Distribution and Retail - Assignment Example

Distribution and Retail Assignment AFFILIATION: Table of Contents What is Efficient Consumer Response (ECR)? 3 Advantages and Disadvantages of ECR 4 Recommendation for Dora Grey Business 5 References 9 What is Efficient Consumer Response (ECR)? Efficient Consumer Response (ECR) is a relatively new concept in the retail industry as the technological experts have recently realized the need of developing the softwares that will help the retailers ensure proper management of their stock (Sodhi and Son, 2009). ECR has its foundation in the strategic management and from there the term “Supply Chain Management” was highlighted. The main aim of Supply Chain Management is to help the manufacturers and everyone in the supply chain process to have adequate knowledge about proper management of stock. The Supply Chain Management was initiated to help mainly the companies functioning in the processed food distribution industry (Harris, 2010). Since the primary purpose of every company is to satisfy the needs and demands of the customers, in the distribution and retail industry the concept of Efficient Consumer Response (ECR) was coined. It was developed in the market in around 1990s and now it has become vital part of every distribution and retail store. The purpose of ECR is to help the company survive in the competitive environment by taking advantage of the latest technological gadgets available in the market. Yellepeddi et al. (2006) described ECR as a “strategy that will help the companies to raise the level of service provided to the consumers and it is possible only when there is effective co-operation and cordial relations between the manufacturers, wholesalers and retailers. Therefore, ECR is the ultimate solution of providing excellent and superb quality service to the customers.” According to Martins and Dooley (2010) and Su (2008), the main aim of every distribution and retail company must revolve around efficient management of stock so that the customers are satisfied with the service and it should be evident from increase in revenue stream. Therefore, the supply chain of every manufacturing business needs to be properly aligned so that the customers’ are provided excellent service. It has been reported in numerous studies that the main purpose of ECR is to re-engineer the business processes so that when internally everything is working properly and in alignment with business goals only then the company will be able to make profits. The concept of ECR comprises of three most important innovations; it led to the standardization of guidelines for supply chain which ensures that there is co-operation among the parties; as compared to past supply chain management concepts, ECR allows market growth as there are cordial relations between the parties and most importantly the concept has been applied at multilateral levels (Petrovic, 2009). As a result of creation of uniform standards in the distribution and retail industry, three major achievements that are recognized worldwide are Electronic Data Interchange (EDI), European Article Number (EAR) and Efficient Unit Loads (EUL). All these steps have enhanced the supply chain mechanisms as they ensure proper Efficiency Replenishment and Category Management for the organizations (Harris, 2010). Advantages and Disadvantages of ECR Since ECR is mandatory for every organization that is involved in food manufacturing or any kind of manufacturing business, it is important that the concerned parties i.e. manufacturers, wholesalers and retailers are aware of the benefits and drawbacks of implementing ECR. The main advantages of implementing ECR in the food industry are as follows: 1. The supply material is secured and the delivery time is enhanced. Since ECR is simple and provides accurate information about the stock, it will help the business to save money and time. 2. The costs related to transportation and packaging will be reduced as the supplies will be arranged in an efficient manner. 3. There will be low rate of incorrect goods that are supplied which means less goods return costs. 4. The flow of information will be fast in the logistics and production departments. 5. The adequate supply of final products will increase the customer satisfaction. 6. The planning of sales promotion activities will be easier. However, there are some drawbacks of implementing ECR which are as follows: 1. The companies will have to pay for high initial capital costs as the hardware and softwares for the systems will need to be installed. 2. The maintenance cost will increase which means heavy expenditures for tuning. 3. The information will be disclosed as everyone in supply chain loop will have access to the private information as well. 4. There can be shift in power of industry and trade. 