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Efficient Consumer Response (ECR) | Marketing Concepts.

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The ECR (Efficient Consumer Response) or efficient consumer response is an initiative North American, involving at the time, the entire food industry. The objective of this initiative was to develop a system oriented to the client in which manufacturers, brokers and distributors work together to maximize the value of consumption and minimize supply chain costs.
The main driver of the ECR in the United States was a noticeable increase of more sophisticated consumers in its demands, requiring:
best quality - largest variety - best service...
for less money - in less time - and reduced complexity in the information, to make more educated choices.
It is in the middle of 1992, when the leaders of the industry food, worried about the loss of competitivity agreed to create a working group called "Efficient Consumer Response (ECR) Working Group". This Committee was responsible to examine industry supply chain food and their business practices, in order to identify opportunities to modify practices.
With the same purpose were they responsible for studying technologies that could make more competitive supply chain. His other task was the improving relations among the partners of industry food, which in the course of time, it had developed aggressive practices of competition, which made that each party involved would like to make profits at the expense of the others.
ECR Working Group asked the KSA company make the analysis of the supply chain. This company had been responsible the development and introduction of the Quick Response System, in the industry of goods. KSA was commissioned to study the value chain store/supplier/distributor/user to determine improvements in the costs and services that industry food could get, through changes in technology and business practices.
Two basic types of ECR can be considered:

Collaboration in operations

Search for synergy and the reduction of costs in all transactions between customer and supplier.
It is an optimization of the physical parameters of the logistical system and optimization in communication and data transmission.
It is done with the aim of reducing or eliminating all activities that do not add value to the product and aims to the integration and close collaboration between customer and supplier.
Different techniques have been developed in this area between the most used are:
  • EDI - Electronic Data Interchange . Electronic communication of data from orders, invoices, etc.
  • EPOS - Electronic Point of Sales . Provider connection with point of sale scanners to meet demand in real-time, basic to trigger more effective supply and system as the basis of the demand for products and the behavior of customers.
  • ER - Efficient Replenishment. It is the provider which is responsible for determining order quantity, time and frequency from a few criteria agreed with the customer.
  • ASN - Advance Shipping Notes . Communication advanced on delivery dates and quantities that must be supplied to facilitate the delivery, customer post-installation tasks.
  • EOS - Efficient Operations Standard. Agreements on procedures allowing to improve the operation of distribution:
    • Types and height of pallets.
    • Bar codes of identification products, boxes and units of expedition, and pallets.
    • Synergy in the transport in order to fill the most trucks in the way of back and forth (to avoid displacement without goods).
    • Coordinate the demand and reliability of transport to facilitate the management of the new logistics platform converted into transit without permanent inventory stores.
  • DSD - Direct Store Delivery . Integrated management by the supplier for the delivery of goods directly at the point of sale.
  • CAO - Computer Assisted Ordering . Design of the order of the final client with computer support to form the demand made custom for that customer, choosing between the different alternatives and options that presents the product and direct communication of the order the supplier from the same point of sale terminal.
  • EA - Efficient Administration . Integrated management of the database of the productos-opciones, options, prices, etc-, orders, invoices, payments, claims, etc.
  • DPP - Direct Product Profitability . Standard way to determine the profitability of the product to the customer, considering not only the commercial margin, but also the rotation of the product.
  • SPACEMAN - Extension of the previous one in that the profitability of the product is measured according to the surface and the dedicated financial investment said product.

Collaboration in Marketing

Focused towards an increase in sales and an improvement in margins. The benefits of this collaboration focuses on an increased ease to capture growth opportunities in areas of activity, a rationalization of the investments promotion, merchandising and product development. There are three basic areas of collaboration:
  • That- Efficient Store Assortment . The decisions taken by the retailer to maximize sales (such as the distribution of space exposure, localization of the product, product range, political price, brand, etc) are shared with the provider. In this way more important, benefit since it contributes its specialized knowledge about the product and the type of consumer.
  • EP- Efficient Prmotion . Supplier and retailer collaborate in promotional campaigns that can cover three different areas:
    • Development of sales through consumer-oriented campaigns.
    • Cost reduction using techniques promote more rational ( couponing and elimination of packs special)
    • Reduction of speculative purchases that hinder efficient logistics programming.
  • EPD- Efficient Product Launch and Development . The introduction of new products is essential in the commercial activity since it improves the position of the supplier against the competition and the retailer providing products better adapted to the needs of the client. The collaboration comes both in this field focuses on the fronts:
    • New product development and launch.
    • Development of white marks (marks with the name of the Distributor and not the manufacturer)

The components of ECR

  • Logistical aspects Logistics are composed mainly by activities related to the physical movement of goods and the flow of information that accompanies them throughout the supply chain. In this sense, be taken into account among others, practices of sourcing, generation of replacement, purchase orders and handling of products. In this field the ECR has defined a basic strategy known as continuous replenishment
    This strategy of ECR proposes the modification of the current logistics supply chain taking it from a "push" system to a "pull" system, in order to meet the real demand of the final consumer. Its objective is to minimize the time, inventories and costs throughout the supply chain.
    Continuous replenishment model is to integrate different replenishment cycles in one comprehensive, placing the consumer as the first link in the chain. The integration of the supply chain requires the intensive use of EAN system. The barcode of product and packaging becomes a fundamental element of identification throughout the chain. The EANCOM standard for electronic interchange of documents allows the flow of information without papers.
  • Commercial aspects These aspects include the three remaining strategies of ECR: assortment, promotion and efficient introduction of new products. The objectives of this strategy mainly associated with an increase in sales and a higher level of customer satisfaction, ensuring their loyalty to the product and chain.
    The basis for the achievement of these objectives consists of the implementation of a process of managing categories, where the supplier and the client work together, sharing information and decisions in order to optimize the supply of products to the consumer, increasing total sales and maximizing the profitability of the companies, to define the categories of products such as strategic business units.

