a legacy platform model is an evolution. Various legacy systems have had success over a long period of time but the cloud can breakdown siloes and is here to stay,” ​he said.

“We expected the US companies [who used a third party provider] to be higher, the companies that had one are generally further along in process. My opinion in the US is some have an ‘I can do it myself attitude’ while Europeans had a focus and understanding that their core businessis not product information management so they find a provider whose core business is that to solve the problem.

“When there is a food safety issue or a recall that drives awareness and demand. It would be nice to see more proactivity sometimes. It requires a top down commitment through the supply chain to understand how important it is and can be to business.

“The key takeaway is move now, how can I leverage the cloud and position myself with a third party provider to breakdown siloes and integrate that strategy to get a competitive advantage.”

Related topics Food Safety & Quality

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