What is ECR?
In the current economic climate, the profile of each individual company is under pressure because of the prevailing forces of change brought about by increasing consumer demands, rising operation costs, increased competition, and rapidly changing technology. The traditional operation strategy cannot, therefore, satisfy consumer needs while keeping opening costs low.
ECR (Efficient Consumer Response) is a new initiative that focuses on improving the efficiency of every member of the whole supply chain process, to satisfy consumer needs better, faster and cheaper. The ECR program involves the co-ordination of activities among all participants in the supply chain in three main improvement areas, which are:
- Demand management
- Supply management
- Enabling technology
ECR is a consumer-focused process which starts from the management of consumer demand, working backward through retailers, suppliers, and suppliers to increase efficiency and remove unnecessary supply chain costs such as inventory, excess administration and empty shelves.
Three areas of ECR
Demand Management
Managing demand is a very critical success factor in ECR implementation because the unexpected change in demand pattern will affect the smoothness of the whole supply chain operation. There are four main areas in demand management: Strategy and Capabilities, Optimise Assortment, Optimise Promotion and Optimise New Product Introduction.
Supply Management
As important as demand management, the improvement of the supply-side activities lead to significant savings by increasing the operation efficiency, reliability and reducing inventory costs. The six supply improvement activities are: Integrated Supplier, Reliable Operation, Synchronised Production, Cross Docking, Continuous Replenishment and Automated Store Ordering.
Enabling Technologies
The implementation of ECR improvement cannot be done successfully without the help of technology. Another critical success factor is the speed of information-sharing among all participants in the supply chain. The integration of this information, therefore, requires the installment of a rapid communication system such as EDI (Electronic Data Interchange).
Expected Benefits
Benefits in Thailand have been shown to be a significant cost reduction of consumer prices (estimated to be more than 35 billion baht for the whole supply chain). This figure does not include the potential increase in sales expected to be achieved by the companies who have adopted good ECR practices. By working together as an integrated supply chain organisation, all parties can achieve benefits from the implementation of the ECR concept in contrast to what an individual company can realise by doing it alone.
Examples of Tops commitment to ECR
Continuous Replenishment
Since the beginning of 1999, Tops Thailand and Procter & Gamble enjoyed a closer relationship with a view to achieving greater customer satisfaction at less costs. Both companies agreed to start a logistics project called “Continuous Replenishment Project” (CRP). Continuous replenishment makes the supplier responsible for the automatic, regular and frequent ordering and supplying of stock within the supply chain. In this way, replenishment orders are usually generated automatically. The objectives of the project are to achieve the right product mix in the right local stores to meet customer needs, to reduce the time and costs involved throughout the entire chain and to minimise inventory levels by creating flexible, demand-based ordering and replenishment.
The principle of CRP is that Procter & Gamble dailyvers replenishment shipments triggered by demand communicated by Tops, either based directly on EPOS (Electronic Point of Sales) data from stores or based on shipments determined upon the frequency of dailyveries to the Distribution Center and minimum order quantities that are cost effective to dailyver. The data is ideally communicated immediately and automatically via EDI links. CRP cuts out unnecessary work in determining what to order and when. Because the process is largely automatic, it can also reduce administrative work by eliminating paper-based orders and increase the quality of the ordering. CRC. Ahold will benefit by reducing stock because less additional safety stock is needed. Procter & Gamble will benefit from regular demand, based on regular sales as the reliability increases safety stock removed from the system. And last, but certainly not least, the customer will benefit by improved product availability and increased customer services.
Next steps
Tops is looking forward to having similar projects with more suppliers and forging a closer relationship with them. Tops' suppliers are, therefore, invited via their normal contact-person to plan the next step to get ECR implemented.
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