The value chain is an ongoing effort of companies to efficiently adapt to constantly changing consumer behaviour and the impact of external factors (see Figure 1). To improve the success rate of this effort, downstream links in the value chain – retailers and manufacturers – have been aligning their processes by collaboratively integrating operations. In logistics, but also in their commercial relations such as category management, planning and execution of promotions and even new product development.

Also upstream – in the relations between manufacturers and their suppliers of packaging materials and ingredients – collaboration and process integration is taking place. To enable this, the so-called ‘Upstream Integration Model’ (UIM) was developed. UIM consists of several building blocks covering different aspects of supplier-manufacturer relations (see sidebar). To implement the UIM across the community and to support the implementation process via guidelines and business cases, the Global Commerce Initiative (GCI, a global group of manufacturers and retailers that seeks to simplify and enhance global commerce) developed a special platform for industry partners upstream in the value chain, to work on creating consensus about the definitions and business rules involved in upstream integration.

This platform is dubbed GUSI, which stands for ‘Global Upstream Supply Initiative’. Despite the fact that retailers are important members of GCI, they do not belong to the GUSI platform. “No, GUSI has first of all been developed for branded goods manufacturers and their suppliers,” said Roland van den Bossche, process manager supplier integration at Unilever, in a session on upstream integration during the ECR Europe Forum last May in Milan.

Trust and misunderstanding

Unilever is among the frontrunners within GUSI and the company announced in Milan that it intends to roll-out its upstream integration processes with all of its suppliers in its food, home care and personal care businesses. “Our benefits are lower planning and administration costs, stock reduction in the overall supply chain and increased flexibility as a result of a more responsive supplier and lead time reduction,” van den Bossche said. “We do this with suppliers we trust, because we place a part of our business in their hands.”

Trust is crucial for all collaboration across the whole chain. “One of the selection criteria we use when deciding whether or not to do an integration project is the stability of the business,” says Jan Tonascia, supply chain director food at packaging supplier Alcan. “This is not something we would do with a customer who is about to issue a tender to reconsider its suppliers base.”

“There have been misunderstandings in the past,” says Jef Verplaetse, chief executive of Van Genechten Packaging, referring to one of the data pools. “CPG Market wanted to standardise product master data, but it also wanted to organise reverse auctions for which it could use the information we supplied. That’s an impossible combination which conflicts with the trust issue.”

During the ECR Forum in May 2007, speakers from GUSI-member companies proudly said that with business models defined, standard messages available and an implementation guide published, the GUSI/UIM standards are ready to use for all manufacturers and their suppliers, large and small. In practice, however, things still look different. Unilever may well be an exception that sets the rule that GUSI is still in its infancy stage and foremost something for the large, resourceful companies. Implementing standards is not easy, is the experience of the Smurfit Kappa Group. “Aligning product data and definitions are traditional bottlenecks for implementation,” says Antoine de Graaf, head of business systems & supply chain support. “To enable Vendor Managed Inventory (VMI) you need good forecasts but also enough storage capacity. In the past, ERP systems (efficient replenishment) couldn’t cope with the change and caused problems. For the larger companies this is now much less of a problem.”

“Our larger clients increasingly request integration of systems, especially those who operate in several European countries and are serviced by local Smurfit Kappa companies,” says Rob Soffers, manager supply chain support at Smurfit Kappa Group. “GUSI focuses on both traditional order management and VMI and it is essentially focused on the business processes. This used to be a trouble zone in VMI. Now ERP systems have improved, software companies have developed GUSI-enabled solutions to support VMI replenishment calculations.”

Capacity is a bottleneck

“During the five years that we have been implementing integrated solutions, we experienced that most issues are caused by data quality and inconsistent processes of both partners’ sides,” says Philip Barnes, supply chain director at SCA Packaging. “Therefore we insist on auditing both sides before deciding whether or not to implement. The quality of data and processes is improving. Manufacturers have invested more in their back end systems recently. There is growing understanding on how this affects the front end of their businesses.”

The packaging industry itself also needs to get ready for GUSI. “The current Smurfit Kappa Group results from m&a activity, so we had to adapt as well,” says De Graaf. “Integrating businesses and ERP systems consumes time and money.”

“We are quite a large company with thirty production sites, but even for a company like ours capacity is a bottleneck,” says Tonascia (Alcan). “At Alcan we don’t have a fully global system yet. We have more than one system, which limits our roll-out capacity.”

“One of our main customers – Unilever – took the lead and invited us to join the GUSI workgroup,” says Marc Delforge, e-business manager at Van Genechten Packaging. “Since last month we are doing a GUSI-project with Unilever which focuses on two of the UIM’s building blocks: ‘demand & supply signals’ and ‘dispatch receipt & consumption’. Originally we planned to be doing this by the end of 2006, but it still lasted until August 2007 before we got the project started. One of the reasons for the delay is attuning things with external parties to which part of the IT function has been outsourced, but we intend to complete the project maybe by the end of this year, but surely in 2008.”

Delforge says that ‘financial settlement’ may well be a further UIM building block to add. “The building blocks ‘data alignment’ and ‘purchasing conditions’ are however ambitious,” he says. “That’s something we can’t yet implement via GUSI.”

“For the time being data alignment is not included in the messages and building blocks for which GUSI-standards are being used,” says Soffers. “Product data is often manually processed. In this early stage, GUSI is used for forecasting, ordering and delivery, and increasingly for financial settlement.”

Communication, no commoditisation

“For commodity items, data alignment is a necessity as it enables customers and suppliers to efficiently change products while having access to the right product-codes and data,” says Delforge. “This transparency is important and useful. For tailor-made packaging we develop and produce for customers like Unilever or Nestlé, efficient communication of product master data between us and our client is crucial and not so much an open data pool system.”

Van Genechten’s chief executive Verplaetse warns that standardisation should not lead to commoditisation of the entire packaging industry. “The combination of high speed and high complexity underlines the importance of supply chain integration,” he says. “Efficient information systems which reduce the time needed to efficiently produce for our clients is valuable. Data pools can do this – supported by GUSI standards and protocols – at an unrivalled cost level. Standardisation, however, has to stop when it starts having an impact on the physical products. Products and their packaging need to retain their distinguishing features.”

“GUSI provides a set of standards we all can use, but from then on it depends on how you work with your customers to make a difference and create a competitive advantage,” SCA’s Barnes says. “GUSI is about the flow of different types of messages, a platform that identifies and specifies data for communication.”

“As a packaging supplier you must make sure that you don’t become easily exchangeable after putting an efficient integrated supply system in place,” says Verplaetse. “The customer outsources an important part of his complex process. To assure added value, the relation with such a customer must be more open and transparent than in a traditional customer relation.”

“Just look at the mottoes used by ECR Europe: ‘Unlocking the upstream potential’ and ‘joint value creation’. This means that despite the rightness of aiming for increasing efficiency to optimise cost levels, there are value-added aspects of suppliers that shouldn’t be underestimated,” says Jan Cardon, executive director of the European Carton Makers Association (ECMA). “There is much talk about IT, processes, stock levels and so on, but there is more upstream potential than just cost cutting. Look at creativity both in form and print, security printing to fight counterfeiting, shelf-ready packaging and – very important – sustainability issues.”