Published Articles: Future of Food Distribution

          We 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.

          Everywhere 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.

          Two 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 and beyond.

          It's 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.

          We 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.

          ECR 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.

          We've 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.

          The 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.

          ECR 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 functional boundaries.

          To 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.

          ECR 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 industry.

          But 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.

          ECR 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.