Growing beyond hard times: realising the full potential of ECR

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Growing beyond hard times realising the full
potential of ECR

• Daniel T Jones
• Chairman
• Lean Enterprise Academy
• Lean Global Network

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My background

• Done my mystery shopping in Greece!
• Studied the Lean business system of Toyota
• Set up 16 research institutes to teach lean
• And to spread lean to every type of industry
• Advised many companies on going lean
• Developed lean supply chains with Tesco
• Joined the ECR Academic Advisory Panel
• Editor of the ECR International Commerce Review

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The Recession

• Big changes in market share happen as we come out
  of hard times
• Big cut in consumer purchasing and borrowing
  power but they are also eating more at home
• Consumers want more value for less money - is
  traditional cost cutting enough? No!
• What can we learn from Aldi and Lidl and from
  Seven Eleven Japan and Tesco?
• We need to actually think outside the box

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Lessons from others

• The Discounters
• Limited range quality products own brand
• Low store costs simple ordering systems
• Lean supply chain with made to order products
• Add stores to add convenience
• Seven Eleven Japan
• Right range at right times sell freshness
• Know who buys what central store ordering
  system
• Low store costs very convenient for customers
• Frequent store replenishment make, ship, sell

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Lessons from Tesco

• For high volume, fresh and own brand products
• Flow through stores and shelf ready packaging
• Continuous reordering daily top up orders
• Suppliers make every day Tesco picks up right
  quantities of products daily cross docks to
  store
• Through consolidation centres for local suppliers
• Replenishing small stores does not cost more!
• Hence the push into convenience stores
• Right stock in right store from Clubcard

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Lessons from Tesco
Supplier
RDC
Store
NDC
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More lessons

• Tescos Fresh and Easy in the USA
• Low cost stores range of fresh, ready meals
  etc.
• Make key products in central distribution centres
• Daily deliveries of supplies and out to stores
• Offering fresh Wholefoods quality products at
  WalMart prices, close to customers!
• Caused a big shock in the USA WalMart and
  others setting up their own convenience chains
• Remember Tesco also successfully pioneered
  pick-from-store internet shopping

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What have we learnt?

• They have already cut the costs you need to!
• By focusing on the right core products
• Cutting handling costs in store
• Cutting costs by moving from push to pull
  distribution with daily replenishment
• Cutting costs by working with suppliers to make
  products in line with demand
• In fact treating all these products as if they
  were fresh products!

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Suppliers dilemma

• Dont want to dilute value premium for products
• But cant ignore the discounters and own brand
• And yet they make every product efficiently in
  a big batch about every 14 weeks
• Which means they probably carry 20 weeks of
  finished goods in addition to retailers stocks
• Forecasts 13 weeks ahead are always wrong so
  they are always short of the right products and
  have too much of the wrong products

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Lean Suppliers

• Make every high volume product every week
• Keep slots for low volume products as needed
• Are able to align production with demand, meet
  orders 100 on time in full with no invoice
  errors
• Improve equipment utilisation and increase output
  by 30 or more
• Free managements time from fire-fighting
• Release cash and capital from less stocks
• Opens opportunities to sell freshness

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Working together

• As retailers streamline the ordering,
  distribution and store operations for core
  products
• And as suppliers begin their lean journey to
  making every core product every week
• This could be the basis for a much bigger win-win
  cooperation to synchronise production in line
  with demand for the first time
• And to jointly plan, trial and roll out
  promotions with far greater impact and less
  disruption

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Growth opportunities

• There are also a big potential growth
  opportunities from leaning your supply chains
• Convenience does not need to cost more!
• So why not develop networks of modern, local
  convenience stores in every neighbourhood
• To do this you need to know who is buying what to
  have the right ranges in the right stores
• They are complementary to your supermarkets
• And someone is going to do it

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Finally

• No one has yet taken the next step - to work
  together with their customers to turn them from
  strangers into partners
• By also seeing local stores as ordering and pick
  up points for internet shopping
• So customers can order anything you can pick
  centrally in time for them to pick them up or
  have them delivered to their home, office etc.
• Think of them as a combination of Fresh and Easy,
  Amazon, Starbucks plus the iPhone!

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Growing beyond hard times realising the full
potential of ECR

• Daniel T Jones
• Email
• dan_at_leanuk.org