Ongoing cooperative efforts between supermarkets and manufacturers to boost distribution efficiency are proving a strong motivator for working together. But players on both sides of the net say trust is still an issue.
"Even with ECR, our relationships with retailers are not buddy-buddy," an official at one prominent manufacturer said. "We've been in contention with one another for 30 years, and there's not a lot of trust between us."
Many retailers agree, especially when asked to share sensitive data about item movement.
"You lose a bargaining tool when you share item movement information with manufacturers," said Tom Howell, director of point-of-sale at Nob Hill General Store, Gilroy, Calif. Howell said supermarket buyers can strike better deals with manufacturers when they keep item-movement information close to the vest.
Sharing front-end data could compromise a retailer's position with the competition, he added. "It's a very competitive business out there and we don't want manufacturer representatives telling competing supermarkets how much product they're moving through Nob Hill stores."
Al Lees 3rd, vice president of Lees Supermarket, a Westport, Mass., independent, said he would not object to sharing some movement data with manufacturers. But he drew the line at any demographic information about his shoppers.
"If Campbell's wants to know how may cans of tomato soup go through my register, I don't have a problem with that," Lees said, "but I wouldn't share specific information about customers with a manufacturer."
Lees said his store keeps information on shopping habits of customers enrolled in a card-based, frequent-shopper program, and the company has promised customers that information would only be used internally.
Grand Rapids, Mich.-based wholesaler Spartan Stores is pulling item-movement information from many of the retailers it serves. Steve Biondo, director of human resources at Spartan, said supermarkets are giving wholesalers and manufacturers the benefit of the doubt when it comes to sharing movement data.
"What you're seeing now in the industry isn't trust, it's faith," Biondo said. "We are believing in the best in our business partners."
Ed Martin, director of information systems at Modesto, Calif.-based Save Mart Supermarkets, agreed. "ECR is painful in some ways because it makes you change the way you're doing business today. It's a leap of faith."
Biondo, however, said Spartan is not asking for blind faith on the part of its retailers.
"We let retailers know that we don't share their movement
data with any other retailers," he said. "We maintain strict standards and strict security codes for anyone with access to that information. Anyone who breaches those standards is in peril of losing his job."
Spartan, which is technically a retailer-owned wholesale cooperative, said retailers also have faith that it will use their movement information to make buying decisions that are in their interest.
"We aggregate the data so it's useful when we deal with manufacturers, but we don't manipulate that data to move more product through our warehouses," he said. "Consequently, we are seeing a willingness among our retailers to share information. And they are doing it out of necessity -- to promote their own business interests."
Retailers, nonetheless, question what's in it for them if they do share movement information directly with manufacturers. Some say manufacturers currently using retailer data for replenishment are not passing the savings that generate down to the retailer.
"We are in the 'show-me' mode," one retailer said. "Until somebody shows me how much I'm going to save, I'm not going to buy into ECR. I understand that ECR is going to save the system money, but retailers have to have their CFOs sitting in on ECR negotiations with manufacturers.
"They have to ask manufacturers, 'What are you guys saving and how much are you going to share with us if we share our data?' We don't go to bat unless there is a stated return on investment."
Other retailers say it's not just a question of money, but one of customer service and the potential of out-of-stocks. They say manufacturers and even retailers who've opted into continuous replenishment tests are misrepresenting the results of continuous replenishment partnerships.
"When I see 10 feet of shelf space completely wiped out of a product at [a competitor's store], their continuous replenishment program just isn't working," one retailer said. "I go into their stores regularly and see it all the time."
The retailer said observations like that have made him skeptical about the benefits of ECR. And retailers are not alone.
Bob Drury, director of MIS at St. Louis-based Pet Inc., said the last thing manufacturers want to see result from ECR is out-of-stocks. Pet is pulling retailer warehouse-withdrawal data back to its offices daily to keep out-of-stocks to a minimum. The manufacturer is involved in continuous replenishment partnerships with nine chains.
"We are pulling back data seven days a week, and our CRP [continuous replenishment] managers review that information every day. We are very concerned because
we know that if our picante sauce is not on the supermarket shelf, they're going to sell somebody else's."
But Pet, like many manufacturers, has reservations about using POS data for replenishment purposes. Though most would not turn down access to that data, they are skeptical about its quality.
"Retailers have been collecting that data for a long time," Drury said, "but they haven't been able to clean it up."
Drury said POS data lacks integrity because cashiers often hit the repeat key when shoppers purchase multiple flavors of a given product or use inaccurate price look-up codes.
Despite the data-integrity problems, Drury said Pet would like to see POS data. "The only thing we don't have is direct reports from the retailers," Drury said. He called working with warehouse-withdrawal data "stealth CRP."
Nob Hill's Howell agreed that POS data is less than perfect. "You're never going to get a clerk to scan every flavor of yogurt or baby food," he said.
A member of the Joint Industry Committee on ECR said that body is working on how best to clean up scan data.
"We are working on how to measure what good, clean scan data is," the source said, "because scanner data should drive the whole process. Right now there are 15 or 20 different things that can impact the quality of point-of-sale data -- nonstandardized UPC codes, use of the repeat key and inaccurate price look-up codes are among them."
The source said syndicated data companies are coming up with ways to adjust for the inaccuracies in POS data. He said working with those companies could increase a manufacturer's faith in the data it is getting from a supermarket partner.