For ECRFor ECRBy: Larry Gillman Wayne East

1) Supply Chain Vision

2) Review of Key Supply Enablers

3) Supply Chain Processa) Master Data Alignmentb) Efficient Replenishmentc) Physical Product Distributiond) Financial Reconciliation

4) Industry Direction

AgendaAgenda

ECR - Grocery Industry ECR - Grocery Industry UpdateUpdate

The 5 ECR Enablers :

1) Scan Data Integrity2) EDI - Electronic Data Interchange3) Continuous Replenishment4) Activity Based Costing5) Category Management

1) UPC - Common Code2) POS Scanning - 3rd Party Validation3) Case Bar Codes - September 19984) EDI - VICS 4010 by March 1999 to standardize the

industry- future releases to be controlled by the industry

Progress to Date :

• Canadian ECR development slow

• Senior ECR Committee formed

• ECR Sub-Committee support

• Some Canadian breakthroughs

• Canadian industry vision

ECR - Canadian ECR - Canadian DevelopmentDevelopment

• To reduce total Supply Chain inefficiency

and costs by utilizing and supporting

technology enablers on all major

transactions.

Supply Chain VisionSupply Chain Vision

• The overall outcome is the right product, in the right place, at the right time, resulting in:

• Reduced inventory

• Higher customer service levels

• Warehouse, handling,

• Transportation and manufacturing

• Efficiencies

Supply Chain Vision (cont’d)

• The industry must achieve critical mass on key enablers:

– UPC numbers on all products

– Bar codes for rapid identification– package, case, pallet

– Integrated EDI

Industry EnablersIndustry Enablers

• Each company will pursue operational enablers independently, including:

1) Activity Based Costing

2) Category Management

3) Forecasting

4) Continuous Replenishment

ECR Operational EnablersECR Operational Enablers

Supply Chain VisionSupply Chain Vision

Key Supply Chain Processes

• ECR Vision addresses 4 key processes:• 1) Master Data Alignment• 2) Efficient Replenishment• 3) Physical Distribution• 4) Financial Reconciliation

• Totally integrated to form “Closed Loop”

• Priority for implementation as above

• Item, price and promotion databases each sku.• Supplier responsible for maintenance/transmission.• One valid set of data for Supply Chain.

• Benefits• Eliminates costly errors “downstream”.• Success on data alignment required to ensure other benefits.

Supplier Distributor

Price Change

Promotion

Item Maintenance

1. Master Data Alignment

• Timely exchange of information between supplier and retailer

• Huge benefits to Supply Chain when executed with excellence

• Four key replenishment models

2. Efficient Replenishment2. Efficient Replenishment

A. Vendor Managed Replenishment

• Warehouse sales data used by vendor for forecasting / replenishment.

Supplier Distributor

Inventory Activity

PO Acknowledgment

2. Efficient Replenishment2. Efficient Replenishment

• B. Retailer Managed Replenishment

• Retailer provides forecast projection for supplier’s planning.

• Retailer forwards purchase order.

Supplier Distributor

Product Planning Forecasting

Purchase Order

2. Efficient Replenishment2. Efficient Replenishment

C. Collaborative Replenishment

Supplier Distributor

JointForecastPlanning

ProductForecastPlanning

ProductForecastPlanning

Purchase Order

Additional Research Required

2. Efficient Replenishment2. Efficient Replenishment

Supplier RetailStore

Product Authorization

Purchase Order

Distributor

• Product Authorization of approved listings, supports scanning.

• P.O. confirms order detail.

D. DSD - Direct Store Delivered Product

2. Efficient Replenishment2. Efficient Replenishment

Supplier RetailStore

Invoice

Distributor

• Invoice sent to Retail/communicated to Distributor.• Supplier summarizes all invoices, and communicates to

Distributor.

DSDSummary Invoice

2. Efficient Replenishment2. Efficient Replenishment

D. DSD - Direct Store Delivered Product

• Benefits• Eliminates errors, manual effort.

• Additional Notes• DEX - UCS Technology generates in-store invoice and Receipt

Advice.• Major differences between Distributors on DSD processes.

Supplier RetailStore

Product Authorization

Purchase Order

Invoice

DistributorDSD

Summary Invoice

2. Efficient Replenishment2. Efficient Replenishment

D. DSD - Direct Store Delivered Product

• Lower Inventories

• Higher Customer Service Levels/Sales

• Transportation/Receiving Efficiencies

• Warehouse Efficiencies

• Purchasing and Manufacturing

Key Benefits of Efficient Key Benefits of Efficient ReplenishmentReplenishment

3. Efficient Physical 3. Efficient Physical Distribution/ReceivingDistribution/Receiving

• Efficient distribution/receiving aids in product movement.• Involves Carriers with requests for transfer of product.• Carrier responds to load tender.

