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Efficient Consumer Response
28 de September de 2022
Efficient Consumer Response is a strategy that optimises logistic flows. It reduces storage and delivery times, it reduces the costs of the process and it satisfies the final demand on time.
It’s a global commitment that becomes more complex as the chain increases in size and it involves producers, wholesalers, distributors, transportation companies, logistic centres and points of sale.
Experts say that the key to a good ECR is to plan the process backwards. Wait… What?! Yes. Backwards. That implies organising the production of a product based on the final sales forecast.
This requires producers to deeply understand the dynamics of sales and the supply chain in order to reduce to the minimum the storage times in production plants, middle distributors and retailers.
When It Comes to Stock, Less is More
Time is money and, unfortunately, we can’t store it (yet). That’s why it’s important to optimise it, taking into account multiple factors: staff schedule, transport hours, time spent on delivery, traffic. And let’s not forget about the circumstances that can have an effect on sales: special offers, months of the year, advertising, consumption habits. It’s a very complex balancing act.
The key to ECR is having products spend the least possible time in stock without building up. An important difference if you compare it to the inclination to have reserves in order to avoid shortage. A product in stock always involves a greater risk of expiring and a greater cost for the company.
Besides, correctly calculating final needs isn’t only about not suffering from shortage, but it also prepares producers to adjust their needs for raw material or components and it helps organise the need for staff and their schedule.
Benefit for Retailers and Consumers
ECR has an impact on the whole supply chain, from the moment a product is produced until it reaches the final consumer.
- More Space: Having less stock and less volume of product, commerces have more space to offer a greater variety of products.
- Better Quality: Less volume of product equals better quality. Thus, the life span of the product increases.
- Profitability: A better product quality makes you a bigger competitor, which increases your profitability.
All these benefits make clients feel a greater satisfaction with the product they buy.
Are There Other Sectors For Which ECR Could Be Beneficial?
Every sector risks losing money with inefficient supply chains. As long as the inventory cost is expensive, there’s the possibility to improve the efficiency for storing the product.
In the tech and innovation industries, there’s an increasing risk of falling into programmed obsolescence, in which products have a pre-established, programmed expiry date.
Gardening could also benefit from ECR, since working with living products makes it more prone to waste or throw away products that could be reused for other purposes.
Special manipulation conditions or delicate products that require refrigeration are also exposed to this. In these cases, shortening times will always be beneficial for all the supply chain.
That’s why companies have been investing money on this for a long time. It’s a process that’s highly dependent on technology and, in the long term, it has a positive effect on costs and increases efficiency and sustainability.
How Does Technology Help?
As technology takes us forwards, new systems come up that help companies have a greater control on their storage and a more complete understanding of their products.
Currently, two tools are used as product automation systems:
- EPC: The electronic product code is a number designed to identify a product around the world. This code links a product to all its possible information, such as time and place of production, expiry date, length, width, condition, storage, etc.
- EDI: The electronic data interchange means the communication between commercial documents companies in a standard format, replacing papers, in orders or receipts.
ECR takes the efficiency of the whole supply chain to the maximum, from producers to consumers, in order not to lose money on product cost and maintenance and, ultimately, satisfying the needs of shops and shoppers.
Article written in collaboration with Francesc Rufas, EAE Business School Professor and Director of Enginy Assessors.