Efficient Consumer Response (ECR) is an industry-wide, collaborative initiative to re-engineer the grocery supply chain. This report presents findings from a study of ECR adoption in Minnesota grocery stores. Data were collected through interviews with managers of forty stores that are broadly distributed over store sizes, locations, and organizational forms. The interviews focused on business practices and technologies related to inventory management and ordering, shelf-space allocation and product assortment decisions, and product pricing and promotions. Findings are presented from three distinct perspectives: (1) stores grouped by location (metro and out- state), (2) stores grouped by organizational form (corporate chain, independent chain, and single store), and (3) stores grouped by levels of an ECR "readiness index" that indicates the level of adoption for key business practices and technologies that support ECR initiatives. The following general conclusions can be drawn from the detailed results presented in this report. 1. Location in the Twin Cities metropolitan area makes an important difference in implementing some components of the ECR initiative. On average, metro and out-state stores differ little with respect to store size or the adoption of technologies that support ECR. Metro stores are much more likely than out-state stores, however, to coordinate shelf space and product assortment decisions and pricing and promotion activities with outside trading partners. 2. On average, stores that are part of a chain, especially a large corporate chain, are making faster progress toward implementation of ECR initiatives than are single stores. However, three independently owned single stores were also among the most innovative of those we visited. In these stores, it appears that a visionary, energetic owner/manager is able to quickly respond to new opportunities. 3. ECR adoption and superior performance are closely associated. Stores with a high ECR "readiness index" have much higher sales per labor hour, sales per square foot, and annual inventory turns. We cannot determine whether ECR readiness leads to better performance or better performance makes it easier to adopt business practices and technologies that support ECR. We can conclude, however, that competitive forces will almost certainly drive more stores toward adoption of a wider range of technologies and business practices that support the ECR initiative. In summary, ECR is changing the way Minnesota grocers do business, and adopting ECR practices goes hand-in-hand with better financial performance. Findings from this study suggest that stores of any size and organizational form that are willing and able to adopt new technologies, to develop cooperative relationships with their trading partners, and to respond to the unique needs of their customers will increase their chance of success in this competitive market.
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Paper provided by University of Minnesota, The Food Industry Center in its series Working Papers with number
14311.
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