Online Mba wiki

What is Efficient Consumer Response

Efficient Consumer Response (ECR) is a joint trade and industry body working towards making the grocery sector as a whole more responsive to consumer demand and promote the removal of unnecessary costs from the supply chain.

It is all about change and continued improvement in the grocery supply chain. The three pillars of ECR are:

• Providing consumer value.
• Removing costs that do not add value.
• Maximizing value and minimizing inefficiency throughout the supply chain.

To implement ECR, distributors and suppliers are making fundamental changes in the business process using today’s technology tools. Their goals are clear:

• Provide consumers with the products and services they want.
• Reduce inventory.
• Eliminate paper transactions.
• Streamline product flow.

What Are the Components of ECR?

Successful retailing involves making sure that stores are stocked with the right products at the right prices at the time the consumer wants them. The 1993 publication Efficient Consumer Response – Enhancing Consumer Value in the Grocery Industry defined four major strategies within ECR, each of which creates value by satisfying consumer needs for product, convenience and price:

• Efficient Store Assortment – addresses how many items to carry in a category, what type of items and in what sizes/flavors/packages, and how much space to give to each item. This is closely linked to category management.
• Efficient Replenishment – focuses on shortening and eliminating costs in the order cycle, starting with accurate point-of-sale data. Includes efficiencies to be gained by using continuous replenishment programs, EDI, cross docking, computer assisted ordering and new receiving techniques.
• Efficient Promotion – addresses inefficient promotional practices that tend to inflate inventories and practices, whose effects may not be fully passed through to consumers to influence their purchase decisions.
• Efficient New Product Introduction – addresses improving the entire process of introducing new products, which is subject to high failure rates, thereby bringing extra costs into the system.

Focus areas of ECR

ECR has a few starting points. Firstly the definition shows that consumer demand plays an important part. The chain has to ensure continual improvement of consumer satisfaction, products, and quality. Secondly, the definition also shows that maximum efficiency of the total logistic chain is required. The realization of the two starting points cannot be done without accurate information, which must be available when needed. To keep the costs low, it is preferred that this information and communication is paperless. To accomplish these aspects of ECR, three focus areas can be distinguished:

1. Category Management,
2. Product Replenishment, and
3. Enabling Technologies.

Enabling Technologies

Category Management and Product Replenishment, and especially the joint aspects between retailers and manufacturers are confronted with a few barriers. To overcome these barriers Enabling Technologies are needed to make Category Management and Product Replenishment work.

A lot of data about demand and supply at SKU level will need to be moved around and manipulated to determine optimum solutions. Electronic Data Interchange and Electronic Funds Transfer are two ways to do this on the scale required. Item Coding and Database Management are necessary to track products accurately at SKU level. Finally, Activity Based Costing (ABC) ensures that decisions are taken based on the actual cost of doing business and not on what accountants or others assume .