Efficient Consumer Response

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Introduction

Efficient Consumer Response (ECR) is a concept that originated in the United States in late 1980s and early 1990s. ECR emanated from the threats of substitute stores and their supply chain. Trippet (1995) defined ECR as a concept that ensures the grocery chain work smoothly and proficiently in serving the consumers wants (Perona, M. 2004).

ECR makes supply chain more competitive as well as bringing value to the consumer. They are four initiatives that define the Efficient Consumer Response. They include: efficient store assortment, efficient promotion, efficient product introduction and product replenishment (Kurt salmon associates, 1993).

Efficient store assortment – enhances the efficiency storage space use by reducing duplicate merchandise.
Efficient promotion – This is achieved by introducing better alternative promotions such as paying for performance.
Product introduction- this entails the development and promotion of new products to the industry
Product replacement- this is done through a replacement of the damaged products.

Benefit of ERC to supply chain

ECR enhances the efficiency between channel members, reduces time between billing and payment, aid in establishing a paperless system and eliminate excess costs (Morgan, R.1999). The sharing of the information in the supply chain enables the companies to have efficient inventories.

ECR ensures that the manufactures, wholesalers and retailers work together as partners and this reduces the total operating cost, inventories and physical resources that are required during the distribution process (Brockman S. 2002). The inventory strategy which is a part of ERC processes involved in the supply chain enables the efficient delivery of better raw materials that results to production of high quality products which in turn satisfy the consumer (Coopers, L1998).

In ECR ensure that the supply and distribution chain run effectively and efficiency. ERC also ensures that there is smooth movement of goods in a warehouse with a minimal disruption and handling of goods. ERC also, plays a big role in labour saving hence enabling the supply chain to gain profit. ERC improves flow of the product from manufacture to retailer.

How ERC increases profit in the supply chain

The ECR strategies have greatly led to increase of profit to the supply chain. ECR enhances the creation of a suitable, accurate, and paperless flow of information and it relies on electronic data exchange (EDI). This efficient flow of information between partners ensures that there is a strategic alliance between the supply chain members. The good relationship between the chain supply partners improves financial performance.

This is achieved due to shorter cycle exchange of information (Sansolo, 1993). These strategies enhance conditional efficiency in the chain management which increase profit (Brown, T.A (2001). The ERC goals take out the supply chain costs that are not of consumer value. ECR advances the competence of the chain supply to lessen costs while streamlining these operations. ECR diminishes time and reduces costs in the production of materials.

Another impact of ECR is it ability to increase the value adding processes of the product making them best. ECR is composed of strategic initiatives, operational programs and number of enabling technologies that improves it activity and making them effectively. Also, products that are not performing well in the market are replaced with other products so as to improve the quality and value of the goods supplied this led to increase in profit.

How ECR increases efficient in supply chain

The Computer Aided Ordering (CAO) enhances efficiency and the smooth movement of goods from suppliers to consumer. CAO is an effective way of meeting consumer needs as orders are well edited and properly stored. The information in these electronic catalogues is usually electronic in nature and this enables faster communications through the modern methods of information transfer such as the internet and mobile phones.

The trade partners are able to receive first hand information faster regardless of the part of the world they may be. This leads to the increase of efficiency of the total supply chain and encouraging inter- operability of world wide. The sharing of the information in the supply chain enables the companies to have efficient inventories.

Category Management (CM) enhances an interactive business process whereby the retailers and manufactures work together to manage supply chain (M. Arango, 1999).This strategy enhances the efficiency in flows of the goods in the supply chain.

How ECR decreases cost in supply chain

The ECR program is supported by a number of technologies in decreasing the cost in supply chain management; these are barcode/scanner, Electric Data interchange (EDI), Computer Aided Ordering (CAO), crosses docking and Action Based Costs (ABC) Computer Aided Ordering (CAO), it objective is to speed up store replacement process and ensures that products are ordered on time. The main benefits of CAO are labour savings; dependability and inventory reduction (J.M. Griffin1998).

The labour saving enables the supply chain to reduce the production cost as they employs fewer employees (King, R.P, 1996) Electronic data interchange (EDI) link the local and international exchange of commerce document in a machined processed form hence reducing the transportation cost.

Activity based costing (ABC), this new costing tool ensures that all activities are linked to their costs. Through ABC costing, the costs of various activities are known and this enables the managers to determine costly activities and develop methods of reducing these costs. Continuous replenishment is also used in controlling and monitoring the goods movement from the manufacture to the distributor (Perona, M. 2004).CRP reduces the distributor’s inventory cost hence cut off the production cost.

How ECR decrease the risk in supply chain

ECR decreases the supply chain risk as it emphasis on production of high quality product to consumer and hence reduces the risk of reluctant for buying the products (Kurnia, S & Johnston, 2001).ECR ensures that the products that reach the consumer are of high quality and are fresh.

The inventory strategy processes involved in the supply chain enables the efficient delivery of better raw materials that results to production of high quality products which in turn satisfy the consumer. This is crucial as it ensures that the customers receive products on time and any complains from them is solved amicably.

The positive handling of the consumer feedback about the good help the supply chain improves on the product. ECR advocate for smooth working relationship among the supply chain hence reduces the risk of miss communication and mistrust.

