ECR initiatives positively impact several business processes of trading partners in the FMCG sector through the following:
Collaborative planning, forecasting and replenishment (CPFR) : Manufacturers are often plagued by inconsistent consumer demand, which results in excessive inventory during lean seasons or shortage of products during peak season. CPFR is a technique that levels traditional supply crests and troughs and reduces out-of-stock situations at the retail level.
EDI/XML for B2B Electronic Communication : Electronic Data Interchange (EDI) enables automatic transmission of standardized information from one system to another over the internet thereby eliminating need for human intervention. EDI standards were developed from UN/EDIFACT (United Nations Electronic Data Interchange for Administration, Commerce and Transport).
Besides UN/EDIFACT, extensible Markup Language (XML) is now used extensively worldwide. It is a meta-language used for creating the markup languages required for encoding instances of a particular document or message over the Internet. Its standard is complementary to the EDI for B2B electronic communication.
Just in Time (JIT) : JIT production and inventory control systems enable better synchronization of supply with demand leading to lesser inventory that needs to be maintained. ECR has been instrumental in creating a business environment that enables the implementation of JIT. By facilitating collaboration between retailers and manufacturers it has ensured free flow of information which is imperative for the success of a JIT system.
Logistics planning : The significance of delivering quality products at the right quantity and at the right time to the consumer cannot be undermined. However, to remain competitive in today’s highly competitive business environment, this has to be achieved at the lowest possible cost. A key component of the cost of delivering an order is the storage and distribution costs. Hence, it is imperative for a company to manage its logistics planning and processes. ECR encourages companies to optimize the utilization of their logistic facilities through techniques like cross utilization of idle capacities (empty trucks returning after delivery, empty or partially used warehouses etc.), integrated logistic planning, better EOQ planning, standardization of palettes, racks, packaging, electronic communication using EDI/XML standards etc.
Benchmarking : ECR is working towards establishing benchmarking standards through the ECR global scorecard to enable companies to assess and improve their own processes. The benchmarking improvement process attempts to determine ways in which the best in class companies achieve superior performance and ways in which the same processes can be replicated by others.
Activity Based Costing (ABC) : This is a technique by which companies can assess their most profitable customer. Firms feel that the best customer is the one that has the largest contribution towards its revenue every year. However, this is not necessarily true. Often times, high volume customers make special requests for which the company has to incur additional costs (e.g. expedited shipping). These costs tend to make the orders unprofitable. ABC makes it very clear that integrated costs associated with the services the customer demands play a crucial role in determining each customer's contribution to net profit.