MANAGING TO CHANGE

Managing the technology of Efficient Consumer Response is complex, but many believe the human element is the far more difficult issue to address.For the ECR initiative to succeed, a host of fundamental changes will have to take hold in how all segments of the industry -- from retailers to wholesalers to manufacturers to brokers -- work with each other.Included in the "paradigm" shift that ECR requires:

Managing the technology of Efficient Consumer Response is complex, but many believe the human element is the far more difficult issue to address.

For the ECR initiative to succeed, a host of fundamental changes will have to take hold in how all segments of the industry -- from retailers to wholesalers to manufacturers to brokers -- work with each other.

Included in the "paradigm" shift that ECR requires: the sharing of sensitive information with companies that once may have been viewed as business adversaries but today are trading partners; the revamping of internal organizational structures, and the changing roles of many employees.

"It is largely accepted that the human element will be the most crucial factor in determining the success of [ECR] for any individual company," states an executive summary scheduled for presentation at this week's Food Marketing Institute convention in Chicago.

The difficulty of making these types of changes, which are considered necessary for implementing many of the ECR programs, was clearly cited by several industry executives.

"The technology is not simple, but most of the time it's easier to overcome technical problems than the business process issues you come across," said Rick Rowan, manager of electronic data interchange communications at Fleming Cos., Oklahoma City.

Rowan said Fleming encountered, and eventually overcame, many roadblocks during the wholesaler's implementation of EDI -- a key component of today's ECR initiatives.

"As we developed [EDI] transactions, we had to go out and sit down with the people who would use them daily -- buyers, the accounting department, distribution -- all facets, especially merchandising," he said.

Fleming began that process all the way back in 1985 when it first began testing some EDI transactions. Today EDI is in use extensively at 31 of Fleming's 34 distribution centers, Rowan said.

John Dickson, chairman and chief executive officer of Roundy's, Pewaukee, Wis., and co-chair of the joint-industry ECR task force on wholesaler and independent retailer issues, also cited the difficulty of enacting the type of change envisioned under ECR.

He compared the supermarket industry's ECR initiative to national health-care reform. "Like health care, everything's not going to change overnight," Dickson said.

"The technology is there; the enablers are in place," added another executive, who asked not to be named. "The critical issue -- the biggest impediment to moving this thing forward -- is the culture." In a similar light, Ralph Drayer, vice president of product supply and customer development at Procter & Gamble, Cincinnati, and co-chair of the joint-industry ECR best-practices committee, stressed that proper communication throughout the organization, to help enable change to take place, is crucial.

Although the top management of most of the industry's key companies support ECR, middle management may not understand its benefits and thus may resist making substantial changes.

"There's a continuing need to communicate [with] and educate middle management," Drayer said. "The message is not getting to the buyer/sales level as often as it should."

ECR clearly will mean considerable organizational change and it will entail trade-offs, stressed Jerry Golub, director of trade and inventory effectiveness at Price Chopper Supermarkets, Schenectady, N.Y.

"ECR may, at times, require a company to give something up to get something of greater value," said Golub, who is co-chair of the ECR holistic work group charged with studying the issue of organizational change.

"More labor may be needed at distribution centers to save labor at the stores -- for example, palletizing the right numbers [of cases] in the right order so it's easier to stock store shelves," he said.

Manufacturers may be called upon to review pack sizes. If cases of 12 items place a three-week supply on store shelves, a nine-pack may prove to be more efficient. That example would entail additional cases going through the system, but would reduce costly inventory on the shelf and free valuable shelf space, Golub said.

In some instances, what are perceived as barriers by some, though, are seen by others as benefits of ECR.

For example, the shift away from forward buying and diverting, which some wholesalers oppose, has been sought by many in the industry for years.

As part of the ECR holistic work group, "we did a study on the management of organizational change," Golub said. "In it, we tried to identify the common themes that are key to any company's ability to successfully manage large-scale, cross-functional change," whether it is for ECR or some other goal.

The work group found:

CEO sponsorship of ECR is crucial, as is a designated "process champion" and a "process implementer."

Cross-functional teams are critical.

Communication efforts must not only inform, but should also enroll support.

Conducting ECR pilot programs are important for reducing risk and creating a learning environment.

Fear, anxiety and skepticism must be addressed; employees need to know how changes will affect them.

In addition, the group advises that ECR implementation is not a project with a recognizable starting point or completion date, but rather it is an ongoing process.