Efficient consumer response

By , | Jul 08, 2002, 12.58 PM IST

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Efficient Consumer Response (ECR) is a global movement in the Fast Moving Consumer Goods
industry focussing on the supply Chain Management.
Suppliers, Manufacturers, Wholesalers, Retailers and 3P service providers work together to fulfil
the changing demands of the consumer better, faster and at less cost.
The ECR ("Efficient Consumer Response") movement began in 1993 in the United States of
America, and spread to Europe in 1994 and then to Asia in 1996. The beginning of the ECR
movement was characterized by the emergence of new principles of collaborative management
along the supply chain. It was understood that companies can serve consumers better, faster and
at less cost by working together with trading partners
At the heart of ECR was a business environment characterised by dramatic advances in
information technology, shifts in consumer demand, and the increasing movements of goods
across international borders aided by the internal European market.
This new reality required a fundamental reconsideration of the most effecive way of delivering
the right products to consumers at the right price. Non-standardized operational practices and the
rigid separation of the traditional roles of manufacturer and retailer threatened to block the
supply chain unnecessarily and failed to exploit the synergies that came from powerful new
information technologies and planning tools.
To better serve the consumer, ECR set out to invert the traditional model and break down nonproductive barriers. The impacts were extensive and continue to resonate across industry.
ECR in India
The Need
The FMCG sector is witnessing fundamental shifts. Markets are stagnating; competition is
growing and becoming more complex; technology is rapidly developing; international and
environmental issues are coming to the forefront; more and more companies are concentrating on
their core business and business is becoming more and more global. At the same time consumers
are becoming increasingly sophisticated and demanding. Consumers demand sufficient choice,
high service and convenience, fresh, high quality and safe products, and value for money.
To be able to cope with these developments, companies in today's society must have an eye for
developments outside their own company. In-company measures appear insufficient to respond
to the growing complexity of the market and consumer needs. Companies will therefore need the
team up with their trading partners. By working together, they are able to combine capabilities

on serving the consumer better, faster and at lower cost. This is in other words Efficient
Consumer Response.
The Beginning of the Indian Chapter
In India, the first meeting on ECR took place on 10 December, 1999. The attendees included
representatives from J&J, Nestle, FoodWorld, PwC and EAN. The message put forth was simple
- there are a lot of areas where collaboration could lead to lower costs and a better supply chain
management. What followed was an effort by these companies to convince competitors to
collaborate. Soon the movement gained momentum, the number of participants steadily
increased and ECR India was set up as a voluntary body. The ECR India founder group includes
HLL, J&J, P&G, Godrej, Nestle, TVSE, TCIL, PwC, EAN and FoodWorld. Mr. Narendra
Ambwani, MD, J&J and Mr. Raghu Pillai, head, retail business, RPG Group are the cochairmen of ECR India.
The members of ECR forum discussed the various issues facing the industry, their criticality, the
drivers of these issues, the benefits the industry can get by solving these, the actions the forum
can take, and who all should be involved in the effort to resolve these issues. Also, there has
always been an effort to increase the membership of the forum so as to have a broader base that
is extremely critical for any effort towards standardization and collaboration in the industry.
Current status
Members
With sustained effort of all the participants the membership of the ECR India today has 22
companies from the FMCG sector and includes manufacturers, retailers, and service providers
(see annexure for details). There are regular monthly meetings of all the members to review the
work being done. The seriousness accorded to these meetings is clear from the attendance which
includes representatives from top management of the member companies.
Current Projects/ Workgroups of ECR India
There are four workgroups set-up working on projects that the Forum after many deliberations
decided to go ahead with.
1. Out-of-Stock Workgroup
How many times has it happened to you that you have gone to a nearby retail shop looking for a
product and there were no stocks available. This is the biggest challenge for any manufacturing
company - to make stocks available at the right place so that demand is not unfulfilled, keeping
in view the complex Indian retail structure. With the traditional nature of the retail network negligible IT systems, measuring impact on business due to such loss of sale is a tough task.
ECR India took it up as a challenge to measure the extent of stock out at the retail level and to
workout solutions to avoid this loss of business.
A pilot is in progress to measure stock-out of various products of J&J, Nestle, P&G, Colgate
Palmolive, Godrej and HLL. Right now the data is being taken from FoodWorld and retail shops
where billing systems provided by TVSE are in place. The data till now has been an eye-opener

