NHMA: RELATIONSHIPS MUST BACK TECHNOLOGY

JAMES TENSER

CHICAGO -- A mastery of information technology may be critical to the process of bringing products to market, but its effectiveness can be severely limited if the brand marketer doesn't get its retailer relationships right.

This point of view informs recent efforts by the National Housewares Manufacturers Association to develop what it calls its "Great Performance Alliances" initiative. GPA was a central theme at the NHMA's International Housewares Show here last month.

"By not understanding and taking the customer into account, you are losing business. Customers drive profits," said Thom Blischok, managing partner of Coopers & Lybrand's retail consulting practice. He made his remarks in a keynote presentation at the show, entitled, "Great Performance Alliances: A Powerfully Different Way of Doing Business."

NHMA first introduced this new acronym, GPA, to housewares marketers' vocabulary last Fall, in an effort to raise awareness among its member companies about the business benefits of relationship building and interpersonal communications.

At its expo here the NHMA showed the first copies of its newly- published GPA Best Practices Manual and announced a formal education and certification program which should commence by April of this year.

While it shares many similar intentions with the grocery industry's Efficient Consumer Response initiative, GPA will differ markedly in its emphasis -- especially when it comes to technology, said Tom Conley, executive director and chief operating officer of NHMA.

"Our focus is to get people to change their business practices," Conley said in an interview. He stressed technology would be a comparatively small portion of the GPA process.

This point of view was emphasized in Blischok's presentation as well. To illustrate, he discussed several shortcomings of Electronic Data Interchange as it has been practiced since the ECR model was introduced.

Said Blischok, "Retailers have spent millions of dollars on EDI. Today with all of our sophistication and all the money we've spent, about 70% of our EDI transactions require manual intervention."

He maintained that the EDI strategy is not working because, "We aren't communicating about the fundamentals of what EDI can do for us."

Added Conley, "If there are deviations from the norm, and people are changing things like deductions and allowances at the last minute, and it doesn't flow, then all the EDI in the world isn't going to help."

NHMA is hoping that through education, GPA will bring needed standardization to the business practices of the housewares industry. Like other fast-moving consumer goods sectors, housewares continues to battle a paradox, said Blaschok.

"Even with all the excess merchandise in the supply chain, the retailer's No. 1 problem continues to be out-of-stocks," he said. Out-of-stock levels range from 6% to 9% in mass retailing, to 12% to 15% in discount retailing, to above 20% in promotional retailing, he said.

"Efforts to optimize inventory in the supply chain, with EDI as a first step tool, are meeting with mixed results," said Blischok.

Key reasons for high levels of manual intervention he said, include: mismatch of pricing and promotion; mismatch of invoice or bill of lading with the order; non-compliance to delivery date or time; and misunderstandings about the so-called "basic deal."

The last source of intervention, he described as "the infamous sliding allowance," and added that all the factors he listed might be mitigated by better communications.

From his research, Blischok cited six key retailer-manufacturer issues and three key consumer issues that housewares marketers must learn to deal with. On the trade relations side, those include: better trust level, higher in-stocks, more-accurate forecasting, deductions, compliance and returns.

On the consumer side he enumerated: higher in-stocks, liberal return policy, and higher, better value.

In implementing GPA, the NHMA will target vertical retail channels, said Conley. He said presentations are planned this year at meetings of the General Merchandise Distributors Council, National Association of Chain Drug Stores, and International Mass Retailers Association.

Conley said NHMA is trying to take GPA "one step further than ECR," by providing formal training through the certification program.

The NHMA expected to have a model curriculum ready for testing by February, and it will begin offering formal training programs by this fall.