CORONADO, Calif. -- New category management and customer service technologies are paying off for Pillsbury Co.
The Minneapolis-based marketer of Grands biscuit dough and Niblets canned corn said its efforts are yielding better retailer in-stocks, combined with lower inventories and unsalables. The company has successfully eliminated most off-invoice deductions and expects to have fully paperless ordering, invoicing and payment systems on-line by this fall.
Pillsbury reported on its Efficient Consumer Response progress to several dozen supermarket executives invited here to attend the finals of the 36th Pillsbury Bake-Off cooking contest last month. It used the Bake-Off event, which caps its most important ongoing trade and consumer promotion effort, as an opportunity to reward and educate its trade partners.
"ECR has been the most talked-about innovation since the arrival of point-of-sale scanning," said John Mann, senior vice president of sales. "But it is about a year old now -- I think it is time for more action and less rhetoric."
Data-based category management is the central activity on the demand side of the ECR equation at Pillsbury, said Scott Glatstein, director of customer marketing.
Glatstein analyzed how category management techniques were impacting upon Pillsbury's highly seasonal prepared dough business. "In some categories, Pillsbury does 50% of its business in seven key weeks of the year, Thanksgiving, Christmas and Easter," he said.
For such seasonally driven products, category management techniques can help determine the best level of inventory buildup and the dates when merchandising begins and ends.
Nielsen Weekly Data has shown how in some cases shifting a freestanding insert drop or in-store display by as little as one week can have a 50% negative impact on its sales effectiveness, he said.
"Such tight windows mean you have to know your consumer," said Glatstein.
This year, Pillsbury is capitalizing on this insight in five ways:
· Building demand through "holiday cues," such as TV commercials.
· Timing consumer events such as FSIs "precisely right." · Using research insights to focus consumer events.
· Timing merchandising events just as carefully as consumer events. · Matching distribution and shelving to anticipated demand.
On what Pillsbury refers to as ECR's supply side, it relies on three key technologies it calls the electronic buy, continuous replenishment and demand invoicing, said Susan Phillips, vice president of strategic customer service.
"In the last four years Pillsbury invested significantly in EDI and UCS technology, which takes people, paper and time out of the process," she said. "Our goal is to be completely paperless by September of this year."
Phillips said that by using EDI, 70% of Pillsbury's purchase orders are being transmitted and 50% of its invoices.
She added, "Transmission of price, promotion, item specification and electronic funds transfer are in pilot programs with several customers and scheduled for rollout in June."
The main benefits of the electronic buy are cost reduction, faster inventory replenishment cycles, staff productivity gains through process changes and increased accuracy.
As Pillsbury defines it, continuous replenishment means a vendor-managed inventory system based on point-of-sale data. This requires trust and two-way communication, said Phillips.
Phillips cited results of Pillsbury's 12-month continuous replenishment pilots:
· Customer case fill levels rose from 96.5% to 99.8%, indicating virtually no out of stocks. · Inventory levels were reduced by 50% since it is now sufficient to keep about one week of coverage on hand. · Sales volumes increased from 5% to 20%.
· National off-invoice deductions have been virtually eliminated.
· Shelf freshness improved 50% and as a result unsalables went down by 40%.
Based on the success of the pilots, "Our target for 1994 is to expand continuous replenishment in the prepared dough business. This category is a natural for this."
Demand invoicing at Pillsbury enables field promotion funds agreed by both parties to be given off-invoice as either lump sum or case rate, reducing the need for deductions.
"Deductions are a $10 billion industry issue, each deduction has a processing cost of $220. That is equivalent to 45 million instances generated," Phillips said.
She said Pillsbury field funds deductions have declined from 52% in 1991 to 25% in 1993. Projected goal for 1994 is 15%.
"Our ultimate goal is to eliminate wasted hours spent by Pillsbury and its customers resolving matching issues. Up to 25% of account people's time has been spent reconciling deductions."
Phillips said the convergence of category management with electronic buy, continuous replenishment and demand invoicing technologies means every brand marketer must continually improve.