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ECR Initiative in India

The document discusses the Efficient Consumer Response (ECR) initiative in India's Fast Moving Consumer Goods (FMCG) industry. ECR aims to address inefficiencies in India's fragmented supply chain that cause stockouts and expired inventory. It brings together competing FMCG companies to share stockout data, best practices, and resources to better meet consumer demand through a more efficient supply chain. The ECR workgroups are implementing initiatives like monitoring stockouts, optimizing logistics through shared warehouses, standardizing data flows, and setting policies for organized retail. ECR's goal is to eliminate 40% of costs from the supply chain and pass the savings to consumers by transitioning intermediaries to a demand-led pull system rather than

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98 views2 pages

ECR Initiative in India

The document discusses the Efficient Consumer Response (ECR) initiative in India's Fast Moving Consumer Goods (FMCG) industry. ECR aims to address inefficiencies in India's fragmented supply chain that cause stockouts and expired inventory. It brings together competing FMCG companies to share stockout data, best practices, and resources to better meet consumer demand through a more efficient supply chain. The ECR workgroups are implementing initiatives like monitoring stockouts, optimizing logistics through shared warehouses, standardizing data flows, and setting policies for organized retail. ECR's goal is to eliminate 40% of costs from the supply chain and pass the savings to consumers by transitioning intermediaries to a demand-led pull system rather than

Uploaded by

HariSharanPanjwani
Copyright
© © All Rights Reserved
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ECR Initiative in India

V. Doctor, “Rushing into Retail”, Business World, (31 May, 1991)

There are two nightmares scenarios for any FMCG organization. One is when its customers return
empty-handed because the product they wanted was not available in the store, and the other is when
the customer is compelled to buy goods just a few days before the expiry date. Both these threats
emanate from the common problem of supply chain inefficiency. These incidentally are the very
problems that the entire FMCG industry in India is facing owing to the overwhelming fragmented supply
chain, and the large inventories trapped in it.
ECR is about these companies who combat for a share of the Rs. 400 billion FMCG market coming
together to:
• Monitor and share the stock-out data of their own brands
• Benchmarking their figures against those of the others
• Share best practices to minimize new product failures
• Tackle problems of excess inventory in the supply chain

This is achieved through sharing resources such as trucks and warehouses, using common business
language in order to meet the ECR objective of fulfilling consumer demand better, faster and at lower
cost by eliminating unnecessary expenses and inefficiencies from the supply chain. ECR expedites flow of
products and information on consumer demand. The intermediary margin cost, cost of logistics and cost
of holding inventory can be reduced up to 40% through ECR and this will be passed on as a benefit to the
consumer.

The ECR initiative is being implemented through four workgroups comprising representatives from the
participating companies.

• The Stockouts Group


– The group measures the actual level of stockouts in the industry and evolves common
solutions. This group has established a pilot study to monitor the stockout levels of 85
key SKUs of five companies.
• The Logistics Group
– The group draws up logistics standards and drives possible cost-saving measures
through collaborations. This group works out synergies through shared warehouses for
non-competing products of different companies and has established a pilot for backhaul
arrangements (using the same truck to carry one company’s product in one direction of
the route and another company’s product during the return journey), which results in 5-
10% savings in transportation costs.
• The Data Flow Group
– The team is responsible for standardizing data definition and flows between various
constituents of the supply chain. The idea is to develop communication framework that
is understood by all the players. Thus a 13-digit code (European Article Number – EAN)
has been developed to identify an SKU and plans are afoot to develop codes for all
entities like manufacturers, distributors and retailers. EAN will help in ensuring the bar
coding is adopted by participating companies. This will enable an enhanced accuracy of
up to 90% in demand estimation and tracking of stocks all along the supply chain and
result in annual savings of up to Rs. 10 million for the retailers.
• The FMCG Policy for Organized Retail Group
– This group draws up policy guidelines for FMCG transactions with organized retail. It is
responsible for benchmarking of intermediary margins in India with other comparable
countries. They plan a value chain analysis every activity of every intermediary in the
supply chain will be examined to define the margins that each deserves.

Together these groups intend to launch an unprecedented ECR initiative in the country that will serve as
a shining example for other who may join in later so that this becomes an industry-wide practice.
ECR is expected to change the current way of functioning of the intermediaries – from push based to
demand-led pull-based operations where the trading partners lift products based on actual demand.
This will also eradicate the biggest evil of excess inventory in the supply chain. The entire FMCG supply
chain is estimated to be carrying an inventory worth Rs. 150 billion (20 week’s sales), which amounts to
an inventory carrying cost of Rs. 16.5 billion every year.

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