In fact, the more ECR practices they adopted in their relationship with Sainsbury’s, the higher their Sainsbury’s-related economic performance. Though many suppliers would disagree, we found that they clearly benefit from ECR. Perceived inequity, accurate or not, can lead suppliers to doubt whether they’ve received any return from ECR at all. For each product category in a supplier’s business with Sainsbury’s, we compared sales, profit, and growth performance with the supplier’s performance at other retailers and in other categories.
We also studied archival data on the suppliers’ economic performance and compared them with the companies’ implementation of 33 different ECR practices. The sample included small and large suppliers as well as private-label and branded suppliers. Although the retailer had documented ECR’s benefits to its own operations, it was unsure whether its suppliers were receiving corresponding benefits.īetween autumn of 2000 and spring of 2001, we surveyed a representative sample of 266 Sainsbury’s suppliers about their ECR relationships with the grocer, the perceived benefits of their ECR activities, and how equitable they felt the arrangement was. Sainsbury’s had asked all its suppliers to adopt ECR practices, and most did to varying degrees. So we decided to more closely examine the relationship between ECR adoption and performance among suppliers of Sainsbury’s Supermarkets, one of the world’s top 20 retailers. As the CEO of one of the largest packaged-goods companies in the world told us, “If there was a dollar to be made from ECR, I haven’t seen it.” But no one had actually tested empirically the suppliers’ conviction that they’re getting a raw deal. Today, suppliers are increasingly apathetic about ECR collaborations. A-a-a-any Day Now!” “ECR: More Promise Than Performance?” and, simply, “ECR Is Dead.” A Raw Deal? Articles in the trade press captured the growing skepticism about ECR with headlines like: “ECR Breakthrough. Having taken on those costs, suppliers generally perceive the benefits of the category management program as flowing mainly to the retailer. For example, with category management, a common ECR initiative, retailers effectively outsource the cost of data crunching and market research to suppliers. As far as suppliers were concerned, the lean supply chain simply fattened the wallets of powerful retailers like Carrefour and Metro, who all the while pressed suppliers to make more and more investments in ECR practices. Retailers and suppliers joined hands with sudden enthusiasm and invested heavily in ECR training, infrastructure, and processes.īut by the late 1990s, it seemed the payoffs had yet to materialize. Companies in the United States, South America, Europe, and Asia responded by launching national ECR initiatives.
The expected reward? Better forecasts of product demand, more efficient use of store and warehouse space, increased sales and category share, decreased inventories and stock-outs, reduced expenses for product promotions, fewer new-product failures, and lower administrative costs.Įarly on, Kurt Salmon, a retail-consulting firm, demonstrated that ECR could reduce costs in the supermarket distribution chain by about 11%, which would translate into annual industry savings of $30 billion in the United States and $33 billion in Europe. It required that retailers, manufacturers, and third-party resellers abandon their mutual suspicion and energetically cooperate to streamline the processes involved in sorting, replenishing, promoting, and introducing goods in supermarkets. ECR promised big payoffs for grocery retailers, suppliers, and consumers through sweeping supplier-reseller collaborations.
Inspired by the apparel industry’s supply chain innovations in the 1980s, the food industry launched the “efficient consumer response” movement in 1992.
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