ORLANDO, Fla. -- The customer is king. And until retailers and manufacturers place the consumer first on their list of business priorities, Efficient Consumer Response will never succeed.
That was the message delivered during a panel discussion about ECR at the ninth annual Information Resources Inc.'s Apollo Users Group International conference here.
"Too frequently we focus in on what our success is in our organization without focusing in on the success of our customers," said Rich Sherman, senior vice president of LogicNet, a division of IRI, Chicago.
"But if we begin the negotiations by helping our customers meet their needs first, the chances of us getting into a win-win relationship are much, much greater," he said.
The key to achieving the goal of placing the consumer first, and developing a more efficient and effective overall food industry, according to speakers at the conference, is category management.
"You have to build the foundation before you build the house. You have to understand what drives the category, where the opportunities are. In our view, category management is probably the foundation of the process," said Jim Hooks, vice president of trade development at Continental Baking Co., St. Louis.
Under the ECR scenario, distributors and suppliers would work closely together to bring better value to the consumer. The value would be achieved, in part, through better product assortment, better in-stock service, better convenience and better prices, all delivered through a leaner, faster, more responsive and less-costly supply system.
To get there, though, will require considerably more work,
including detailed category management analysis, on the part of all segments of the industry, speakers said.
"If you look at some of the projects on category management, you typically find that 30% to 40% of the items generate 60% to 70% of sales. On the other side, 20% to 30% of items may be responsible for 70% to 80% of product mark downs and spoils," Hooks said.
To improve on these figures, retailers look at and emulate productivity tactics now being employed by other retailers, both in and out of the supermarket industry.
"Regardless of the type of retailer you are, there is nothing to prevent you from using [programs] such as space management. That is something that can be done today. It is not something just limited to Wal-Mart and Kmart. We even deal with convenience store operators who have made incredible strides," Hooks said.
LogicNet's Sherman said the industry must also examine its distribution practices on a more realistic and widespread basis if ECR is going to work.
"When we go out and evaluate inventories, generally we are looking at inventories in the warehouse. We're not even thinking about the inventory that is traveling the highways or sitting in a truck out in the parking lot," Sherman said.
"We have to look at how we are moving product, how well we can move product, and if we can match the actual production with the actual consumption by the consumer," he said.
"There is an inventory of 120 days of velocity in the channel. If we take bar soap that means we have 120 days of supply sitting in the channel. If you multiply that by 350 different types of bar soap, then we have a 100-year supply of soap in the channel right now," he added.