g with accurate scanning, is a prerequisite to almost all the other ECR activities. From all the available UCS transactions, we selected the set that is called the purchase-order-to-payment cycle. These are what we consider to be those transactions you would call "best practices" in today's world. It's a group of eight logically related transactions, which we chose because we think they're the most widely used. We think that the greatest direct labor dollar savings are available through the use of those transactions, and they are the best opportunity that we collectively have in the industry today to reduce invoice deductions.
If you extend the savings-per-transaction times an average number of purchase orders for a $500 million unit of 35,000, we get an indication that the benefits to the companies of doing this particular work run between a quarter of a million and three-quarters of a million dollars a year for that size unit.
Continuous replenishment has the potential to generate 38% of the total projected industry savings in ECR.
Our approach is based on identification, the development and the piloting of best practices of continuous replenishment outside and inside the industry.
We found that we had an awful lot of opportunity here. We actually had to finally decide on who we would interview, and we settled on 30 companies, all of whom have been interviewed.
When we broke all of this down, we came up with really six phases that it takes [to carry out continuous replenishment] CRP. The first phase, to develop your objectives and desired benefits.
Phase two is the internal assessment of your capabilities. In phase three, how you would like to do CRP, most companies, once they determined that they were CRP-ready, found that they needed to create a plan that made CRP practical. That plan included profile requirements, specific responsibilities and a project timetable.
They then moved to section four, which was selecting a partner. In phase five, you pilot and you assess, which includes testing [Uniform Communications Standard] transaction sets and your organizational responsibilities.
And the last phase, called "ramp-up," is a process of taking CRP from a pilot or a limited activity stage to a critical and mass stage.
The Holistic Work Group undertook a study that was designed to look at the organizational and human sides of ECR. We wanted to identify the best practices or the key themes that consistently surface as being important to a firm's ability to successfully manage large-scale organizational change.
Our study clearly showed that CEO or CEO-equivalent support will be a crucial element to any successful ECR initiative. As the primary sponsor, you may have a very specific vision of the future. If so, this must be communicated to as many people as possible.
Your role also includes that of "resource allocator." Here, resources come in a few different forms. The first is people. Cross-functional teams will be critical to the successful implementation of new business processes and require a number of different individuals from different departments.
president and CEO Sara Lee Bakery, North America Cross-docking not only reduces the time goods spend in the flow between the manufacturer and retail store but it also reduces or even eliminates many of the costs of handling and storage in between.
While cross-docking practicing companies we interviewed, both in and outside the grocery industry, had difficulty defining precisely their savings for cross-docking, most participants agreed that significant distribution savings had been achieved. Retailer/wholesaler participants have seen reductions in labor costs and inventory levels with participants indicating merchandise handling cost reductions of as much as [33%.]
Pilot testing by our committee in 1994 will attempt to substantiate this experience. Now, it is important to know that most of the savings are achieved on the wholesaler/ retailer end of the supply chain and in fact manufacturers may at least initially incur an increase in merchandise-handling costs as they take on the responsibility for building store-configured pallets.
You know, as part of the best practices initiative, [direct store delivery] represents a significant and yet complicated opportunity for all of us.
This project, due to the complexity, was divided into three coordinated pilots. In those three coordinated pilots are included value chain analysis, EDI UCS transaction sets and best operational practices.
The best operational practices group has taken what I would call a specific micro look at each one of the activities in the supply and delivery process. They have utilized industrial engineers and have identified cost-benefit analysis with the change drivers. That potentially could mean in the area of $200 million to $300 million in savings -- I mean they are specifically identified, quantified and I believe deliverable with the right approach.