CHERRY-PICKING ECR

LINDA PURPURA

For many retailers and wholesalers, Efficient Consumer Response has shifted from a sweeping industrywide initiative to one in which companies choose specific programs that best fit their business needs.

Wegmans Food Markets, Rochester, N.Y., has a variety of ECR initiatives under way, including improving flow-through distribution to facilitate product movement through the supply chain.

H.E. Butt Grocery Co., San Antonio, has established a specific department devoted to both measuring and improving efficiencies in product supply, among several other areas. Buehler Foods, Jasper, Ind., has used category management, a key ECR component, to pare excess stockkeeping units from its shelves, increasing sales and profits along the way.

In addition to being specific to each company's needs, these ECR programs all provide potential benefits to the consumer. Moving products more quickly through the supply chain, for example, means items are fresher when they reach the store. Adjusting assortments so that they better address consumer needs through category management is another way companies are emphasizing the "C" in ECR.

"ECR is a total service initiative aimed at eliminating waste, reducing cost and abandoning activities that add no value for the customer," said Tim Flanagan, director of corporate procurement engineering at H-E-B. "Implementing ECR must make a difference to the customer while being transparent to the customer."

Following are three examples of ECR projects that aim to both cut supply chain costs and improve customer service.

H-E-B Department Promotes

Business Efficiencies.

By improving business processes and systems for product supply and transaction efficiency, H-E-B seeks to lower its cost of goods by 3% per year net, and reach 100% accuracy in its business transactions.

To this end, H-E-B created a new department, procurement engineering, late last year. The department was formed to provide dedicated resources to eliminate waste in the procurement process, which affects H-E-B's customers, trading partners and suppliers. The department's mission also includes developing strategies, tools and tactics for reducing costs.

"Procurement engineering designs the business processes and systems for product supply and transaction efficiency, in a collaborative model with suppliers and other H-E-B functional areas," said Flanagan.

The department is also responsible for measuring the value added by specific projects, both for customers and the company itself. Its current projects include the elimination of unproductive inventory, while at the same time supporting the goal of a 100% in-stock presence on store shelves.

Other department activities include establishing joint business planning with suppliers, increasing speed to market with the products that customers want, and elimination of rework in business transactions. The benefits of eliminating waste will be measured via the cost of goods, the cost of handling and the cost of serving H-E-B's customers.

"These projects have always been on our radar screen," Flanagan said. "With dedicated resources we will increase the speed with which these disciplines deliver value."

And value is what ECR is about at H-E-B. "Our interest in ECR is measured against our success in delivering on our customer promises -- providing great people, best service, great products, low prices and a shopping experience that meets the customer's needs," Flanagan said.

Category Management Hikes

Sales, Net for Buehler Foods.

Buehler Foods is finding category management can be a powerful method to combat intense competition while increasing sales and profits and reducing SKUs.

A category management test that took place within the last 12 months yielded a 5% increase in sales, an 8% increase in profits and an SKU reduction of 20% in 19 categories, according to Kris Buehler Massat, executive vice president of Buehler Foods. The retailer has 28 stores that range from 30,000 to 75,000 square feet.

The retailer's interest in category management stems, in part, from increased competition in the markets it serves. Buehler Massat spoke on the company's category management efforts at the Fourth Annual ECR Conference, held in March in Atlanta.

"Like most people in our business, competition has really intensified in our trading area," Buehler Massat said. "For the past decade we have competed with increasing numbers of mass merchants, including Wal-Mart, Kmart and Target. Over the past three to four years, half of our stores now compete with supercenters, club stores and a full array of category killers."

At about the same time Buehler Foods began "feeling the pinch from competitive threats, we started reading about ECR and particularly category management," she said.

Buehler Foods decided to pursue category management on its own because neither of its two wholesalers had an established category management program at that time.

"We singled out some categories where we thought we were losing share to competitive formats, and asked the brokers and vendors to help us use the ECR category management process," she said.

While the retailer learned that it could achieve sales and profit improvements with category management, it also determined that it did not have the internal staff to complete and maintain the process.

"We've concluded that we cannot broadly do category management without the support of a wholesaler who has a category management program," she added. "I also suspect that working this closely with a wholesaler as well as our broker/vendor partners will yield other benefits as well."

To this end, Buehler Foods is working with Supervalu, Minneapolis, on category management, according to a source familiar with the situation. Buehler Foods declined to comment on its current category management efforts.

"The category management process can be very cumbersome due to the resources needed and the time involved in completing the process, but the benefits it yields clearly prove that this is the right direction for the future," Buehler Massat said.

ASNs and Dock Performance

Measures Improve Wegmans'

Receiving Efficiency.

Among its many ECR-related initiatives, improvements in receiving efficiencies have been a major focus at Wegmans Food Markets. Use of the Uniform Code Council UCC-128 expanded serial codes along with advance ship notices have helped the retailer cut receiving times by 30 minutes per truck at its grocery distribution center.

In addition, by monitoring the dock performance of both its own employees and its vendors, the retailer has been able to track performance improvements in receiving efficiency.

"The biggest key within the ECR framework is UCC-128 and ASNs, because that gives us the ability to essentially 'count without counting,' " said Michael Reyda, perishables and frozen-food supply chain manager at Wegmans.

ASNs can be used in conjunction with the UCC-128, the expanded industry standard serial code that carries detailed information about product shipments.

"If the vendor is providing us with an advance ship notice that tells us what is on the truck, and each pallet has a license plate [describing its contents] on it, we can just scan that pallet and take that as what is received. The receivers no longer have to count each case," Reyda explained.

Reyda spoke about Wegmans' ECR efforts in the receiving and distribution areas at the Fourth Annual ECR Conference, held in Atlanta in March.

Receiving has emerged as an area where bottlenecks can easily occur, particularly in Wegmans' grocery operations, which tend to operate on a round-the-clock basis.

"If we continue to grow and add products, we have to find ways to make receiving faster," said Reyda. ECR processes such as cross docking are helpful because they are designed to get product in and out quickly, but "you have to make sure you're counting right."

Wegmans has been using UCC-128 and ASN technologies for more than a year at its grocery distribution center, and expanded their use to the perishables and dairy areas earlier this year. Implementation of these processes in the frozen area is slated for the future, though no timetable has been established.

The technology presents benefits beyond the dock area, Reyda noted.

"If the pallet coming in matches how we store it in the rack, then there is no need to touch the cases, which reduces handling and damage, and cuts time," he said. "This is positive receiving. We are certain what's on the truck is there, so we no longer have to count it."