KRAFT GENERAL FOODS IMPLEMENTING ECR IN STEP-BY-STEP PLAN

JAMES TENSER

ATLANTA -- Even at the mighty Kraft General Foods, implementing Efficient Consumer Response activities can be a halting process.

To get it moving, the company has focused on low-tech measures first -- simplifying logistics, trimming down its assortment and building strategic alliances with retailers -- as it seeks cost savings that will help fund more sophisticated later steps.

"We are implementing a basic ECR package in 1994," said J. Mark Harran, senior vice president of sales, customer development and marketing services for Kraft General Foods. "So we have taken some of the ECR capabilities that we can do broadly, and we are training our 1,100 account managers to implement that selectively with our customers."

Harran, who spoke here at the GMA/NeoTrends Conference, said his company also will be testing and launching some "more advanced capabilities" through its alliances over the coming months, including continuous replenishment pilots with a few customers who are ready.

With many ECR capabilities to develop "you must choose the ones that have the biggest, quickest payback," said Harran, who continues to serve as manufacturer chairman of the ECR Joint Industry Executive Committee.

Among the most easily realized savings are those that can be won from variety management, he said. His company has cut 8% of the stockkeeping units out of Kraft USA, for example. "And we took 40% of SKUs out of Polly-O [cheese products] without losing any volume," he added.

He described how adopting four simple transport policies saved the company the equivalent of "two margin points" in operating its fleet of 440 trucks: Ordering was standardized by pallet and layer quantities, which reduced product damage due to excess handling. A single purchase order was specified per truck, instead of as many as five, which saved on paperwork. Operating only full trucks, instead of sending them out with a minimum weight, saved 40 trucks. Scheduled appointments at loading docks saved time and improved efficiency.

"We are also addressing internal problems, like deal deductions, also known as shooting ourselves in the foot. Ninety percent are caused by us: They're late, they have no location, inaccurate invoices, unnecessary complexity. It costs us $120 -- like it does most of you -- to resolve each one, plus lost selling time and focus. This is something that we are moving to correct internally," he said.

"These low-tech examples will pay for other more technologically advanced activities," he added.

In the months to come, Harran said he expects KGF to take some tentative steps into continuous replenishment. "We have 60 categories. Are we going on continuous replenishment on all 60? No, we've decided to concentrate on coffee, for example, as our first category for CRP with one of our customers," he said.

In a conversation with Brand Marketing following his talk, he declined to name the customer involved in the pilot. He mentioned there was at least one other test in progress in another category, "but we are not into it on a broad basis with CRP like P&G or Campbell is."

Harran predicted that across the industry "continuous replenishment and electronic data interchange are going to fall in place sequentially over time. I think we are going to see an exponential increase over the next 12 months."

How rapidly such activities develop also will depend, in part, on the readiness compatibility of individual retail customers, he said.

"We rank our customers by platinum, gold, bronze and so forth. We have some guidelines. We are not going to do this in alliances with customers who are not into quid pro quo." At KGF, another issue being addressed is change management, he said. "We have an ECR customer support team that is working with our alliances and our regular sales people on a strap-on basis to make sure that they get the resources they need to do this, because traditional line people can't move into these new paradigms by themselves."