ECR COMMITTEE ISSUES MAJOR REPORT 1994-06-27

JOHN KAROLEFSKI

WHITE SULPHUR SPRINGS, W. Va. -- The first major report of the seminal Efficient Consumer Response project is hot off the presses.

Copies of "Performance Measures -- Applying Value Chain Analysis to the Grocery Industry" were handed out here at the annual Executive Conference of the Grocery Manufacturers of America.

Richard Mayer, co-chairman of the Joint Industry Executive Committee ECR, unveiled the "milestone" report at a special session.

"The tools provided in this report are an attempt to put [ECR operating] principles into practice. They apply the concepts of value-chain analysis to establish a structured framework and common language for ECR," said Mayer, who is chairman and chief executive officer of Kraft General Foods, North America.

The report analyzes the different ECR opportunities for three distribution channels, or value chains: the self-distributing retailer, the wholesale-supplied system and the manufacturer direct-store-delivery system.

The report is the first of 19 documents that the ECR committee is scheduled to release by the end of the year. The documents collectively will provide the new steps the industry can take to introduce, merchandise, promote and replenish products.

Mayer also announced a joint industry ECR conference to be held Jan. 11 to 13 in Dallas. "The conference is an excellent way to showcase the results of the ECR project and provide a forum where your organization can learn more about ECR," he said. Joining Mayer in the presentation was John McCracken, a partner with the consulting firm of Coopers & Lybrand, who provided executives with details on

"how you can apply these tools within your own organization."

ECR is the well-publicized strategy that aims to eliminate unnecessary costs from the total supply chain, resulting in more value for the consumer. The ECR committee, which is creating and disseminating the specific steps of the strategy, is composed of a cross-section of the grocery industry trading partners. GMA and the Food Marketing Institute are the key trade groups among the 11 associations affiliated with the ECR project.

Speaking of the report, Mayer told company executives that they can use the tools to do three things:

Identify and prioritize ECR opportunities.

Estimate current costs and cost-reduction potential.

Work with trading partners to define ECR opportunities and estimate potential cost reduction for the total value chain.

According to McCracken, the three distribution channels, or value chains, covered in the report are "focused on one goal: getting the right products to the right place at the right time and at the right price.

"It is imperative to understand that we are looking at the value chain," he said. "Our ability to realize the magnitude of cost reduction is dependent on all of the trading partners of that value chain. Certain portions of it we can realize individually, but this is all about working together with our trading partners in that value chain to achieve the full benefits of ECR," he said.

The 200-page report, accompanied by an ECR cost-reduction estimating model on a computer disk, presents three key findings:

Most companies may be able to enjoy significant benefits through the application of ECR within their own organization, and these benefits may multiply if their trading partners embrace ECR operating principles.

ECR-related costs and reduction opportunities vary significantly by product category, distribution channel and trading partner, and assessments should take these differences into consideration.

The value-chain analysis tools developed during the study can provide a structured framework and common language for ECR that permits companies to compare and contrast ECR opportunities and accomplishments -- both within their own organization and with their trading partners.

"The greatest barriers to implementation of ECR are cultural and organizational, not technical," said McCracken. "Technically, we've got what we need."

According to Mayer, the ECR publications available this summer "will focus on technology and organizational change -- key enablers of many ECR business practices."