How ECR decrease the inventory cost in the supply chain

Continuous Replenishment Programme (CRP) has been used in controlling and monitoring the goods movement from the manufacture to the distributor (Greenbaum, J.1997). CRP reduces the distributor’s inventory costs. CRP) enhances partnership practises among the members of dissection channel by allowing products to move from manufactures to customers (Ellram, L & Weber, M 1989).

This led to decrease in the inventory cost. Computer Aided Ordering (CAO), it objective is to speed up store replacement process and ensures that products are ordered on time leading to decrease in price.

Impacts of ECR on supply chain

ECR has resulted to increase in profit as it provides a platform for efficiency working relationship among the partners in supply chain. ECR enhances the efficiency between channel members, reduces time between invoice and payment, aid in establishing a paperless system and eliminate excess costs (Hall Edward & Mildred Hall, 1990).

The sharing of the information in the supply chain enables the companies to have efficient inventories. This sharing of information helps in strengthening the efficiency in supply chain management (Holms. J, 1998). ECR eliminates the supply chain costs as well as improving it production and distribution.

ECR has linked the manufactures, merchants and a vendor to work together in achieving their objective goals hence reduces mistrust among the partner. ECR has also led to decreases in the inventory cost. ECR has also led unswerving flow of products at the distribution centre to the receiving shipping centre. This helps in eradicating additional handling and storage steps in the distribution cycle.

How is (ECR) Impacts the Inventory Strategies?

The inventory strategy processes involved in the supply chain enables the efficient delivery of better raw materials that results to production of high quality products which in turn satisfy the consumer (Brockman& Morgan, R. 1999. Cross docking strategies enhance flow of products at the distribution centre to the receiving centre.

This helps in eradicating additional handling and storage steps in the distribution cycle. Cross docking ensures the movement of goods in a warehouse with a minimal disruption and handling of goods. The method decreases the inventory cost (Brown, T.A. (2001).Barcodes and scanners are used to note the information about the products number and this aid in tracking the movement of goods and help the businesses keep track of all the products in store and those that have been sold.

Efficient strategy

Many companies have put efforts to make their supply chain efficient in reducing costs. These strategies great help in achieving budgetary constraints and requirement which are essential in the running of companies. To achieve efficiency many framework are available in literature such as the Efficient Consumer Response (ECR), and competitive advantage among many others.

These strategies enhance conditional efficiency in the chain management.ECR advances the competence of the chain supply to lessen costs while streamlining these operations. ECR improves product flow by to minimizing inventory of supply chain and make cash flow faster.

ECR ensures that the products that reach the consumer are of high quality and are fresh. This is due to the fact that raw materials reach the company on time and this enables the production and distribution of the finished products on time and at the right place. ECR have dealt with challenges of shortages as well as mistrust in the supply chain (Brown, T.A. 2001). ECR maintain the supply chain in remaining competitive and advancing on competitive advantage.

Conclusion

Efficient Consumer Response (ECR) enables the chain management suppliers to work together to fulfil consumer wishes better, faster, and at reduced cost.

Cost saving, supply efficiency and profit increase can be gained from the implementation of the Category Administration (CM), Continuous Replacement Program (CRP) barcode/scanner, Electric Data Interchange (EDI), Computer Aided Ordering (CAO), cross docking, and Activity Based Costing (ABC) among others strategies of the effective consumer response.

ECR is designed to restructure the supply sequence from the supply push structure to the pull structure where the merchandise is controlled by the consumers demand at direct sale.

References

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Ellram, L & Weber M 1989, “Retail Logistics”, International Journal of Physical Distribution & Materials Management, vol.19 no.12, pp.29-39.

Greenbaum, J. M 1997, “Efficient Consumer Response: How software is remaking the consumer packaged goods industry”, Software Magazine, vol.17 no.1, pp 38-48.

Hall Edward & Mildred Hall, 1990, “Understanding Cultural Differences, Intercultural Press. Strategy for Grocery Businesses”, International Journal of Service Industry Management, vol.11, no.4, pp.365–370.

Holms. J. 1998, “Implementing Vendor-Managed Inventory the Efficient Way: A Case Study of Partnership in the Supply Chain”, Production and Inventory Management Journal, vol. 39 no.3, pp1–6.

King, R & Phumpiu, P 1996, “Reengineering the Food Supply Chain: The ECR Initiative in the Grocery Industry”, American Journal of Agricultural Economics. Vol.8 no.78,pp.1181-1186.

Kurnia, S & Johnston, R 2000, “The need for a processual view of inter-organizational systems adoption’’, Journal of Strategic Information Systems, vol. 9 no. 4, pp. 295-319.

Kurnia, S & Johnston, R 2001, “Adoption of Efficient Consumer Response: The Issue of Mutuality”, Supply Chain Management: an International Journal, vol.6 no.5, pp 230-241.

Kurt Salmon Associates 1995,” ECR 1995 progress report”, Kurt Salmon Assosciates, New York.

Perona, M. 2004, “A New Framework for Supply Chain Management Conceptual Model and Empirical Test”, International Journal of Operations, vol.22 no.14,pp.123- 134.

Roh, J.J.&Park,Y 2008,”Organizational culture and supply chain strategy: a framework for effective information flows”, Journal of Enterprise Information,vol. 21 no.4,pp. 361-376.

Stank, T.& M. Arango1999, “Benefits of Inter firm Coordination in Food Industry Supply Chains.” Journal of Business Logistics, vol 26 no.7, pp.20-22.

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