The idea of the internet being solely a medium for selling products is as out-dated as a dial-up connection. Now the potential lies in the web shoring up areas of the industry where efficiency is everything.
IN AN interview with the drinks business almost three years ago, Liv-ex director James Miles made a notable observation. Speaking about the need to reduce costs in a wine trade which was weathering the worst of the recession, he said that the online medium should be considered not just as a tool for shifting stock, but making savings. “The focus of the last 10 years has been on using the web to sell stuff but less focused on how it can be used to make the wine trade more efficient,” he said, adding: “Our view is that the next five years is going to be a lot more about the back office and there are going to be fundamental changes. It may not be as glamorous but in many ways it is more important.”
But what was Miles alluding to? How exactly can the web make the wine trade more efficient, and consequently save it cash? Well, one important development is the increasing use of the net for immediate access to sales and stock information, aiding the salesman in deal- making on the move. Another is the increased availability of real-time data to improve the accuracy of stock control. And a further benefit is the integration of computer systems, and improvement in
data exchange online, which together are reducing the need for the most costly element in wine trading: labour.
Dealing firstly with the latter opportunity, managing director of Vintner Systems Nick Gabb observes the emergence of greater efficiency savings due to the net and new technology: “Everything at the minute is down to getting systems to talk to each other so you can take out the human element.” Continuing, he says: “A three person company can be reduced to a two person one with a good computer system,” while had adds, half joking: “Soon we will be able to sit back and computers can run the world, although someone still has to drink the product.”
In essence, there is more data interchange occurring in the wine business without any human input whatsoever. Take, for example, internet- based ordering, where the purchase, stock level adjustment, and delivery details are all done electronically, requiring nothing more than one person to oversee the processes taking place online.
THE UNIVERSAL PROBLEM
However, both Gabb and Miles highlight an obstacle to the smooth operation of such electronic processes, particularly in the world of fine wine trading, where products often repeatedly change owners and move between storage facilities. And that is the lack of universal identification of the product. Miles explains: “The big stumbling block in the process is the naming of wine because there is no standard way of calling, for example, Château Lafite, Château Lafite. Everyone has a unique way of describing it and it gets more complicated when you get into Burgundy, and Germany even more so.”
Pointing out that one bonded warehouse might have as many as 6,000 different ways of listing the leading first growth on their system, not only is there potential for errors, but a single order could be rekeyed manually into a computer system as many as 16 times as it passes through the supply chain, according to Miles. “Any interconnection of systems has a man in between; it is not an electronic conversation because there are people at either end manually inputting information into the system.”
Consequently, as reported by db back in 2011, Liv-ex launched L-Win, a six-digit code (with a seventh “check digit”) that can be used for each and every SKU in wine with a secondary market value.
As Miles states: “What we stumbled upon is this huge requirement for a common language for the wine name component, because, by just supplying that part as a number, it means people can continue to describe the wines as they want, but the computers can talk to each other, so they can immediately identify Château Lafite as Château Lafite, not Carruades.”Already, L-Win numbers, which can be obtained free from Liv-ex for fine wines, are being adopted by warehouses, who, Miles reminds, “have issues with databases with inconsistent wine names.”
Continuing, he says: “We are now at a point where dozens of people are using L- Win and it is a completely free service.” Not only that, but Liv-ex has developed a tool which will “clean” wine lists. Miles explains: “Everything in this business starts with a list of wines, whether it’s a price list, or goods-in receipt, or orders to upload, and the list of wines is usually in the wrong format, but we have made available online to everyone [through Liv- ex] an ExCel programme which will automatically clean the list and match the wines to L-Win; and once you have an L- Win, you can share data.”
He also points out that there’s nothing new about these codes in other sectors: “An ISIN (International Securities Identification Number) is used for every financial product that’s issued, and books have an ISBN (International Standard Book Number).”
Considering the Liv-ex fine wine exchange specifically, he says: “One of the big challenges was getting L-Win integrated into our own business, and now we have done that, anyone sharing data with us is now using the L-Win.
In summary, he comments: “The trends are allowing businesses to automate a lot of processes that were labour intensive, giving them the opportunity to become more efficient, and allowing business to scale their operations at much lower costs.”