CHICAGO -- Store handling practices, which range from receiving product at the back door to stocking shelves, account for an estimated 8% of in-store costs, and will likely be among the prime areas of Efficient Consumer Response focus in the year ahead.
Other recommended new or expanded ECR activities for 1997 include a greater emphasis on demand-side initiatives, especially in the area of home meal replacement, and involvement of marketing executives to help respond to fast-changing consumer demands.
The long-awaited ECR studies on the sensitive issues of efficient promotion and efficient new product introductions will also soon be published, said Gary Capshaw, vice president of logistics at Fleming Cos., Oklahoma City, and Jack Haedicke, vice president of ECR finance at Kraft Foods, Northfield, Ill.
Haedicke and Capshaw, co-chairmen of the ECR Operating Committee, spoke with SN following a committee meeting here to finalize recommendations for future work. The recommendations will be voted on at an ECR Executive Committee meeting Nov. 14.
"When you look at major components of cost within a grocery store, about 8% is right there in handling the product from the back door to the shelf to checkout. It's almost all labor, and if you look at what is controllable more than anything else by a retailer, that's it," Haedicke said.
A document examining the issues of store handling practices is now being circulated internally for comment and is expected to be ready for publication by year's end, he noted.
Specific practices covered in the draft report include automated ordering, order frequency, efficient receiving, optimal store inventory, cross dock pallets, store fixturing, shelf stocking and efficient packaging, Capshaw said.
"I don't think manufacturers have understood how their actions grow the cost in the store for retailers. This document will help illustrate that," Haedicke said.
On a broader front, the entire industry must do a better job in meeting fast-changing consumer demands and marketing product selection and stores to compete more effectively with today's newest generation of alternative formats.
"We did a good job getting started on it this year, but that's just what it's been, a start. Category management and efficient assortment are all wonderful. But we need some different people, maybe some marketing folks, to help us in this," Haedicke said.
"Supply chain initiatives work. But you can have the cheapest store in the world, and if no one shops it, who cares," he said.
"Maybe there's a shortcoming in that we haven't had enough marketing professionals involved in the ECR process. You tend to see experts in logistics and activity-based costing," Capshaw added.
Demand-side initiatives, rather than supply-side issues, are expected play a much more prominent role at next year's Joint Industry ECR Conference, Mar. 12 to 14 in Atlanta. A separate track of workshops focusing on demand-side issues, for example, is being proposed, Capshaw and Haedicke said.
Progress in what Haedicke termed "third-party work" can also be expected to gain even more momentum, later this year and in 1997.
The document on new product introductions, spearheaded by Grocery Manufacturers of America, Washington, and Ernst and Young, New York, for example, should be ready for publication before the ECR conference next spring. A draft of the paper is expected to be up for review before the end of the year.
"Efficient new product introductions is going to be a wonderful document. It will be a significant piece of new learning. The idea here is to look at how trading partners can work together to ensure the success of a new product and examine what the real track record for new product introductions have been over time," Haedicke said.
"There's a lot of people who say new products are bad. Well, when you are fighting for the food-away-from-home dollar and changing consumer tastes and nutrition concerns, new products are probably going to get even more prevalent than in the past. So if that is the fact, how do we do this smartly as an industry," he said.
Progress is also being made, albeit slowly, in finalizing and publishing the ECR study on efficient promotions, which has been undertaken by Andersen Consulting, Chicago.
"The good news is that both of those are going to get done. The wording on the efficient promotions piece is going through severe legal scrutiny, but the goal is now to get it out by the end of the year. If that happens, I will be pleased as punch," Haedicke said.
Capshaw and Haedicke also stressed the importance of other areas of ECR work, including scorecards, attendance at next year's ECR conference and the need for industry players to keep working together to achieve critical mass and cash in on the opportunities now opening up.
There are seven ECR scorecards for use by wholesalers, retailers, manufacturers and brokers. "The key with these is how they are used. They should be as a form of communication. If I'm Kraft Foods, here's how I score in these areas and where I'm trying to go. I can then use that to match my priorities and goals with what Gary, for example, wants to do at Fleming," Haedicke said.
"The real strength that they've brought to us, and we've been through several of these, is they provide a great agenda for a meeting. You came away with actions based on each other's priorities," Capshaw said.
For next year's conference, the goal is to attract 1,500 to 2,000 attendees and to strengthen the program by stressing more concrete examples of how trading partners are successfully implementing ECR at their companies.
"ECR is still a relatively young activity. In past years a lot of presentations were, by nature, about pilot programs, things in progress without complete results. We hope to have a lot more next year on how people are rolling out some of these activities and their successes," Capshaw said.
"One message we got loud and clear from the last conference was to continue to get away from theory and more into practical applications. In 1997 we're going to focus as much as possible on nuts and bolts and on having trading partners up there together," Haedicke added.
Both co-chairmen also emphasized the need for distributors and suppliers to continue making progress in ECR to reach critical mass -- or risk losing the potential rewards from much of the work and investments made to date.
"I don't think ECR will happen on its own. To move ABC, EDI and category management along, for instance, requires a joint industry effort. In EDI, when you reach a critical mass, that's when you start seeing money being saved," Capshaw said.
"Remember what the No. 1 overall objective was for ECR. The traditional grocery channel was at a severe disadvantage compared with alternative formats. Have we made up for that difference in operating expenses? We've made a darn good start, but I don't think we're not all the way there," Haedicke said.