Call of the CrawlBy Deborah Gage | Posted 2002-07-10 Print
The Springdale, Ark., food giant produces more than 146 million pounds of chicken per week and it's looking to electronic exchanges to get more efficient—and gain understanding of the products people want to eat.
Call of the Crawl
Tyson's attentions also have been focused elsewhere.
Since September 2001, when Tyson and IBP finally merged, Tyson's desire to conduct transactions online has been dampened by its overriding imperative to marry IBP's information systems with its own.
IBP was a collection of 14 independent companies in 30 locations, all taking orders and handling logistics and warehousing products however they chose. Some used EDI and some did not. Networks like EFS give Tyson better data and therefore better insight into how to use information systems efficiently. But those systems must work together first.
Cooper says he is cutting down Tyson's internal information systems from 16 to two—one focused on all aspects of getting fresh meat to market and one for everything else.
Once that is completed, Tyson will focus harder on trading online. "We're in a crawl, walk, run scenario," says Cooper, who says he has been working so hard recently he rarely sees his children. "Our first slogan has to be, do no harm—we can't break either one of these companies in the process. But if you listen to John Tyson, the goal is one order, one truck, one invoice."
Tyson's hope is that it will only have two platforms to worry about online, as well. It intends to use EFS to communicate with operators of restaurants, campus cafeterias and other food services; and, iTN to communicate with operators of groceries, supermarkets and other retail food outlets.
And EFS still faces competition from an exchange developed by Amphire Solutions, of Boise, Idaho. The Amphire exchange has signed up some of Tyson's top distributors and operators. But Parisi suggests that Amphire could pass transactions that originate on its network to Tyson, through EFS. That way Tyson wouldn't have to join another network, with even more integration costs. Besides, in Amphire's system, the seller—Tyson—pays the full costs of transactions. In EFS, buyers and sellers split transaction costs.
Not all of Tyson's distributors agree with this idea. "EFS has its cost per transaction, and Amphire has its cost, and if Amphire passes transactions through EFS it doubles the cost," says Craig Smith, senior manager of e-business for Gordon Food Service, which signed an exclusive contract with Amphire, in part because it can trade online right now with operators as well as suppliers like Tyson. "The idea with exchanges is to lower costs. It's less costly in the long term to integrate into the other exchange."
To help cover its many possible e-business contingencies, Tyson in March joined with Sysco, the U.S. Department of Agriculture, its long-time competitor Smithfield, and other food companies to co-found mpXML, an organization that will attempt to set XML standards for the meat and poultry industry. Since Wal-Mart, for example, is forming its own online network, having a common language for exchanging transaction data would make it easier for Wal-Mart to connect with other Tyson customers and partners.
Even though only a fraction of Tyson's foodservice orders (and none of IBP's orders) are going through EFS today, the network holds much promise. For instance, Tyson right now has little insight into what happens to Wings and Drummies once its distributors sell them to restaurants or cafeterias.
"You can't scan a piece of chicken entrée at a restaurant," says Parisi. "Ultimately [we don't have] a great mechanism for understanding what the consumer is doing."
Distributors historically have been reluctant to share data with suppliers like Tyson because they want to control relationships with customers themselves. Besides, many distributors don't have the electronic infrastructure necessary to get data fast enough to Tyson to affect its ability to change what products it produces. With EFS, a big operator like McDonald's could feed data from its cash registers on how many McNuggets it sold in a day onto the Internet. EFS would feed that data back to Tyson. Tyson could check on the stocks of McNugget inventories at McDonald's' distributors; and figure out how many new nuggets to produce the next day.
Distributors, meanwhile, could use EFS to track all their transactions and hence figure out how many orders Tyson filled correctly. BiRite's Collins is pushing EFS to adopt a process that would, for instance, resolve the disputes that occur when a Tyson driver shows up at a BiRite warehouse with a damaged case of Drummies.
