ATLANTA -- Efficient Consumer Response, the industry initiative that promised $30 billion in savings from eliminating inefficiencies in the supermarket supply chain, is undergoing a series of changes.
ECR today is less about implementing four sweeping initiatives -- Efficient Replenishment, Efficient Assortment, Efficient Promotion and New Item Introduction -- and more about long-term, specific changes in business practices. Industry sources say ECR needs to encompass a series of ongoing processes to work.
For example, the efficient replenishment initiative began with a major emphasis on continuous replenishment. Today the scope of this initiative includes improved forecasting and planning through collaboration, and use of the Internet for communication.
In this environment, where ECR includes many different projects within its four basic areas, retailers and wholesalers are picking and choosing which programs fit their own agendas and priorities, based on their systems' capabilities and operational needs.
"ECR does have strategic importance to the extent that we want to become a lower-cost operator," said Wylie Fox, director of business development at Harris Teeter, Charlotte, N.C. "And by lowering our costs we can then translate that to better value for our customers. For example, cross docking has helped lower costs and provided better service to our stores as well as our customers."
These and other issues will be among the hot topics discussed at this week's Fourth Annual ECR Conference, March 18 to 20 here.
In addition, sources said that for ECR to be successful in 1998 and beyond more information-sharing and changing of internal processes and systems must take place, as well as greater use of technology, than in the past.
"ECR is the way we should be doing business," because it focuses on business practices that companies should employ for their own efficiency and growth, said Joe Andraski, vice president for customer marketing operations at Nabisco, Parsippany, N.J. Andraski serves on the ECR Operating Committee.
While Fleming Cos.' interest in ECR has not diminished since the initiative was first introduced in 1993, ECR itself doesn't look exactly like it did in the past, noted Gary Capshaw, vice president of logistics at the Oklahoma City-based wholesaler.
"Efficient receiving was easy until we got to the point of item maintenance, for example," said Capshaw, who is co-chair of the ECR Operating Committee. "Efficient promotion never went forward as an industry effort because of the legal issues."
While ECR has changed on some levels, it remains a solid infrastructure to match retailers, manufacturers, brokers and consultants to create a team to change business practices, said Tom Christal, president of Christal Co., a San Antonio-based broker. "What drove us together is keeping us together," he said. Christal pointed to his company's activities as an example. By applying the principles of activity-based costing, Christal Co. has been able to quantify all the various activities it performs for retailers and manufacturers. As a result, the broker has become more integral to its trading partners' processes.
Like activity-based costing, scorecards have been another big win in ECR. Scorecards allow trading partners to review their businesses together. Fleming reported that manufacturers of nearly 60% of its grocery, frozen- and chilled-product volume have been through the scorecard process at least twice, some as many as four and five times.
Harris Teeter recently spent time with many of its manufacturers and solicited responses on the industry scorecard, said Fox. "From what I gathered there was still interest on their part to answer the questions on the industry scorecard," he said.
But while some ECR initiatives like scorecards are working to change business practices and get trading partners to talk to one another, other programs, such as technology to enable greater use of electronic data interchange, are more challenging because of the time and costs involved.
"We are like a lot of other companies that have found the technology piece of ECR is more expensive and more difficult than anyone really expected going in," Capshaw said.
For example, Fleming's timetable for item maintenance, an EDI transaction allowing manufacturers to transmit item characteristics to their distributors or retailers, has been "pushed back some," Capshaw said. Advance ship notices and Uniform Code Council-128 pallet tag technology are "still on our radar screen, but we still have not been able to get to it."
Many companies are still uncertain about the return-on-investment for ECR programs, especially those involving use of new technologies. Susan Buddenbaum, manager of education, consumer goods and retail at CSC Consulting, El Segundo, Calif., said that while ECR is sparking greater usage of EDI, for example, justifying the cost is still a major issue.
"There is a need in many companies for top management to understand what they are reaping from ECR," she said. "Companies need to work hard to capture the profit-and-loss impact of ECR."
This issue, she said, is being addressed by a new tool under development that allows a company to use its own numbers to demonstrate to senior management the effect of a specific ECR program on a profit-and-loss statement.
However, some retailers charge that ECR initiatives can't change business practices when the programs are too vendor-driven and not in tune with their needs.
"To us right now, ECR means a bunch of efficiency programs being offered by vendors," said a supermarket retailer who requested anonymity. The problem is "these are inefficiencies from the vendor perspective, but from our perspective they might be normal operating procedures and we have legitimate grounds for doing them."
A good example is off-loading of trucks within two hours, said the retailer. "The vendor has paid a lot of money for a pallet and he wants to turn it, and the only way to do that is to get a carrier in and out of our building," he said. "However, we will hold the truck up if we have to devote our time to something else," particularly if it is related to a store's needs.
In addition,
"Two hours for every load doesn't [always] make sense," he said. "Different loads may take different times. So it's not an entirely credible goal to achieve."
In addition, while it may be more efficient for a vendor to ship a whole pallet to a retailer's warehouse, a half-pallet may fit a retailer's needs better. "This concept of pallets moving across the supply chain doesn't really work," unless it's for high-volume moving products, he noted.
That said, even this vocal critic conceded ECR does offer value when trading partners work closely together. To this end, the retailer said its organization has six different efficiency programs in place, all of which have receiving, order quantity and electronic transmission of data as their cornerstones.
