The ECR ("Efficient Consumer Response") movement effectively began in the mid-nineties and was characterised 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, growing competition, pressure on margins, global business structures and consumer demand focused on better choice, service, convenience, quality, freshness and safety 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 effective 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, as well as the lack of collaboration between them, 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 non-productive barriers. The impacts were extensive and continue to resonate across industry.

Focus Areas of ECR

There are four focus areas under ECR. These areas are broken down further into core and advanced improvement concepts. They form the basis of the Global Scorecard.

scheme

Individually these concepts are commonly known and well documented methods to improve effectiveness and efficiency.

However, when applied under ECR, they have two distinct differences: They are intended to be addressed as an integrated set, not individually.
They are assessed in terms of their impact across the entire supply chain, not just the business of individual trading partners.

The Global Scorecard helps you to explore the potential of working together within your company or with your partners in the supply chain. The scorecard provides a clear description of ECR improvement concepts and lists Key Performance Indicators to evaluate you present situation. Originally named the ECR Europe scorecard, it is now adapted to world-wide use. The maintenance of the Global Scorecard is supervised by the Global Commerce Initiative and has been enriched by a set of additional performance indicators relating to the use of Global Standards.

Challenges and Key Benefits of ECR

mplementing ECR means dramatic change in current business practices. ECR is about redesigning the processes, altering paradigms and changing attitudes. Proper management of the ECR process is effective in mitigating resistance and increasing co-operation. A clear communication by top management of the benefits and rewards of ECR will make the process more effective.

ECR challenges many existing approaches, which can often lead to inefficiency. Trading partners are asked to work together in order to increase value to the consumer. The intensifying competition amongst trading partners often presents an apparent barrier to achieving this. However, just the opposite is true – ECR allows companies to seek a competitive advantage by demonstrating their superior ability in working with trading partners to add value for the consumer.

In 2004, ECR Europe was preparing to celebrate its 10^th anniversary. The ECR Europe Board commissioned a study – The Case for ECR . The purpose of the study was to review ECR achievement in Europe, to report the progress which had already been made and to estimate the further benefits which could be achieved. In the report presented here you will see that

since 1995 3.6% of consumer sales value has been saved through successful ECR adoption in Europe or a €18 billion benefit in cost and inventory reduction
a further 3.3% of retail sales value could be saved by full adoption of ECR ,a €28 billion benefit in cost and inventory reduction by adopting fully ECR business practices
potential sales growth of 5% – €42 billion - is available by better meeting shoppers and consumers needs through new product, improved information and service offerings in store .
top tier ECR adopters enjoy 6% better service levels, 5% higher on shelf availability and 10 days lower finished goods inventories than low or non adopters of ECR practices.

The Case for ECR - A Review and Outlook of Continuous ECR Adoption in Western Europe
by ECR Europe, ECR Academic Partnership and IBM Global Business Services (2005)

& Click to download: the Executive Summary or the Full Report or the Presentation

Glossary

Activity Based Costing (ABC)

An accounting method that enables a business to understand more clearly how and where it makes a profit. In ABC, all major activities within a cost centre are identified and the costs of performing each are calculated – including costs that cross functional boundaries.

Auto-ID Center

Founded at the Massachusetts Institute of Technology (MIT), the Auto-ID Center is a global industry funded research programme tasked with developing the ‘ultimate solution’ for RFID: an ultra low cost, open standard system, that can be used for any application on any physical object, including low-priced consumables such as grocery items. The Auto-ID Center mission is to ‘merge the physical world with the information world to form a single seamless network, using the latest technology developments.’ The Centre is currently focussing on development of the so-called electronic product code (ePC) (see below for definition).

Automated Store Ordering (ASO)

A retail-based system that automatically generates store orders when shelf stock falls below a set level. A computer system will track stock of all items in store, adjusting for deliveries of stock and sales of products (using EPOS data).

Business Process Re-engineering (BPR)

Restructuring of all company activities to improve the service given to your customers.

Category Management

Category Management is a retailer/supplier process of managing categories as strategic business units, producing enhanced business results by focusing on delivering consumer value.

Computer Assisted Ordering (CAO)

A retail-based system that automatically generates store replenishment orders when the shelf inventory drops below a pre-determined level. A computer system tracks inventory of all items in the store, adjusting for receipts and sales.

Consumer Enthusiasm

The level of consumer commitment where consumers are not only satisfied and loyal to the offer of a company but are surprised by that company when it anticipates or creates consumer needs and desires. Consumers develop a strong emotional link with the company and its offer, which becomes part of their lives.

Consumer Relationship Management (CRM)

CRM is a collaborative integrated ECR demand management strategy, which helps manufacturers and retailers to jointly recognise & value consumers’/shoppers’ individual needs and tailor their offers to them.

Consumer Value Management

The creation and enhancement of consumer value by implementing actions that provide consumer satisfaction and enthusiasm, thereby providing value to the consumer.

Consumer Value Measurement

A method to measure the effectiveness of commercial actions in delivering value to the consumer and the commercial value received by the company as a consequence.

