THE SUPPLY SIDE 1996-01-15

J. Mark Harran

When the time came for the original Efficient Consumer Response study group to name the four ECR strategies, we were too quick to use the "E-word." It was and still is appropriately used in the case of "Efficient" Replenishment. Better names for the others, however, would have been "Effective" Promotion, "Innovative" New Products and "Smart" Assortments.

Undoubtedly, the biggest damage was done by the name Efficient Promotion. This choice was a major contributor to the ECR initiative never officially addressing promotion. It helped to create concerns among distributors about lower promotional fund profits and worries among manufacturers about antitrust investigations. As a result, the linchpin strategy for ECR to achieve full implementation has yet to be fully addressed.

Until the North American food industry adopts more effective promotional strategies and tactics, it will continue to risk share losses to alternate formats employing more consumer-responsive promotions. Moreover, the fundamental building blocks of ECR, such as continuous replenishment, will never reach payback levels. Full ECR implementation will always be somewhere in the future, as long as forward buying and its brother, diverting, are dominant in the supply chain.

There are some positive steps under way on the promotional front, however. Three examples: (1) there has been a recent upsurge of interest and use of electronic marketing programs, which provide very effective alternatives to the traditional off-invoice deals and marketing development fund programs; (2) Andersen Consulting has undertaken a study of promotional practices that will be shared with the industry later this year; and (3) the ECR Operating Committee recently announced that during 1996 it will analyze various forms of in-store promotions.

To the extent the ECR initiative identifies effective promotion alternatives to move more full shopping carts out the front doors of supermarkets, it will help to accelerate the move away from the unproductive practice of loading unnecessary inventory into warehouses with such costly byproducts as excessive damage and reduced freshness of products at retail.

Understandably, it is very difficult for the food industry to move away from its dependency on forward buying in a cold turkey fashion. But the joint industry ECR initiative can help by the dissemination of best practices.

J. Mark Harran, a former senior executive with Kraft General Foods, is a consultant based in Apopka, Fla.