Just-in-time deliveries have let automobile assembly plants cut
their stock of car parts to a few hours' supply.
A similar effort in the grocery industry could bring shipments
of cereal to stores just when shelves need restocking.
The food industry effort - called Efficient Consumer Response,
or ECR - could trim as much as $30 billion a year in costs from the
processing, transportation, handling and sale of food, industry
studies suggest. The savings could cut a dime out of every dollar
consumers spend on food.
"Everyone who's involved in the food industry sees a benefit"
from improving efficiency in the food distribution system, says
David P. Skarie, corporate vice president and director of customer
development for Ralston Foods, a subsidiary of Ralcorp Holdings
Inc. Ralston Foods makes Chex cereals, Beech-Nut baby food, RyKrisp
and Bremner crackers.
Consumer prices will stay lower if stores, distributors and
food processors cut waste from the food distribution system, said
Craig D. Schnuck, chairman and chief executive of Schnuck Markets
Inc. Stores will be more likely to have what shoppers want when
they want it. Many manufacturers, stores and distributors are
dabbling in efficient consumer response, but few are using it
throughout their business, said Richard Sherman, senior vice
president of IRI Logistics of Chicago, a company that collects
product sales information from grocery check-out scanners.
"Nobody is all the way there yet," said Ralcorp's Skarie.
About 60 companies are part of an ECR effort sponsored by the
Food Marketing Institute and the Grocery Manufacturers Association.
The trade groups are trying to come up with "best practices"
standards for various aspects of ECR. The groups recently published
results of its first studies.
For grocers, one of the most exciting aspects of ECR is
category management - matching the assortment of products in each
store to its sales and the needs of surrounding neighborhoods,
For example, a brand-name calcium-fortified orange juice may
sell well in one neighborhood, while shoppers in another location
prefer the lower-priced store brand.
If each store has the same amount of each type of juice, the
store that sells a lot of the calcium-fortified juice may run out
of that brand while the store brand languishes in the freezer. The
store that sells a lot of store brand juice will run out of that
while the juice with calcium sits unsold.
In either case, the result is unhappy shoppers and lost
profits, especially if the unsold juice can't be moved before it
goes bad, Sherman said.
At Schnucks, planners have made detailed plans for every shelf
in each of the chain's 64 stores, said Craig Schnuck, who serves on
a national food industry committee that promotes ECR. The
computerized plans show how much space to give each product and
which sizes to stock.
Schnucks' Frontenac store, for example, has a wider variety of
gourmet foods, wines and other specialty products, he said. Stores
in lower-income neighborhoods have more space for rice, pasta and