AEON: Leveraging the Internet

Since the early days of the Internet, retailers have recognized its potential as a tool to streamline their dealings with manufacturers, bringing efficiencies as well as lower product costs. That early promise spawned a host of Web-based business-to-business trading exchanges such as GNX, WorldWide Retail Exchange (WWRE) and Transora.

Since then, Transora merged with UCCnet to form 1Sync, which is focused on data synchronization, while GNX and WWRE merged to become Agentrics. In addition to data synchronization, Agentrics offers online sourcing (auctions), product life cycle management (PLM), data synchronization and other collaboration solutions.

One of the retailers regarded as among the most dedicated and engaged users of Agentrics' online B2B tools is AEON (pronounced ee-on), based in Chiba, Japan. AEON, which had revenues of $37.5 billion in its 2006 fiscal year, comprises a wide range of retail operations, including supermarkets, general merchandise stores, drug stores, convenience stores and specialty stores (including Talbots in the U.S.), in addition to shopping center development and other service businesses. In 2006, it operated 711 supermarkets, most of them in Japan, generally carrying the Maxvalu banner. It is Japan's largest food retailer.

AEON has been especially active in conducting online auctions via Agentrics' sourcing application to buy both products sold in stores as well as not-for-sale goods needed for internal use. Since it began using the sourcing tool in 2000, it has purchased $6.66 billion worth of for-sale and internally used goods. “We conducted around 1,000 auctions last year,” said Atsunobu Agata, AEON's senior vice president, information technology.

The company also plans to employ the PLM online tool to develop private-label food products next year, said Agata; this year the company began to pilot the technology. Using PLM, a retailer can coordinate product development among multiple ingredient, packaging and labeling suppliers worldwide.

AEON has played an important role in the development of global data synchronization in the Japanese market. The company participated in a project with the Japanese Ministry of Economy, Trade and Industry (METI) over the past two years to create a Japanese National Registry (JNR) of product data. This year, “we will implement [global data synchronization] and start with health and beauty goods,” said Agata. He also co-chairs the Japanese division of the Global Commerce Initiative (GCI) standards group, which AEON founded in 2002.

For its proactive use of online supply chain technology and for its leadership position in the development of data synchronization and other standards in the Japanese market, AEON has been selected to receive SN's Technology Excellence Award in the International Retailer category.

Becoming Centralized

AEON's B2B activities fall under the purview of its corporate IT department, led by Agata. Currently, each of AEON's group companies, including the ones that operate supermarkets, has its own IT department, “because they had historically used their own systems,” said Agata. However, AEON is moving to a more centralized management of its divisions, under which corporate IT applications would be applied more uniformly, and this effort “is producing results,” he said.

Meanwhile, the use of online sourcing, PLM and data synchronization is having an impact on all of the supermarket divisions. “For example, we can slash the costs of [store] fixtures through group buying and auctions,” said Agata.

AEON's use of online sourcing and auctions puts it among the top five users of that application in Agentrics' worldwide network, and the biggest in the Asia-Pacific region, said Nihat Arkan, Agentrics' senior vice president, global customer management and services. “They use every functionality we have, and have developed a unique functionality they can use in Japan called Parallel Trade,” he noted.

Under Parallel Trade, “they can negotiate with multiple suppliers by exchanging real-time information,” said Arkan. “They can buy per store per day or week. Suppliers can give them a price per store.” He stressed that price is only one of the factors negotiated online; others include quality specifications and delivery terms.

AEON is stepping up its Japan-focused global data synchronization efforts this year after helping Agentrics develop the JNR under an agreement with METI. In Japan, retailers wanted their own product registry, rather than the Global Registry used by U.S. retailers and others around the world, because Japanese retailers purchase 90% to 95% of their products locally, explained Arkan.

Another difference is that Japan uses a multi-tiered supply chain consisting of retailers, wholesalers and manufacturers, in contrast to the retailer-manufacturer model typically used in global data synchronization.