Polytechnic University of the Philippines

College of Business Administration

Department of Human Resource Management
A.Y 2020-2021

BAROT, JOHN PAUL CASTILLO January 5, 2021

BSBA-HRM 2-3N LOGISTICS MANAGEMENT

ACTIVITY #7
Answer the following:
1. What is the focus of Efficient Consumer Response (ECR)?
2. What are the problems in Vendor-Managed Inventory (VMI)?
3. Give an example Quick Response (QR) logistics.
4. Differentiate Efficient Consumer Response (ECR) from Collaborative Planning,
Forecasting and Replenishment (CPFR).
5. Why is Continuous Replenishment important?

Answers:
1. The focus of ECR is to integrate supply chain management with demand
management. This requires supplier–retailer collaboration – but in spite of the apparent
emphasis on the end-consumer, a lot of the early ECR studies focused on the supply
side. Subsequent increased focus on demand and category management, however, has
led to the adoption of a more holistic view of the supply chain when discussing ECR
initiatives. In addition, ECR has stimulated collaborative efforts that have increased the
emphasis on key areas such as EDI, cross-docking and continuous replenishment.
2. Other than the practical difficulties of setting up a VMI system, a number of
problems can prevent the attainment of the above benefits. Five of them are listed
below.
a. Unwillingness to share data - Retailers may be unwilling to share their
marketing plans and product range strategies with manufacturers. This is
particularly true in the UK, where supermarkets have strong own brands that
compete with those of the manufacturers. Retailers continue to be the owners
of information on actual demand passing through their tills. An inability to
forward this information, whether due to reluctance or to procedural and
technical problems, will prevent suppliers from responding effectively, leading
to the need for buffer stocks and increasing the risk of stockouts.
b. Seasonal Products - The benefits of VMI are quickly eroded in fashion and
seasonal products, especially apparel. VMI in these cases can involve
suppliers making to stock based on a pre-season forecast with little scope for
manufacturing in season. Small quantities are delivered from this stock to the
retailers over the season. Naturally the forecast is regularly at odds with
actual demand, so products will be frequently understocked or overstocked.
In effect all that has happened is that the burden of owning inventory and
disposing of excesses has been moved onto the supplier.
c. Investment and restructuring costs - Adopting a VMI approach incurs a high
investment by the customer and supplier. Setting up the processes and
procedures for undertaking this new way of working takes time and effort. The
customer will need to close their materials management function if they are to
make cost savings, while the supplier will need to develop the capability to
take over this task.
d. Retailer Vulnerability - The process of outsourcing materials management to
suppliers makes the retailer more dependent on them.
e. Lack of standards procedures - The practicalities of the processes and
procedures that underpin VMI may not be transferable from one customer to
another. Customers may ask for different tagging methods or bespoke
labelling. With many industrial products there is no bar-code standard.
f. System Maintenance - Errors creep into inventory records due to incorrect
part counts, mislabeling, damage, loss and theft. These records need to be
maintained through manual methods such as stock counts.
3. Quick response (or QR for short) is an approach to meeting customer demand by
supplying the right quantity, variety and quality at the right time to the right place
at the right price. The concepts behind QR are based on taking a total supply
chain view of an industry. From this perspective it is possible to understand
overall performance and the causes of poor performance, and to identify
opportunities for improvement.
4. Efficient Consumer Response is designed to integrate and rationalize product
assortment, promotion, new product development and replenishment across the
supply chain. It aims to fulfil the changing demands and requirements of the end-
customer through effective collaboration across all supply chain members, in
order to enhance the effectiveness of merchandising efforts, inventory flow and
supply chain administration. While the Collaborative planning, forecasting and
replenishment (CPFR) is aimed at improving collaboration between buyer and
supplier so that customer service is improved while inventory management is
made more efficient
5. Continuous replenishment logistics is important because it is a pioneering
approach to using developments in IT to supply demand quickly from the
manufacturer. Using electronic point of sale (EPOS) data to track customer
demand through the till, CR shares data from retailer to supplier. The aim is for
the supplier to replace quickly what has been sold today, so that stock availability
on the shelf is maintained at the retailer. It offers both retailers and their suppliers
the opportunity to manage their inventory in a more efficient manner.