In Japan the total population began to decline in 2005 and the economy has been exhibiting symptoms of deflation. Sales of the retail industry here have been registering year-on-year decreases for the past several years. To cope with such business environment, the retail industry has been calling for more efficient, sophisticated information systems based on the latest information technology.
The Ministry of Economy, Trade, and Industry (METI) has been promoting the National Project for Supply Chain Information System Standardization since fiscal 2003. The Japanese retail supply chain is comprised of three sectors - manufacturers, wholesalers and retailers - but the information is not shred efficiently among them. This has caused redundancy throughout the supply chain, often resulting in shortages of hot sellers and overstocks of slow sellers. Through the standardization of EDI, this Project aims to link information seamlessly among companies and construct an optimum system that can provide consumers with the highest added values.
The sharing of POS data and inventory data is necessary for developing EDI messages that can effectively prevent stock shortages and reduce excess stock. Before taking on this task, however, the Project set out to establish basic transaction processes, ranging from the exchange of product masters to payments, and standardize the EDI messages required for these processes.
Regarding the exchange of product master data, master data items necessary for consumer packaged goods (CPG) sold at supermarkets were examined. Then, while following the GDSN model by GS1, pilots in fiscal 2006 on data exchanges between the data pools of manufacturers, wholesalers, and retailers via a registry in Japan were conducted. Data exchanges have been implemented on a practical level since April 2007 between two leading supermarkets and a source data pool of the sundry goods and cosmetics industries.
Looking at the history of electronic transaction data exchange, the supermarket industry has been using Electronic Ordering Systems (EOS) for 27 years, as described in section 2.1. With an increasingly felt need to replace EOS with a latest IT system, the supermarket industry and the wholesale industry began studying EDI standardization. Current status of EDI standardization is detailed in the subsequent sections.
The final goal of this Project is the overall optimization of the retail supply chain by expanding target product category and business type.
The Project has the support of 42 organizations in the retail, wholesale, and manufacturing industries, including associations from the sundry goods, processed foods, fresh produce, pharmaceuticals, footwear, and stationary industries.

Fig.2.2.1-1 Scope of the Project

In Japan's retail industry, EDI started in 1980 when JCA Protocol were established for an EOS system that came into widespread use among supermarkets. The JCA Protocol is capable of only slow-speed communication, but its use spread throughout a tremendous number of suppliers. Accordingly, despite subsequent progress in IT, the retail industry today has been literally stuck with this protocol, and unable to replace it with any of the latest Internet communication systems.
Limitations of JCA Protocol, such as the discontinued supply of JCA-enabled communication equipment, began to emerge during the past few years. It is disadvantageous in that the data exchange format (fixed-length format) varies with retail businesses and that data items cannot be added easily in response to changes in the business environment. Expressing concerns about the future continued use of the EDI system, two supermarket industry associations, the Japan Chain-store Association and the Japan Supermarket Association, held a joint information system committee meeting in June 2006 and agreed to start developing next-generation standardized EDI based on Internet technology.
METI financially supports the EDI standardization activities of these two associations, with an understanding that different EDI formats and code systems used by different retailers are a major obstacle to information linkage in the supply chain.
In August 2005, twelve leading supermarket chain operators organized the New EDI Standardization Working Group. This WG set out to study basic EDI systems, focusing on CPG among a wide variety of merchandise. The WG continued its study up to October 2006 and drafted standard messages for the following six basic processes:

1. Ordering (retailer a supplier)
2. Shipping (retailer s supplier)
3. Receiving (retailer a supplier)
4. Returning goods (retailer a supplier)
5. Billing (retailer s supplier)
6. Payment (retailer a supplier)

Fig.2.2.2-1 Business Processes between Retailers and Suppliers, and Ryutsu BMS Ver. 1.0

The drafted standard messages using an XML scheme were jointly tested by four retailers (AEON, Daiei, Heiwado, and UNY) and nine CPG wholesalers. After their practical utility was confirmed, the messages were released in April 2007 with the name "Ryutsu Business Message Standards (Ryutsu BMS) Ver1.0."
The four retailers participating in the pilot began operating new EDI systems based on the Ryutsu BMS in April 2007. Other retailers also started adopting new systems becoming local pioneers in the field. The majority of companies in the supermarket industry are expected to shift from the JCA Protocol to the new standard within three years.

