GS1 system standards enable effective supply chain management and are currently quite widely used in the part of the supply chain related to the storage and distribution of finished goods, especially consumer goods (between the finished goods manufacturer and the retailer, for example, a retail chain). To date, GS1 system standards in the area of procurement, the so-called upstream, are not very widely known or used in the supply chain between the manufacturer and their supplier of production materials.
This can be observed by visiting procurement warehouses in many manufacturing companies in Poland, where the degree of implementation of any standard solutions in terms of identification and communication is virtually negligible. Interestingly, many companies have already implemented solutions using automatic identification techniques in their finished goods warehouses, whereas the procurement area is treated differently, and no standardization is applied in contacts with suppliers, both in terms of identifying supplied materials and transmitting electronic information about them. The Global Upstream Supply Initiative (GUSI) working group, established in 2004, which was an initiative of major global manufacturers and their suppliers (including Unilever, Smurfit Kappa, P&G, Nestlé, Crown Europe, IFF, Danisco, Novozymes, National Starch, Tetra Pak, Quest), worked together to identify ways to increase the efficiency of the supply chain between FMCG manufacturers and their suppliers of raw materials, components, and packaging. This served as a starting point for further development and the creation of an integration model in the upstream area (Upstream Integration Model – UIM).
The Upstream Integration Model standardizes business processes and data exchange between trading partners (suppliers of raw materials, semi-finished products, and packaging, and their recipients – finished goods manufacturers) and includes the following elements of cooperation:
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procurement
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materials planning
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inventory management
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demand and supply
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shipping, receiving, and consumption of materials for production
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financial settlement.
The use of ready-made, standard solutions is a significant facilitation for companies operating in the area of consumer goods production procurement. Manufacturers and their suppliers do not have to develop their own bilateral solutions but can use the developed scenarios in the areas mentioned above. This is particularly valuable in the food industry, where there is an obligation to monitor the flow of products and track them in the supply chain, known as traceability. This obligation results from relevant legal regulations, in particular EU regulations 178/2002 and 1935/2004. These regulations define actions that allow for the effective and easy withdrawal from the market of specific batches of goods (mainly food, but also those in direct contact with food, such as packaging materials) that are suspected of being dangerous to the consumer. Withdrawal takes place after first locating the whereabouts of the defective batch of products. Companies participating in the GUSI Upstream Integration project (including those belonging to the group of the world’s largest consumer goods manufacturers) have achieved significant benefits from using solutions that utilize GS1 standards. The most important of these are:
– faster integration (agreeing and connecting common business processes): up to 75% reduction in the time to implement business-technical connections with a new contractor,
– IT cost reduction: 1/ at the integration stage – reduction of implementation and training costs for business and IT personnel; 2/ during operation – lower maintenance costs of the cooperation system with partners thanks to the elimination of many different, individual, and non-standard connections by replacing them with a uniform, standard interface supporting cooperation with many contractors,
– economies of scale: improvement of the return on investment (ROI) indicator in the partner cooperation system thanks to the use of standard solutions allowing it to work with many existing and new commercial partners.
The article comes from the magazine “Logistyka” 4/2009.