Co-Managed Inventory (CMI, see also VMI)

Retailers and suppliers work together to reduce the level of stock holding and to improve the availability of products in their supply chain. Sales forecasts and promotional plans are shared and discussed so that the precise amount of stock is available at the retailer’s RDC.

Collaborative Planning, Forecasting & Replenishment (CPFR)

CPFR is an ECR improvement concept whereby all participants in the supply chain jointly manage planning & forecasting processes and share the necessary information.

Consumer Direct

This term is used to describe on-line services that offer grocery and related products which consumers can order and receive remotely from a retail outlet supported by information technology. Similar terms include Business-to-Consumer (B2C) or Direct-to-Consumer e-commerce.

Consumer Direct Logistics

The supply chain processes and tools needed to enable Consumer Direct operations.

Continuous Replenishment Programme (CRP)

The concept of continuous supply of goods between supplier and trade partner based on automated exchange of current demand, inventory and stock management information, within the framework of an agreed supply policy. The aim of CRP is to achieve a responsive and precise flow of product to the store, with minimum stock holding and handling.

Cross Docking

A product handling concept where stock for store orders are not put away into warehouse racking for later picking but are either processed into store orders, or arrive ready assembled. This can mean breaking down the inbound delivery into store ready consignments or, if consignments are pallet sized, moving pallets across the docking areas (hence the name) for loading onto delivery vehicles.

Customer Account Profitability (CAP)

A technique used by suppliers to measure the relative profitability of serving their trade customers. All costs of serving that customer are accounted for and the level of profits made through that customer is measured.

Data Pool / Data catalogue

Repository (mainly electronic) of data related to items and parties.

Direct Product Cost (DPC)

A method of assigning all costs of a particular product (manufacturing, distribution, stock holding, handling costs, store display, etc) directly to that product (i.e. bottom up)

Direct Product Profitability (DPP)

The profit a product contributes after all its costs (DPC) are accounted for.

Direct Store Delivery (DSD)

A method of delivering merchandise from manufacturer directly to the retail store, by-passing retail warehouse facilities.

EAN International

International association whose object is to establish global multi-industry systems of identification and communication for products and services based on internationally accepted and business-led standards.

EAS tagging

Electronic article surveillance tagging, often applied at source, is a technology required by a number of retailers to protect a product against external theft.

Efficient Consumer Response (ECR)

A joint initiative by members of the supply chain to work to improve and optimise aspects of the supply chain and demand management to create benefits for the consumer e.g. lower prices, more choice variety, better product availability. The mission of ECR Europe is ‘To serve the consumer better, faster and at lower costs’.

Efficient Unit Loads (EUL)

EUL activities seek to improve the efficiency and effectiveness of current and future supply chains by promoting harmonisation and integration of transport and storage items (pallets, crates, cases, roll-cages, etc.). RTI (reusable transport items) are an integral part of Unit Loads.

Efficient Replenishment

Supplier and retailer working together to ensure provision of the right product, to the right place, at the right time, in the right quantity, in the most efficient way possible.

Electronic Data Interchange (EDI)

Computer-to-computer transmission of business information between trading partners based on standard file formats and transaction sets.

Electronic Fund Transfer (EFT)

Management of cash flow and timing of payment to suppliers and retailers using electronic data interchange.

Electronic Point of Sale (EPOS)

The method of recording store sales by scanning product bar codes at the stores tills.

Electronic Product Code (ePC)

A 96-bit code of numbers, which provides unique identification for physical objects in the supply chain. The EPC acts simply as a number providing a pointer or address to information about the object in question held in databases sitting on local networks or the Internet. The EPC is being administered by EPC Global (subsidiary of GS1). It has now become the Global RFID Standard for the FMCG industry.

Global Commerce Initiative (GCI)

The Global Commerce Initiative (“GCI”) is a worldwide voluntary body created in October 1999 by manufacturers and retailers to improve the performance of the international supply chain for consumer goods through the collaborative development and endorsement of voluntary global standards and business processes. GCI believes that the interests of consumers worldwide can best be served efficiently through the standardisation and improvement of key business processes.

Global Data Synchronisation (GDS)

The process of continuous harmonisation of information between trading partners within the supply chain using common data standards.

Global Data Dictionary (GDD)

Lays down the common definitions for master data (neutral and relationship dependent).

Global Location Number (GLN)

GLN is a 13-digit EAN.UCC code that identifies a physical, functional or legal entity.

Global Registry

Repository, which holds the basic information of all items and parties in all data pools and the location of each item’s home data pool.

Global Scorecard

A Capability Assessment Tool designed to give companies a detailed understanding of their ECR capability and to highlight specific improvement opportunities for them. The Global Scorecard currently comprises four formats: entry-level, intermediate and full, as well as a GCI compliance scorecard, which allows companies to check their conformance to specific GCI-endorsed standards.

Global Trade Item Number (GTIN)

GTIN Is a 14 digit EAN.UCC number used to identify products and services.

Improvement concept

The fourteen areas that have been identified as key to implementing ECR because of their potential for improvements. They are grouped under three areas: Supply Management, Demand management and Enabling Technologies.

Intranet

Network of connected systems using internet technology but with access restricted to permitted users e.g. a retailer and its group of suppliers.

