of Food Distribution
in the U.S. have the most efficient food system in the world.
No other country devotes less of its total private consumption
to food.. But we're nowhere near as efficient as we could be.
in the supply chain, we've let inefficient practices creep in..
Fully 40% of our inventory is irrelevant to the efficient delivery
of food products to consumers. Inefficiencies cost about $30 billion
-- or about 10% of grocery industry revenues -- each year.
years ago, the industry held a mirror up to itself, took a good
hard look, and decided that a complete, long-term makeover was
in order. And we created a blueprint for success in the 1990s
an industry-wide strategy to enable manufacturers and distributors
to work together to bring more value to the consumer. It's a quest
to streamline the grocery chain by integrating the information
and distribution systems of manufacturer, wholesaler and retailer.
It's a crusade to root out anything that adds unnecessary time,
complexity or costs to the distribution of our products. Very
simply: it's a gargantuan effort to restructure our industry,
to transform the way we do business -- and to do it by the end
of the decade.
call it Efficient Consumer Response, or ECR. ECR is about efficiency
-- in our store assortments, replenishment, promotions, and product
introductions. ECR is also about the consumer, who will
be the ultimate beneficiary; and it's about response, because
the entire system is geared to respond to the consumer's need
and to provide a better assortment of higher quality and fresher
products at lower prices.
is an idea whose time has not only come, but is long overdue.
We're all working to become more efficient and profitable. But
there's only so much that we can do alone. ECR synergizes our
efforts and innovations across the whole industry.
already begun work on some of the major themes of ECR. We've long
been leaders in Electronic Data Interchange -- and we'll continue
to be. With some of our customers, we've begun continuous replenishment.
We're also looking for ways to simplify our trade deals. And we're
constantly scouring our product line to eliminate slow-moving
or low-profitability SKU's.
success of ECR depends on widespread involvement. A company won't
start to see benefits until one-quarter to one-third of its trading
partners are using elements of ECR. But then there's a snowball
effect, as the opportunities start to expand more rapidly. And
the sooner a company gets involved, the sooner it will begin to
see the kind of cost-savings and efficiencies that are critical
to success in our ultra-competitive environment.
isn't just high technology. It's primarily a process and culture
issue; most of the savings can be achieved by changing practices.
And the obstacles aren't technological or financial, but organizational.
For example, the traditional vertical, top-down organizational
structure, with each function operating separately and measured
independently, is a barrier, because every ECR change crosses
help people adopt new habits and practices, we'll invest in education
and training at all levels; make structural changes in reporting
relationships and accountability; and set up new performance measurements
for business units and for individuals.
isn't a short-term panacea. We'll all need understanding, patience,
and commitment, because it's going to be tough to move change
of this magnitude through individual companies -- and an entire
ECR is a journey, not a destination. Even with full implementation
-- probably in the mid-1990s -- the project will be ongoing. Continually
improving our industry's best practices will become a new way
of life for all of us, and we'll see further ECR developments
and benefits that we can't envision today.
is a quantum leap forward. For us in the grocery business, it's
the most far-reaching and exciting project of our generation.
As we bring ECR to life, we'll not only reap the rewards for our
businesses and our consumers; we'll also set our industry on a
permanent course of improvement, innovation, and renewal.