Efficient Consumer Response (organisation)

The concept of Efficient Consumer Response (also efficient consumer response ) describes an initiative for cooperation between manufacturers and retailers, aiming at cost reduction and better satisfaction of consumer needs. Here, the value chain, from production to consumer choice, studied for optimization. The aim is to link logistics sided rationalization potential market with growth potential on the part of marketing. Through the cooperation between industry and trade potential can be revealed or realized that would not be possible through an insulated internal viewing.

Reasons for ECR

The Importance of Efficient Consumer Response in relation to the detection of rationalization and market growth potential is demonstrated by the dramatic developments on the (European) market for consumer goods, which take place since the early 1990s. One of these is the saturation of the markets, which causes a decline in market volume. Since then, competition will increasingly take place mainly at the level of the price. This results in price wars that make massive rationalization measures in the logistics and human resources required. Also, the increased demands of consumers characterize this development.

Description of the ECR concept

Efficient Consumer Response can not be regarded as an entirely new idea. Rather, for many years already certain techniques of this concept, such as collaborations between industry and commerce or the design of efficient distribution systems applied. However, the ECR concept contains three important areas:

  • Standardization: Existing supply chain -wide rationalization opportunities were hampered mainly by non-uniform packaging or package carrier ( eg pallets ), different software, and differences in the product labeling. The creation of standards by the ECR concept now enables rapid cooperation, which form the foundation for rationalization.
  • Rationalization and market growth: the ECR concept is in contrast to previous collaborations establishes a connection between rationalization measures and measures to realize market growth potentials.
  • Multilateralism: Previous collaborations were limited to the bilateral level, while the Efficient Consumer Response is based on a multilateral cooperation idea.

Creating uniform standards

As already mentioned, Efficient Consumer Response aims at optimizing the entire supply chain. For this it is first necessary to establish uniform standards. These concern the following areas:

  • Efficient Unit Loads (EUL, "Efficient goods bundling " ): This refers to the uniform design of transport packaging and package carriers.
  • Electronic Product Code (EPC, " Electronic Product Code " ): It is used for semi-automatic identification of products, mostly in product packaging.
  • European Article Number ( EAN, " European Article Number " ): It is used for optical identification of products, in product packaging as for the individual product.
  • Electronic Data Interchange (EDI, " Electronic Data Interchange " ): Paperless and electronic exchange of data such as orders, invoices or delivery notes between farms.

Building blocks of the ECR concept

Based on these standards, the process of the supply chain can be carried out efficiently. With respect to these processes can be made ​​between:

  • Logistics embossed or supply-side processes which and the so-called Efficient Replenishment
  • Marketing embossed or demand -side processes, which are summarized in the product group management,

Be distinguished. Both the efficient replenishment and category management will now be explained in more detail:

  • Efficient Replenishment (Eng. "Efficient supply of goods " ): The objective is to build an efficient distribution system, that is, to make the replenishment efficiently. The production is controlled on the basis of customer demand at the sale location. The customer should be supplied at the right place at the right time with the right product in the right quantity and quality. Through the exchange of electronic data is attempted to make the information flow as efficiently as possible.
  • Category Management (CM, dt " category management " ): Category Management is the demand -side dimension of Efficient Consumer Response. It is operated jointly by industry and trade, to make a needs- just for the customer offer. Goal of category management is on the one hand to increase the benefits for the customer and also to optimize the (own) result. This is done through the control of material groups. A further development of category management is at the moment - from authors at the Harvard Business School ( Kracklauer / Mills / Seifert ) - discussed under the heading of collaborative CRM. Collaborative CRM opens up new avenues for trade and industry to work together to operate along the value chain, customer acquisition, customer retention and customer development. This is also based on the knowledge that dealers have esp. data about the shopper, while the industry about you as a user of the products has better data.

Below are explained next to the category management now more demand-side strategies based or building blocks.

  • Efficient Product Introduction (EPI, dt "Efficient Product Introduction"): This is the success rate of ( re) launches to be lifted through cooperation between dealers and manufacturers, or the " flop rate " be reduced. The cooperation takes place both in the areas of product development and product launch.
  • Efficient store assortment (ESA, dt " Efficient Assortment at store level " ): An attempt is made by inventory and space management to achieve higher productivity of retail space and a higher turnover of goods.
  • Efficient Promotion (EP, dt "Efficient promotion ") → Efficient Promotion: This promotion activities between producers and distributors should be coordinated. The aim is to reduce the cost of sales-boosting measures.

Benefits

  • Shortened delivery times and higher security of supply, as forecasts by the ECR be easier and more accurate
  • Reduction of costs of transportation and packaging, as goods can be collected efficiently
  • Reduction in the rate falsely deliveries and thus the error correction costs
  • Improved information flow within the supply chain reduces the impact of the bullwhip effect ( bullwhip effect)
  • Sales promotions can be better planned
  • Customer Satisfaction
  • For consumers: higher availability of products, better value for money and freshness of the goods

Disadvantages

  • Software and hardware systems for the establishment of the ECR caused high investments necessary
  • Big coordination effort
  • Disclosure of information, such as scanning data
  • Risk of misuse of data
  • Cooperation and skills of all stakeholders are required
  • Shift of power between retailers and manufacturers

Practice examples

  • Cooperation between ADEG Austria Handelsaktiengesellschaft and Unilever Austria GmbH Ice Cream & Frozen Food: These companies were able to achieve through a company-wide process optimization with special consideration of consumer needs a strong reduction of shelf gaps ( from 9.1 to less than 4 %). Shelf gaps caused by the lack of articles on the shelf. Lower sales as well as negative effects on competition of the dealer and the manufacturer can be the result.
  • Savings, Austrian goods Handels-AG: This company was able to substantially improve its profitability ECR. This was achieved by inventory reductions and the increase of the durability date articles on the shelf. By lowering the stocks storage costs could be reduced. These cost savings are passed on to consumers in the form of lower retail prices. By increasing the shelf life of the customer benefits the most from the freshness of the products.
  • Other companies that are successfully applying the ECR concept: Henkel detergents and cleaners GmbH, Nestlé products GmbH, Ikea, and more.
Buyer decision process Bilateralism Technical standard Collaborative Planning, Forecasting and Replenishment Quick response manufacturing
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