Wait a minute! Efficient Manufacturer Response? What happened to the consumer? Good question! In a mad dash to get started down the Efficient Consumer Response road, many manufacturers are making serious -- and what will prove to be costly -- mistakes.
From the moment ECR was first announced at the Food Marketing Institute Mid-Winter Conference in January 1993, most manufacturers initially struggled. "What to do?" For the majority of those who just decided to "do something," continuous replenishment programs have been the response of choice. Others have chased after category management, for which it is virtually impossible to find a common definition. Still others have changed their promotional structure, set up electronic data interchange systems, and/or other "improvement" initiatives.
Only a small handful of companies have taken a "holistic" approach to addressing ECR and each of its components in a prioritized, synchronized and orchestrated fashion. For the vast remainder, while their many individual programs may be directionally right by themselves, they are insufficient reactions to the complex and often intertwined issues underlying ECR. Worse, the business risk is that individual programs will ultimately prove to be inefficient manufacturer responses to an industry cry for badly needed reform.
For example, a common ECR response for a manufacturer is to pull together a category management story about why an account should take on three or four more stockkeeping units of the manufacturer's product. Yet this kind of individual program misses the whole point.
The widespread re-engineering at companies today, I suggest, is a direct response to some egregious management errors of the past. The greatest of those errors was not getting out in front of the industry's structural change. Re-engineering is sorely needed for organizations to catch up with past failures in reading and acting on changes taking place in the marketplace. Unfortunately, in practice the term is often a code word for downsizing.
There is a parallel in the way ECR has been implemented so far -- a focus on developing one or two programs. This is hardly an efficient use of resources in dealing with the challenges posed by ECR. Jumping on the category management bandwagon while virtually ignoring other ECR activities may be a necessary component of response to a changed marketplace, but it is certainly not sufficient as a total response. A holistic approach is required: The entire company has to be involved, with individual programs initiated in the context of a consumer-driven strategy.
Every manufacturer needs to do the "man in the mirror" test, honestly asking themselves, "are we touching all the required bases here simultaneously -- or have we embarked on a singular program just to do something?"
The phrase is Efficient "Consumer" Response. But where is the consumer in all this? The benefits of ECR will not be realized until a manufacturer's ECR activities are pursued on a companywide, holistic basis, linked with jointly defined activities of their customers and directly tied to (and driven by) benefits for the consumer. In short, the "holistic" approach to ECR is the only Efficient Manufacturer Response, and in the long run, the most effective approach to business with your customers.
