The good doctor ECR is in, and has been receiving patients suffering from various anti-efficiency maladies for quite a while now.
And, to greater or lesser degrees, the doctor has been able to bring comfort to many suffering invalids by alleviating afflictions such as inefficient assortment, wasteful couponing, unnecessary trade secrecy and others. Even the plague of forward buying has shown tiny abatement.
But one condition remains quite impervious to all cures. It's the disorder of diverting. It seems that the strange practice of buying product in a region where a deal is offered, then shipping it elsewhere where the deal doesn't pertain, can't be stamped out. To the contrary, diverting may now be increasing sharply, following a downturn that occurred in the ECR honeymoon period.
The increase is occurring even though manufacturers, wholesalers, retailers and every entity imaginable -- except those brokering transshipments -- agree that the practice makes no macro-economic sense. After all, the practice not only introduces untold transportation, handling and capital costs, but blocks the successful implementation of needed continuous-replenishment tactics.
Why won't this economically painful practice go away? The answer is an easy one: Diverting inflicts long-term pain, but confers short-term gain. To find out more specifically about why diverting remains so intractable, take a look at the news feature on Page 1, written by SN reporter Elliot Zwiebach. But before you do that, here are some ideas about the underpinnings of diverting:
Clearly, diverting could be stamped out overnight if manufacturers eliminated regional deals, or if distributors forswore taking advantage of any price offer outside their home region.
But no one thinks either scenario is likely, or that it's nearly so simple.
Manufacturers offer regional deals to sop up excess output, or to meet quarterly sales goals. And, truth be told, if that can be accomplished, it's to the good, no matter where product ends up.
Also, there's the question of who jumps in first: It takes a strong manufacturer indeed to declare against an anti-efficient -- but popular -- practice knowing full well that competitors won't make such a move.
Meanwhile, diverting remains popular with retailers and wholesalers for the simple reason that they need to obtain the best price if they want to buff up margin yield. Again, it takes a strong distributor indeed to turn a blind eye toward the diverting wire knowing that competitors are transfixed by the price spreads offered.
So, is there much hope that diverting will ever fade away?
Many observers predict that in time, CRP agreements between buyers and sellers will impart relief, and that may be the case.
But the reality is that anti-efficient practices' worst enemy is everyday-low-price strategies, and many retailers -- ever on the outlook for points of differentiation -- are now inching away from EDLP. Many vendors have a similar outlook.
So don't expect to hear much talk about RIP to diverting because of ECR, CRP, EDLP or any such prescription. There is a cure, but it involves medicine that's just too bitter to take at the moment.