least to say, and has led to discussions throughout these firms on how to bridge the gap.
2. Logistics Workgroup
The objective of this workgroup is to draw up standards in the field of logistics and to drive
possible cost savings through collaboration across industry.
In the FMCG Industry today, there is a glaring lack of standardization in packaging of products.
Each manufacter has its own carton sizes, pallet sizes, as a result of which there is a lack of load
optimization in transportation.
The logistics workgroup is working on standardizing cartons for similar types of packaging
across the Industry. For example Tins and Glass jars of a particular volume / weight could have
standardised outers across the Industry. This would lead to synergy of procurement and delivery
from supplier (standarised raw material requirement) to logistics (synergy of load optimisation ,
stocking at the trade level etc).
Study is being done to see the use of EURO size pallet for optimised material handling, better
utilisation of closed body containers and synergy of logistics and stocking at the trade / retail
level. Also, effort is being made to standardise the outers to best fill the EURO size pallet. This
would lead to cubic space optimisation and subsequent cost saving due to lower freight and
space savings.
All member manufacturing companies are working towards getting standard bar codes in place
on all their SKUs as well as outers. This would lead to savings in terms of cost and time for
transportation and also at the retail level. To give an idea, FoodWorld does re -barcoding of all
the products on its shelf due to lack of standard bar codes (bad quality of bar codes is also a big
issue).
An effort is being made to see if economics of scale can be brought about by collaboration
amongst the member companies in the field of distribution. The warehousing operations of
participant companies (Nestle and J&J) are being studied in Uttranchal for possibility of
consolidated warehousing.
3. Dataflow Standards Workgroup
This workgroup is working on setting DataFlow standards within the FMCG industry. The
purpose is to benefit from
* Generic norms - common transaction formats and identity code structures (product and entity)
around which individual elements may develop future solutions to manage their shop/service
operations.
* Obviate duplicity and unstructured development of software solutions by members, solution
providers and the trade at large.
* Early and low cost adoption of Extensible Mark up Language (XML) standards (Schemas and
Resource Description Framework) to allow heterogeneous systems operated by various elements

of the Supply Chain to digitally converse with each other.

* Invest supply cost savings in consumer service and product differentiation.
A pilot is being put in place to automate the data being exchanged between J&J and FoodWorld
including purchase order, supply invoice, goods return note, etc.
4. FMCG Policy for Organised Retail
Organised retail is growing in India at a fast pace and undoubtedly is the future of retail in India.
But till today there is no standard policy across manufacturers for transacting with them. The
purpose of this workgroup is to put in place a policy guideline for FMCG transactions with
organised retail. The following are some of the fields which will looked into (a) Assortment guidelines: Retailers to formulate guidelines that are clearly understood by the
manufacturers. To have clear guidelines on delisted SKUs.
(b) New Product Introduction guidelines: When should the retailer be informed about new
product launches. To ensure consistent execution across stores.
(c) Data sharing and Role clarity: Agreement between manufacturers and retailers on what type
of data can be shared and at what frequency. This guideline will be consistent for all
manufacturers, so that it is clearly understood. The retailer will also share a simple matrix that
shows, for any decision, who is the Approver, who is the influencer and who needs to be kept
informed.
(d) Improving inventory turns at the retailer): Both groups to work together to study how to help
retailer help in improving inventory turns.
(e) Trade terms: The scope of the work would essentially revolve around how to reward Scale
(Modern Retail) v/s rewarding Reach (Distributors).
Going Forward
The way forward for ECR India is to get some substantial benefits from the projects under
progress and use these as a selling point to get more companies on board. This would help in
having more broad based benefits from the projects in the future, which would help in realising
the mission of ECR India of "removing unnecessary costs from the Supply Chain and making the
sector, as a whole, more responsive to consumer demand."
Members of ECR India:
1 Agro Tech Foods Limited
2 Container Corporation of India Limited
3 Wipro Consumer Care & Lighting
4 CavinKare Private Limited
5 SmithKline Beecham Consumer Healthcare Ltd.
6 Procter & Gamble Hygiene & Healthcare Ltd.
7 Colgate Palmolive (India) Limited

8 Marico Industries Limited

9 Pricewaterhouse Coopers Private Limited
10 Nestle India Limited
11 Foodworld Supermarkets Limited
12 Hindustan Lever Limited
13 Transport Corporation of India Limited
14 Godrej Consumer Products Ltd
15 Ean India
16 Kodak India Limited
17 ITC Limited
18 Cadbury India Limited
19 Subhiksha Trading Services
20 Johnson and Johnson
21 South Eastern Roadways
22 Henkel Spic
For further information on ECR India please contact
Mr. Ravi Mathur,
CEO, EAN India
502-503, Arunachal Building,
Barakhamba Road,
New Delhi - 110001
e-mail address - rmathur@eanindia.com