Inventory

The average level of stock in a given point of the supply chain at a given point in time.

Just-in-Time (JIT)

The movement of merchandise or part finished stock to the next point in the supply chain as it is required for consumption or use. In its widest context ‘just-in-time’ is also used to describe the philosophy of short lead times and low inventory levels within the supply chain.

Key Performance Indicator (KPI)

Measures that are deemed essential in monitoring the performance of a business e.g. service level, profitability.

Lead Time

Cycle time between order placement and delivery of goods. Lead times are usually expressed in days or hours.

Logistics Service Provider (LSP)

Company that offers a range of transport, warehousing, distribution and related services to other companies in the supply chain. Also called third party distribution companies, 3PL or contract distribution companies. Currently a new generation of logistics service providers is emerging, so-called 4PL (4th party logistics) – these are companies which provide overall management of logistics networks and LSPs on behalf of manufacturers and retailers.

Master Data

Any item and party data applicable across multi-business transactions; it can be neutral – constant across all trading partners (e.g. product size, name of manufacturer) – or relationship dependent (e.g. price).

Master Data Alignment

Bringing commonality to data between trading partners based on agreed standards.

National Distribution Centre (NDC)

A large single stock holding point serving retailer regional distribution centres and other customers in either domestic or international markets.

New Product Introductions (NPI)

The term that refers to the process of developing and launching a new product. Alternatively known as New Product Development (NPD).

Optimal Shelf Availability (OSA)

OSA is the name of an ECR Europe project which aims to reduce the occurrence of out-of-stocks (OOS) in the supply chain and ultimately on the shelf by recommending a number of improvement levers (e.g. measurement, management attention, replenishment, merchandising, inventory accuracy, etc.) and how they should be tackled jointly between manufacturers and retailers.

Pay-on-Scan (Scan based trading)

Settlement of payment whereby a manufacturer’s invoices are paid by the retailer as the products are being sold (scanned). This implies that the stock stays under the ownership of the manufacturer as long as they have not been sold to the final consumer.

Point of Sale Data (POS Data)

POS Data are all information captured at an identified point of sale (POS) and generated by the act of purchase; this includes both product and consumer related data. For the sake of manageability, the ECR POS Data Management project has currently limited its scope to product data only.

Product Classification

Common language to support flexible categorisation of products.

Profit Impact of ECR Task Force (PIETF)

The PIETF has established a European Profit Model, which is a methodology to assess the costs and benefits of all ECR improvement concepts from a total supply chain perspective.

Quick Response (QR)

A strategy where partners in a supply chain work together to respond more rapidly to consumer demand. This may involve sharing point of sale data, forecast demand levels and making manufacturing as flexible as possible so that production can be agreed to consumer demand.

Radio-Frequency Identification (RFID)

RFID is a technology that uses radio-frequency waves to transfer data between a reader and a tagged movable item to identify, track or locate that item. RFID does not require physical sight or contact between the reader (scanner) and the tagged item. Broadly speaking all RFID tags (also called intelligent tags or smart labels) comprise a semi-conductor chip with memory processing capability and a transmitter connected to an antenna. The advantage of RFID over traditional barcode-based technologies is that it does not require line of sight and can read in bulk.

Retail Distribution Centre (RDC)

A distribution point operated by or on behalf of a retailer that serves a number of stores in an area with a range of products.

Self Billing

Settlement of Payments, where no invoice is issued by the supplier, and the retailer pays automatically upon receipt of goods.

Self-scanning

A procedure whereby the consumer scans the purchased item him/herself at the check-out.

Service Level

The extent to which demand is met by availability of product. Service level is usually expressed as a percentage and can be measured at a number of points in the supply chain e.g. 95% service levels means that the products is available 95% of the time or 95 out of 100 customers will be able to buy the product.

Shelf Ready Packaging (SRP)

Term used to refer to a product that comes in a ready merchandised unit . SRP is synonymous with RRP (Retail Ready Packaging), and ready to sell or PAV (prêt-à-vendre). SRP covers all types of shelf ready packaging, including promotional displays, pallets, etc.

Shrinkage

Stock loss occurring in supply chain and at store through errors, theft (internal & external) or supplier fraud. The extent of shrinkage in Europe has been estimated at € 18 billion for the year 2000 by the ECR Europe shrinkage team.

Stock Keeping Unit (SKU)

Trading unit (e.g. case, tray, promotional shipper, pallet), that can be ordered by customers and handled in the supply chain. It is labelled with a uniquely identifiable trade item number. It may internally consist of consumer units (product package size as sold to consumers) or other trading units.

Synchronised Production

Manufacturing aims to co-ordinate production to match demand for product. Rather than manufacturing to build stock levels or to forecast, products are made to order not for inventory.

Value Added Network (VAN)

A clearing house for electronic transfers between partners.

Value Chain Analysis (VCA)

A tool for identifying and quantifying cost reduction opportunities within the supply chain.

Vendor Managed Inventory (VMI) see CMI

In VMI the Vendor (supplier) manages the stock levels and availability in his customer’s warehouse, based on forecast demand.