As described above, Ryutsu BMS is gradually being put to practical use in the CPG sector. General merchandising stores (GMS) dealing in a wide variety of products - from fresh produce, apparel, home electric appliances, books, and shoes to sporting goods - are looking to replace the JCA Protocol with the Ryutsu BMS standard in other sectors as well. This is because operating the JCA Protocol and the new standard together would incur additional costs.
Ryutsu BMS Ver1.0 was originally developed for CPG. While this standard is applicable to some products as well, fresh produce and apparel are thought to require additional message types and data items. Accordingly, as part of the activities to increase the variety of supermarket merchandise to which the new EDI standard can be applied, the Project members are developing standard messages for fresh produce and apparel that require special processes.
For example, greengrocers are obliged by law to indicate the origins of the fruits and vegetables that they sell. However, the same kind of fruit or vegetable is first supplied from the southern areas and then from the northern areas in Japan because the country roughly lies from north to south and there are four distinctive seasons. In many cases, the origin of a product can be identified only at the time of shipment. This means that a data item for the origin must be added to the shipping data. Also, meat products have per-unit-weight prices. Transaction prices are determined by multiplying the unit price by the weight of each package. Because meat products vary in size and weight, data items such as "unit price" and "weight" must be added to EDI messages.
Japan's apparel industry has set no standard for the price tags attached to apparel products, so manufacturers make tags for each retailer and attach them to products (vendor marking). To cope with this business practice, a message has to be added to allow retailers to send price tag generation data to apparel manufacturers.
The standard messages for fresh produce and apparel sold in the supermarket industry will undergo joint verification in fiscal 2007. The formal release of these messages is scheduled after April 2008.
The department store industry, another category of Japan's retail business, participated in this Project in 2006. Japanese department stores are now in the process of mergers and reorganization into several groups. Regarding EDI, several systems coexist as de facto standards, and this is a factor that contributes to higher cost for major apparel manufacturers doing business with multiple department stores. Aware of the need for EDI standardization in its industry, the Japan Department Stores Association and the Japan Apparel Industry Council have been conducting joint research on the standardization of EDI messages.
In addition, the drug store chain industry started studying the standardization of product master data and EDI in fiscal 2007. This industry is interested in product master data synchronization system which will be necessary when pharmacies attach medical information documents to drugs. The document issue will become mandatory when the amended Pharmaceutical Affairs Law comes into force in June 2009.

Small- to medium-size companies constitute about 80% of the retail industry in Japan, so they are thought to hold the key to the further use of standard EDI. The widespread use of JCA-based EOS is attributed to the existence of a variety of network service providers who support small- and mediumsize businesses.
A typical example is the support given by local value-added networks (VAN), which number about 20 VANs throughout Japan. For instance, JCA Protocol use telephone lines as the communication media, which means phone connections have to be established for each party. When retailers send order data for multiple wholesalers to a VAN, the company sorts this data and distributes it to the respective wholesalers. Such a service has laid out a foundation for small- and medium-size retailers and wholesalers to readily introduce EOS.
To promote the spread of Ryutsu BMS, the 2007 Project provides support for the construction of a model built around local VAN services. Now that support for Ryutsu BMS is being recommended by multiple communication protocols, the use of VAN companies enables messages to be exchanged without concern for differences in the protocols. Also ASP services play an important role in the spread of Ryutsu BMS from the standpoint of business outsourcing. The Project aims at promoting a speedy penetration of Ryutsu BMS by increasing VAN and ASP services built around this model.
While more and more systems complying with Ryutsu BMS are put into practical use, labels for logistics units, such as shipping carton marking (SCM), are still left untouched by the standardization trend in the industry. There has been concern that these labels will cause a bottleneck in our efforts to improve the efficiency of transaction operations as well as the efficiency of the entire supply chain. Accordingly, in fiscal 2007, we began surveys and research on labels for logistics units and delivery specifications, with a view to standardizing logistics documents and forms.

Fig.2.2.4-1 Scope of the project in FY2007

Investigations on standard communication protocols for Ryutsu BMS also started in fiscal 2006. As a result, we have decided to recommend three protocols (EDIINT AS2, ebXML MS, SOAP-RPC) which have been selected from the viewpoint of global standardization, the usage rate in Japan, and prospect of widespread use among not only large corporations but also small- to medium-size companies.