P&G IS FINDING ECR BUILDS BRAND LOYALTY

JOHN KAROLEFSKI

PALM DESERT, Calif. -- Procter & Gamble Co. is prospering with Efficient Consumer Response, said a senior executive of the Cincinnati-based company. Using continuous replenishment, cross-docking and category management has benefited P&G and its trading partners, said Ralph Drayer, vice president of product supply and customer services. "At P&G, we see ECR as a critical business strategy to build brand loyalty by better meeting consumer needs and delivering greater value by driving non-value-added costs from our systems," he said. "The consumer is changing, the marketplace is changing, and it was clear to us that we needed to change as well in order to meet our financial objectives."

Drayer spoke here at the annual health and beauty care conference sponsored by the General Merchandise Distributors Council. He gave the following rundown of P&G's ECR programs:

Continuous Replenishment -- "We are now providing this service to 45 customers, 170 [distribution center] ship-to locations, and when fully expanded to all categories and all ship-to locations, this will represent slightly more than 40% of our case volume," he said. Drayer listed the following results: reducing inventory of P&G brands by half, doubling turns and improving case fill from customers' distribution centers to the store by two percentage points. "Our customers have realized a $35 million one-time cash flow savings, and an approximately 25% improvement in before-tax net margin," he said.

Cross-Docking -- "We are having excellent results with simply full-unit load cross-docking, which can save up to 50% of customer handling costs, and beginning everyday replenishment with two customers on an individual case sortation cross-dock basis," he said.

Category Management -- "We have used and were part of the development of the ECR category management best practice model, and are currently involved in four category management pilots of this caliber," he said, "but many more involving elements of the best practice model based on our partners' desired starting point."

He listed the following "representative results" to date for distributors: an 11% rise in market share, a 13% increase in category consumption, a 67% hike in inventory turns, a 5% average transaction climb, while gross margin increased 1.2 points and the number of stockkeeping units declined 25%.

"While there is no set road map or model in terms of where we start, or the sequence of ECR activities with our trading partners, we generally prefer to start with the basics -- reliability of the order, shipping and billing process," he said. "Then, based on a joint assessment of our distributor's strategy and needs, we move to other value-added logistics services such as continuous replenishment, cross-docking and the use of activity-based costing techniques to quantify the value of these opportunities," he said.