The four strategies of ECR

There are four strategies on which works ECR. On the logistic aspects, find one:

Efficient replenishment

Efficient replacement model aims to only provide the right product, at the right place, in the right amount and as efficiently as possible. I.e., which requires a joint effort between supermarkets and suppliers to generate a flow of information, unique, accurate and on time throughout the supply chain.
That way it's getting:
  • Reduction of missing sales increases.
  • Reduction of inventory in the supply chain / cost reduction of obsolescence.
  • Cost reduction management order, storage, handling, transport by shortening the supply chain.
With regard to commercial aspects (Category Management) efforts are directed to:

Efficient assortment

The retailer must have the right assortment to satisfy the needs of the consumer. This is important to the efficient use of local and gondola, offering consumers products that really demand.
The right assortment allows:
  • The increase in revenues and margins per square meter.
  • The availability of product for the end consumer.

Promotion / price efficient

This technique defines procedures for promotions to achieve the expected results. Actions for each category are designed and adapted to each local sales, obtaining greater profitability. In this way it aims to get suppliers and retailers:
  • Increase of sales by market segment, form and time of promoting optimal selection.
  • Reduction of costs of production, storage and distribution by induced seasonality.
  • Reducing costs of management and control of the promotions.

Efficient releases

The goal is to optimize investments in development and launch of new products that better meet the needs of consumers, reducing the amount of releases failed to market. They get this way:
  • The reduction of unprofitable releases.
  • The optimization of the profit margins obtained from the releases.
For these business objectives to achieve success, the implementation of the Category Management (categories Administration) is essential. It is the selection or choice of product groups (categories) which are managed as strategic business units. This includes marketing, storage, supply, determination of price, variety and introduction of new products, so that you maximize the potential of each category. In turn these actions require the use of data from point of sale to develop strategic plans, spaces for product tracking and measurement of the performance of the category.
The system takes companies to focus on categories that offer the best return increasing your sales per square meter.

Pillars and goals

Efficient Consumer Response rests on three basic pillars: providing value to the consumer; removing costs that do not add value, and maximize value and minimize inefficiencies through the supply chain. Goals, in turn, are summarized in four brief and blunt statements: provide consumers of products and services that they want; reduce inventory; eliminate paper transactions, and modernize the product flow.
In this way, more than a tool, ECR, constitutes an organizational change, and involves rethinking the business. Therefore your success is unthinkable if it is not made from:
  • A profound organizational and cultural change of the company as a whole.
  • An Association of type win-win between supplier and retailer that leads to a list of business partners. This new scheme will require greater openness between the parties, and exchange of information that currently is considered confidential.
  • The incorporation of the basic tools: use of technologies for information about demands; communication between mouths, deposits and central administration systems; and standard coding level product, container continent and pallet.

Implementation

ECR implementation can be divided into four stages.
  • It consists of dividing all business in categories and establish strategies for each of them. A boss or Manager of categories may have to charge one or more categories and will be its responsible for covering the entire process, from negotiation of purchase, stock management, marketing policy, the location of the product in the gondola, and finally the sale.
  • It refers to the implementation of the Category Management. At this stage they can be implemented all categories at the same time, or incorporate them gradually to encompass a whole. It is necessary to define indicators that will measure the performance of each category, such as: sales and gross profits, margins on sales, marginal contribution, days of stock, rotation etc.
  • It consists in extending the process of management of categories to the provider. Provider should adapt its structure to establish a more fluid communication with the person in charge of the category.
  • It refers to the continuous provisioning. The central idea is that purchase orders or orders not made, but the supplier to receive figures sales, through the use of EDI, deliver on time and products.
As you can see, implementing ECR implies a profound change in the customary practices of doing business. It's redesign processes and change attitudes. However, the ECR is not only for big companies. All firms, regardless of their size, can adopt the processes, technologies or avail themselves of some of the tools proposed by ECR. To provide consumer products you need, and in the time and form appropriate to their needs, is the door that opens up the space to greater and better benefits for the entire chain of value.

Requirements to carry out ECR

There is a set of fundamental factors so that the benefits can be achieved by companies that incorporate the model ECR as a new business scheme.
  • Organizational and cultural change deep, perhaps the most difficult to achieve.
  • Association of the type win-win between supplier and retailer that leads to a list of business partners. This new scheme will require greater openness between the parties, exchange of information, currently considered as confidential and development linkages of greater trust between organizations.
  • Incorporate basic tools of the ECR model: EDI, POS (point of sale) to collect information about demands, communication systems between mouths, deposits and central administration and standard coding level product, container continent and pallet.

Achieving this depends on:

  • Commitment to the initiative.
  • Training.
  • Leadership.
Published for educational purposes
Concepts of Leadership and Marketing

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