5. The data is also vulnerable to be used in abusive way. Recommendation for Dora Grey Business Dora Grey is in the biscuits manufacturing business for quite long and has been managing adequate supplies around Great London. Although initially the owner will have to incur some heavy expenses for developing and installing the system for her business but eventually in the long-turn she will be able to make profits. In today’s competitive environment, the customers are being bombarded with a lot of new products and services and even with attractive promotion offers. In order to ensure that the customers remain loyal to a particular store, the companies need to make sure that they are able to meet the needs and demands of the customers. Since Dora is working in FMCG industry, she will have to make sure that she is able to satisfy the customers and do something out of the box in order to exceed their expectations. The implementation of ECR will help Dora to ensure that the products are available in huge quantity, the store is never out of stock, the goods are properly assorted in the stores, the goods will be fresh and cordial relationships will be developed with the wholesalers and retailers. The main aim of ECR is to help the manufacturers in producing fresh and good quality products, provide easy access to the consumers and give the consumers wide options for selection. I would recommend that Dora should implement ECR in her business as it will help her to accomplish three main goals that every distribution and retail company is concerned about i.e. category management, product replenishment and enabling technologies. In order to maximize the consumer value, the demand creation and meeting the demands of the customers is important and ECR will help Dora in achieving them. The main purpose of Category Management in ECR is to help the business in Product Promotions, Store Assortment and Product Introductions. ECR will help each trading partner to manage the internal activities so that they all are well-integrated and they work in collaboration by making use of their competitive advantageous resources towards the achievement of satisfying the customer and providing him the best proposition value. ECR will also help Dora to ensure efficient flow of products from the shelves of the retailers. The system will be more flexible and allow the business to meet the demands of the customers immediately. Since Waitrose is offering a good and reliable provider of Electronic Data Interchange (EDI) system, she does not need to worry about its maintenance. However, she must also do some market survey to gather information about the cost of acquiring the EDI system and try to get the best deal for her investment. With the help of this system, the information and communication between the trading partners will be enhanced and will help them in saving a lot of time and money. The representation for Dora regarding the positive aspects of ECR can be explained as follows in the form of figure: Source: Harris (2010) Proper implementation of ECR concept will help Dora to overcome the barriers. In the above figure, the barriers are shown which show the need of appropriate EDI system. Since implication of ECR concept will means that a lot of data and money needs to be exchanged among the trading parties, proper and efficient technologies need to be in place. Most of the data will be related to the supply and demand of SKU and it will be mandatory to determine the optimum level of stock as well. Hence, with EDI, Dora will be able to easily manipulate the optimum level of stocks required in every retail store. Hence, in today’s competitive and ever changing environment, Dora will have to apply ECR concept so that she can provide value added services to the customers and enhance their experience at the retail stores. Although ECR concept seem expensive initially but it has been found that Return on Investment (ROI) is more than expected (Harris, 2010). Since Dora is doing business in FMCG industry, she will have to be flexible and proactive in responding to the customers’ demands. She will be able to have access to a lot of information about the customers and changing trends in the market. With efficient and proper exchange of information, the promotion offers will be properly designed, stocks will be stored in right amount, customers will be satisfied, superb quality and fresh products will be produced, high value will be given to the customers and most importantly the company will eventually increase sales and make revenue in the long-run. Hence, Dora must apply ECR concept in her business and get competitive edge over its competitors. The ECR concept will definitely help her business in future expansion and she will have timely access to valuable information about the customers. Therefore, the business will be flexible and will always be ahead of its competitors. References Harris, L.C., 2010. Fraudulent consumer returns: exploiting retailers’ return policies. European Journal of Marketing, 44 (6), pp. 730-747. Martins, B.J. and Dooley, F.J., 2010. Food and grocery supply chains: a reappraisal of ECR performance. International Journal of Physical Distribution & Logistics Management, 40 (7), pp.534 – 549. Petrovic, D., 2009. Principles of e-Marketing. Oxford: Oxford University Press Sodhi, M.S. and Son, B.G., 2009. Supply-chain partnership performance. Transportation Research Part E: Logistics and Transportation Review, 45 (6), pp. 937-945. Su, X., 2008. Consumer Returns Policies and Supply Chain Performance. Manufacturing & Service Operations Management, 11 (4), pp. 595-612. Yellepeddi, S., Rajagopalan, S. and Rogers, K.J., 2006. Linking Forward Supply Chain Performance with Reverse Supply Chain Returns. Technology Management for the Global Future PICMET 2006 Conference, 6 (c), pp. 2748-2754. Read More