"When the truck leaves Arkansas, the invoice leaves via the U.S. mail and they both arrive at about the same time," Collins says. "If our receiving clerks could sign onto the network and do an electronic handshake with the driver—you're over an item on this case, that case was damaged—we're all in agreement, and then Tyson could send a clean invoice about which there is no dispute."
Using EFS, Tyson can trade electronically with any partner—even the smaller ones—without building separate connections and remapping EDI transactions for each partner. EFS doesn't care which format—EDI, flat files, XML and so on— partners use to send orders. EFS translates all incoming orders into a format that Tyson wants to receive: orders with data in the right fields for the Electronic Document Interchange system it already has in place. And those distributors and brokers that now use PCs to send Tyson Excel spreadsheets via e-mail will be able to connect directly into EFS with a Web browser.
Indeed, Sysco, which began processing orders through EFS in May, continues to pass orders to Tyson through their EDI network. This lets EFS concentrate on getting Tyson's and Sysco's smaller partners running on its network. Sysco alone accounts for over half of the $40 billion of distributor buying power estimated by EFS, and of the 700 partners Sysco has asked to build EDI infrastructures, says Tripp, only 200 have complied so far. Given the relative simplicity and economy of trading over the Internet, there is little reason for any of those companies to do EDI now.
EFS currently supports six steps in the ordering process that are defined as transactions in a format for Electronic Data Interchange known as the X.12 standard. These steps are called order, partner delivery acknowledgement, confirmation, advance ship notice, invoice, and notification of receipt. If successful, the EFS approach would set standards not only for the content of transactions, but also for the order in which those transactions are conducted. That would eliminate the need for foodservice employees to attach yellow sticky notes to their monitors so they can remember whom to call when, which is the way some conduct transactions today.
For a future release, EFS is scoping out Electronic Funds Transfer, which would tie electronic bill payment to invoices so EFS customers can pay for their orders online. Right now, the EFS system provides Tyson with information on which customers order products and in what volume. But Tyson still has to negotiate prices and collect payment manually.
Around the second quarter of 2003, EFS plans to introduce contract and rebate management, allowing customers to see on screen the contract terms and the changes that have affected those terms as they negotiate, rather than working blindly over the phone. Advanced features like logistics and demand planning come later. Meigides says that some of those features, like the ability to track all transactions, are technically easy, but customers have to be ready. For example, EDI is not flexible enough to support networked demand planning, which requires the Internet's HyperText Transfer Protocol.
Customers that want to do business on EFS must first get their data cross-referenced with the catalogs of every other customer with which they wish to trade. FoodHandler's e-business director, Paul Finnegan, says cross-referencing is EFS's biggest issue right now because the industry's uneven support of Universal Product Code standards makes it hard to be efficient.
Once FoodHandler sends a purchase order, and Tyson receives it, EFS returns an acknowledgement. Then, EFS matches the order with products in Tyson's catalog. If the content does not match, the order drops out and the customer support desk is alerted. EFS also validates content—whether units and measures are correct (chicken wings may be ordered by the pound but bought by the case), whether the quantity is correct, and whether all agreed-upon rules for doing business (e.g. distributors must buy a minimum of 30 cases) are followed.
If not, the distributor is called and the order is fixed manually. Then it goes into Tyson's enterprise planning system. Later, EFS notifies distributors that the order will ship. Any changes in the order are highlighted, a feature that distributors like BiRite find very valuable and that EFS may patent.
EFS software is hosted, and Tyson says the technical effort required to integrate into the network was minimal. No new hardware or software programs were required. But Tyson did supply people to work with EFS on "the subtle nuances of EDI," Cooper says, in part because so few Tyson orders go through EFS now.
"If you're conducting business with a customer electronically via EDI today and you start doing part [of that business] via another methodology, like EFS, the trick inside systems is to know where the message came from and where to send it back to, because there are two ways it could go," Cooper says.
"We want to make sure we've got standard items transacting cleanly and have a short turnaround time on fresh product," he continues. "Most of the customers we're bringing on don't buy fresh or commodity items, but there's a saying in the fresh business—sell it or smell it."
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