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THE C IN ECR

The big-picture focus for Efficient Consumer Response is about to shift to the consumer. The sweeping initiative, which has concentrated most heavily on re-engineering supply chain practices since it was launched three years ago, is set to address the great missing link in the ECR equation: targeting consumers.The overall ECR emphasis also is changing from publishing best practices reports and launching

The big-picture focus for Efficient Consumer Response is about to shift to the consumer. The sweeping initiative, which has concentrated most heavily on re-engineering supply chain practices since it was launched three years ago, is set to address the great missing link in the ECR equation: targeting consumers.

The overall ECR emphasis also is changing from publishing best practices reports and launching pilot programs to providing concrete examples of how retailers and manufacturers are benefiting from larger scale initiatives.

Industry progress in implementing ECR and the mandate to address the needs of consumers were among the key issues discussed in a wide-ranging interview with Harvey McCoy, vice president of grocery category management at H.E. Butt Grocery Co., San Antonio, and Jack Haedicke, vice president of activity-based costing at Kraft Foods, Northfield, Ill.

Haedicke and McCoy are co-chairmen of the Joint Industry ECR Operating Committee, which is charged with carrying out the main body of ECR work for the future.

"We've done a tremendous job with the 'E' in ECR. But we've done less well when it comes to the 'C' in ECR. If we look at what we need to work on in the future, it's to concentrate more on the 'C,' " Haedicke said.

"One of the biggest opportunities now is how to frame this whole consumer piece so we can take it forward as an industry initiative. If there's one area we haven't focused on yet, it's the consumer. That's probably the biggest opportunity facing us," McCoy said.

According to the two executives, the industry has made enormous strides in implementing many aspects of ECR, but a wide range of critical issues still needs to be addressed. In addition, they said, it's time for the ECR initiative to head in new directions, both strategically and organizationally. Among the key points cited by McCoy and Haedicke:

Surging Support: The industry will miss the original deadline for implementing ECR best practices across the board by the end of 1996. But the momentum driving ECR is swelling throughout the United States and worldwide.

Enabling Gains: Retailers and manufacturers are embracing the key enablers of ECR, including category management, electronic data interchange and activity-based costing. Progress in other areas, such as efficient promotion, is also taking place but only on a company-by-company basis. (See related story below.)

Structural Change: The ECR Operating Committee will focus on three main areas: completing unfinished work, education and communication, and continual improvement. At the same time, the number of executives officially involved has dropped from 180 to 18. (See related story, Page 27.)

By far the most crucial change in direction in the industry's ECR initiative heading into 1996 involves focusing much more intently on how best to serve and win consumers.

The big challenge now is for the ECR committees to develop a roster of proposals for work in this area.

"What we now have to do with other key committee members is work up some recommendations of where we go for 1996 and beyond. We're in the discussion phase of that now. Bringing the 'C' back into ECR has got to be key going forward," Haedicke said.

"We've done a good job in talking about how to get product to the shelf effectively and efficiently. Now we need to talk about how to get product off the shelf and into the consumer's basket," he said.

"At this point we haven't defined what the consumer piece will entail. Frequent shopper programs may very well be a part of it, but the scope hasn't yet been defined," McCoy added.

Although the solution has not been found, the challenges and the opportunities are clear: For instance, how can the industry do a better job of cashing in on the prepared meals arena?

"Look at meal solutions. A lot of consumers are going to places like Boston Market. How can we have meal solutions that are competitive and offer an even better value? How do we fixture the shelves to make it easier for consumers to pick up these products? It sounds simple, but there are a lot of issues we haven't wrestled through yet," Haedicke said.

"The real challenge is making better use of consumer data, of framing the information for making better decisions," said McCoy. "We need to determine where the consumer fits into all this, and how we frame the process to move forward. It's a missing component right now, but it's a very important component. We're not yet sure how companies can go about incorporating the 'C' into ECR, but we're exploring the question."

Although considerable work remains in developing the consumer piece of the ECR picture, the industry nevertheless has made enormous gains in implementing improved supply-chain practices.

"ECR has taken off because it was needed, and we're now getting demonstrable results. Look at the hard numbers. The most recent ECR Kurt Salmon report stated that nearly 20% of grocery volume is now going out on ECR-type alliances, and I think that number is low. "The enablers -- category management, electronic data interchange and activity-based costing -- are now givens in the industry. Nobody argues the merits of those initiatives. People understand them. If there's one thing we can hang our hat on, it's that there's hardly a major firm in the country that hasn't started and made progress on those basic enablers," Haedicke said.

"There's a lot of energy around category management, continuous replenishment and other ECR initiatives at companies like Fleming, Supervalu, Roundy's and others," McCoy added. "The news they're making and the things they're looking at are making people stand up and take notice."

In areas such as efficient promotion, efficient store assortment and efficient product introduction, on the other hand, strategic decisions are much more dependent on individual company needs and merchandising approaches.

"There's been progress made in all those areas, but it's hard to put a finger on it because it varies so much within each company," Haedicke said. Haedicke and McCoy admitted that the industry is a long way from meeting the original target dates for implementing ECR best practices on a widescale basis.

"Obviously, it's not going to happen," Haedicke said. "We underestimated the task in front of us. It was more complex than we thought. So if you look at that milestone chart, we're not going to meet that goal for implementing best practices.

"We also probably haven't reached the depth of implementation the [Kurt Salmon] report talked about. As for breadth, however, I don't think anyone can argue that this thing has gotten bigger than anyone anticipated." The momentum driving ECR change, however, clearly is growing rapidly in the United States and internationally.

"There are a lot more steps being taken than just six months, much less a year, ago. There's a tremendous desire to learn, understand and investigate. The searching is rising to the level of intense," McCoy said.

"I get calls every day about ECR," Haedicke added. "There's a very, very healthy ECR initiative in Canada. There's a European effort involving the Germans, French, English and Finnish that's going great guns. The South Americans are getting started. It's gotten bigger than we ever thought it would by this point." Haedicke also predicted that the industry would exceed the original cost savings estimate of $30 billion. "There's a lot of money to save out there. I would argue it's larger than $30 billion, that we don't even know what the real number is. But even more important, what we're talking about here is the survival of this industry. So, to me, the number is kind of a moot point," he said.