A question of trust

The term "supply chain management" serves to conceal an important part of any business process. Your business is not just about getting supplies to you, but also about getting your products to your customers. One of the strategies used to achieve this is efficient consumer response, or ECR.

The ECR movement kicked off in the US in 1993, heralding the emergence of new principles of collaborative management along the supply chain. Around the same time, technology was being heavily punted as the cure for all supply chain woes. Like earlier supply chain initiatives, ECR was criticised as being just another buzzword, or phrase, in a long line of buzzwords. Today, technology is more realistically seen as a supply chain enabler, as opposed to a saviour, and approaches like ECR are proving their worth. "ECR is not just about the supply chain," explains National Brands business systems head Eric Stockenstrom. "A better term would be collaboration or partnership. And yes, the supply chain does benefit, but so does the demand chain, so you could say the whole value chain from raw material to consumer benefits."

Processes and their management is at the crux of ECR, which focuses on ensuring that all parties in a chain work together to benefit themselves, each other, and end-consumers. By focusing on the management of several key areas (category management, demand management and order management), National Brands has been able to collaborate with its customers to the benefit of all of the parties in the chain.

"Responding to customers efficiently is not just about the supply chain."

Eric Stockenstrom, business systems head, National Brands

"Category management," says Stockenstrom, "is about how we get together with the retailers to maximise value to the consumer, and also to ourselves. For example, take hot beverages. We go to the retailer, and tell them: `This is what we know about how these are consumed in urban areas or townships. We`d like to share the research with you and between us come up with a shopper proposition that appeals. That results in wins for us and wins for the consumer`."

Demand management is about forecasting with the retailers and working together to determine demand. "For example, take a pop concert. They know it`s happening and can let us know, so we can then determine demand and ensure that we make only what we will sell.

"Order management is about ensuring that the customer (the retailer) gets the right order in terms of quantity and price, and that it is delivered on the right date at the right outlet. The result of a bad order is a credit note. A worse result is non-delivery and non-availability on the shelf. Credit notes cost several hundred rand to produce and every one avoided results in substantial savings for us and the retailers. They also have rooms full of people resolving these issues.

"Part of the success trick for order management is the product data catalogue," he continues. "This is the catalogue in which suppliers publish details of all the products they sell to retailers, so that when a deal is struck, everyone is speaking the same language.

"In the past, a telephonic order taker would record an order from, for example, Pick 'n Pay, for 1 000 cases of 200g Eat-sum-mores. If the order-capturing clerk got that right, it would be recognised by the person punching orders into the production system and you`d get the right product. This is fraught with difficulty as some product differences are subtle, and if you`re not talking about the same thing you get the wrong item delivered and the product is sent back. The truck has to go to the outlet twice, the goods sit in the sun, are handled and dropped, and possibly become unusable."

The product data catalogue, provided it is accurate and regularly updated, resolves these issues by including detailed product specifications and cutting out the human operator who may take down an order incorrectly.

A combination of electronic messaging (XML and EDI) to facilitate transactions and portal technology to collaborate around category management and demand management has yielded huge returns for National Brands. But as Stockenstrom says, the technology is mostly irrelevant. It`s the relationships between the parties, and the levels of trust that make the difference. "If asked whether ECR is about IT or about relationships I would say relationships every time. If you get the relationships right you`ll find a way to sort out the processes. Doing it the other way around is a waste of time.

"For us, ECR has been very successful and resulted in huge improvement in our business relationships and business processes with key retailers. Our modest investment in ECR has yielded stunning returns," says Stockenstrom.

So while ECR has been criticised for delivering as few returns as its predecessor, Quick Response, did, perhaps the implementers were letting the technology stand in the way of good relationships because ECR has certainly worked for National Brands.