Imagine trying to connect a water pipeline with a moving caravan. It sounds ridiculous, but it's similar to the challenge facing the grocery supply chain. The water pipes to our homes deliver an instant product, in any volume, at any time. It's the perfectly responsive chain. But how can we emulate this pipeline for other goods? In other words, how can we provide a constant flow of products, perfectly synchronised with consumer demand? The more efficient we become, and the UK is widely regarded as the world leader in grocery logistics, the more difficult it is to improve the system. What makes it harder still is the shifting shape of the grocery industry and its rapidly changing consumer needs. Consider the impact of the following three factors: n There is a fast growing demand for fresh foods, part prepared meals and eating away from the home. n The information revolution is changing the relationship between customers and suppliers. E-shopping is ready for take off. n A genuinely global marketplace is opening up, encompassing every stage of the chain. Mergers, acquisitions, new start ups and company rationalisations are transforming market structures in the UK and beyond. Who would be bold enough to map out a course for the future supply chain amid such change? Step forward, the ECR replenishment group. This group, comprising representatives from leading multiples, leading retailers and food and drink manufacturers, was formed in 1998. It was born out of the decision by the ECR UK executive board to tackle longer term, structural issues. Initially the ECR movement had concentrated on developing a series of process guidelines advising companies on how to work collaboratively. But now it felt a different course of action was needed. The objectives of the group were ambitious and it started by asking some tough questions. One of its concerns was how effective are members of the current supply chain in viewing it as a total system and from a consumer perspective? Where are the costs incurred, where do quality issues arise,, and how reliable is the on-shelf availability? The UK grocery chain employs over three million people, providing more than half a million products to 58 million consumers. It moves more than three billion cases through 27 million sq ft of retail warehouse space each year. So measuring the system was going to be no easy matter. One of the issues it wanted to consider was how the industry might provide a better service to consumers, balancing cost, quality, variety and reliability. For this to be achieved, new industry standards would be needed and reinvestment or perhaps disinvestment in physical assets. The ECR Strategy group also considered what information needed to be exchanged and put its mind to identifying barriers to change and working out how they could be overcome. Then there was the crucial qestion of how to allocate costs and benefits. It went still further by considering how to future proof the plans and how best to chart progress and alter course, if need be. Such a root and branch review takes time, but the group has made good progress and has formed working parties to focus on three important issues: n downstream logistics, advising on the link between manufacturers and retailers. n handling units, reviewing the variety of packing containers used to transport goods, such as cases, crates, pallets and dollies. n data alignment, reviewing the information needs of tomorrow's supply chain. The replenishment strategy group, co-chaired by Nestlé director of planning and logistics Tom McGuffog and Somerfield head of supplier partnerships David John, oversees these activities, pieces them together, looks further upstream in the chain, and fills in the gaps. It plans to issue a full report later this year, but it has already come to some interim conclusions, not least that there remains plenty of scope for improvement. The group sees the main priorities as: n improving on-shelf availability, particularly late at night and on Sundays while simultaneously reducing wastage from overordering n taking excess stock from the chain, in particular, by synchronising today's deliveries from suppliers with tomorrow's requirement in stores, and thereby cutting back drastically on the stock held by retail warehouses n minimising the number of product movements and handling activities ­ it is not unusual for some products to be handled 20 times from production line to consumer n improving efficiency of the vehicle fleet by increasing the average load size and thereby reducing total vehicle miles n minimising the number of different handling units n reducing the cost of administration and data errors through the accurate application of data standards. However, we cannot currently monitor performance of the whole chain because there are no accurate performance measures available. The IGD and the ECR group are therefore developing a plan to measure the entire network. What is already clear though is that industry consolidation centres can help both to reduce inventory and to increase vehicle loads. If smaller manufacturers hold their finished goods jointly, they can deliver more frequently to their customers in full vehicles. Somerfield's David John outlined his vision for consolidation in The Grocer (July 17 1999) and the ECR group has set up a trial to test the feasibility and economics of such centres. The results will be made public later this year. As retailers work individually to improve their own supply chains, the replenish strategy group recognises there is a danger of several proprietary standards causing extra cost and confusion among their joint suppliers. So, following on from the ECRate ­ a long awaited industry standard in returnable plastic crates, which could be circulation by this time next year ­ the ECR unit handling group is working on a standard for dollies. Analysis by Jon Woolven, research director and Tarun Patel, business analyst, IGD. {{FOCUS SPECIALS }}