DALLAS -- Independent doesn't have to mean inefficient.
That message was aimed at independent retailers and their wholesalers at an unveiling of Efficient Consumer Response guidelines for this sector. The guidelines -- which place electronic data interchange, category management and cost measurement as top priorities -- are intended to boost the position of independents in a venture that sometimes seems tailored more for well-capitalized major chains. The new ECR roadmap for the independent sector was discussed here at the Joint Industry Conference on Efficient Consumer Response, where the concerns of independents were acknowledged.
"To be an independent operator today means many things," said John Hanson, president of Sixth Street Food Stores, a 12-unit chain headquartered in North Platte, Neb. "In most cases, it means you're the underdog. You probably work 60 or 70 hours a week to try to maintain the status quo against much larger corporations with seemingly unlimited human resources and very deep pockets."
Hanson added that the high levels of investment necessary to achieve ECR are often considered prohibitive to independents.
"The primary problem at this point, from an independent perspective, appears to be that while the investment necessary to move forward with ECR is high, the return on investment at this point appears nonexistent in the short term."
Nevertheless, Hanson said his organization is moving ahead with ECR and there are real opportunities for independents.
"We are discarding the notion that independent retailers are a relic, a dinosaur, a thing of the past," he said. "I personally think we are at a time of tremendous opportunity for independent retailers. Independents can move quickly, we don't have the burden of bureaucracy."
The new ECR guidelines were developed by the Wholesaler Independent Retailer Task Force, which includes many executives in that sector. The guidelines are available for purchase in report form from various trade associations.
In outlining the results, Victor Orler, a partner in the strategic services division of Andersen Consulting, said while there are many enablers of ECR, three key areas deserve primary focus: electronic data interchange and improving the application of point-of-sale scanning information, category management, and cost measurement programs that highlight or provide incentives for supply chain members to behave more efficiently.
Calling EDI "the minimum ante to compete in the food industry," Orler said the task force found the most immediate benefits from EDI would be in areas such as administrative cost reduction, lead times to reduce inventories, transaction accuracy and warehouse efficiencies. Independents were urged to embrace industry standards such as the uniform communications standard and to work on achieving accurate point-of-sale data.
Independent retailers and their wholesalers also need to focus on category management, Orler said. "The key to a successful wholesaler/retailer category management program is a methodical approach and well-defined roles and outcome," he stressed. Such a process needs to employ information technology and a plan to measure and reward associates, he said.
Orler said WIRTF also stressed the importance of cost measurement using the methods of activity-based costing. "For example, some wholesalers have unbundled costs for retail services to allow retailers to select only those services they value," Orler
said. "Other product-handling programs vary charges based on mixed-pallet, full-pallet or cross-docking services."
The group's report also emphasized the importance of building better working relationships. "The biggest challenge is the communication issue; we need to become more trusting and open," said Charles Butson, president of Butson's Supermarkets, a 10-unit operation based in Woodsville, N.H. Butson moderated the ECR session on the independent sector.
Also at the ECR session, John Dickson, chairman and chief executive officer of Roundy's, Pewaukee, Wis., urged top executives to empower employees as part of the ECR effort.
"We must let go of past practices, and we must also let go of a lot of responsibilities by pushing down responsibilities to managers and department heads," he said.