Supplier DistributorResponse toTender

Load Tender

Response toTender

Load Tender

Carrier

Supplier Distributor

Advance Ship Notice

• Once product is loaded, Supplier confirms details via Advance Ship Notice.

• Carrier also confirms status of load on route.

ShipmentStatus

ShipmentStatus

Carrier

3. Efficient Physical 3. Efficient Physical Distribution/ReceivingDistribution/Receiving

3. Efficient Transportation and Receiving3. Efficient Transportation and ReceivingAdvance Ship Notice/Case Bar Codes/Advance Ship Notice/Case Bar Codes/

Pallet License PlatesPallet License Plates

• Both Case Bar Code and Pallet License Plate technology enable efficient Transportation and Receiving.

• Supplier assigns each pallet a license plate confirming specific sku’s and quantities.

• Advance Ship Notice details each pallet and license plate.

• ASN updates Distributor’s receiving system, ensuring a match.

• Receiving by license plate versus scanning physical count.

• Stock put away by scanning the case bar code.

• Enables inventory, cross-dock, flow-through warehousing.

• Benefits

• Decreased receiving time/costs

• Reduced errors

• Elimination of paperwork/manual effort

• Reduced cycle time

3. Efficient Transportation and Receiving3. Efficient Transportation and ReceivingAdvance Ship Notice/Case Bar Codes/Advance Ship Notice/Case Bar Codes/

Pallet License PlatesPallet License Plates

• All financial activities automated.

• Distributor informs/pays Supplier on actual goods received (less OSD’s).

• Distributor informs Supplier of actual payment, including cheque stub.

• Distributor/Supplier communicates debits.

Supplier Distributor

Receiving Advice

Debit Credit

Payment/Remittance Advice

Financial ReconciliationFinancial Reconciliation

• Benefits

• Mismatches for over, short and damages eliminated, as Distributor pays on what is actually received

• Paperwork/manual effort on deductions eliminated

Financial ReconciliationFinancial Reconciliation (cont’d)(cont’d)

Individual Processes and Transactions are understandable and manageable.

In total

It is more complex and takes resources to plan the path forward and to manage on a day-to-day basis.

EDIEDI

Process Supplier Distributor

Banks

879, 889, 888

855

850

990

Data Entry

Ordering

Shipping

Invoicing

Payment

Price, Promotion,Item Information

AccountsReceivable

Invoicing

ShipmentProcessing

Order Entry

AccountsPayable

InvoiceMatching

ReceiptProcessing

Purchase OrderManagement

Price, Promotion,Item Information

Transportation Transportation

= optional process)(

204

213 214

856

990 204

213214210

861210

810

820

812

Closed Loop EDI

Key EDI Transactions and Processeshave been identified.

The Supporting Supply Chain Enablersare known.

The Question: SO WHAT

EDIEDI

• Unless the industry commits to the direction, then establishes timelines, and incentives for compliance, we will only drift forward without momentum.

ECRECR

• A suggestion for the sequence of events and timelines.

ECRECR

Master DataAlignment

879-889-888

DSD878-850-810-

882-820

RMI830-850

CollaborativeReplenishment

830-850

Payment820-812810-210

Start - 6 Months 6 Months 6 Months6 Months6 Months

ShipmentManagement

856-861

May99

Nov99

June2000

Dec2000

June2001

Dec200

1

VMI852-850

TransportManagement204-990-214-

213-210

EfficientReplenishment

determinealternatives

Suggested Integrated Supply Chain Suggested Integrated Supply Chain Development Sequence with Timeline Development Sequence with Timeline

EstimatesEstimates

• The benefits are different by company/difficult to quantify

• Long-term, large investment

• Long timelines require discipline/commitment

• Year 2000 and business opportunities have priority

• No “Burning Platform” for our industry

• History shows our lack of industry compliance

Supply Chain Vision IssuesSupply Chain Vision Issues

Comments We Have HeardComments We Have Heard

• We know the benefits • Quaker - Sobeys pilot

• Stop talking - start implementing

• The burning platform is competitors that • have pushed ahead and have efficient supply chains

• If we haven’t accomplished this by the year 2002, it won’t matter anyway

ChoicesChoices

If our industry has an acceptable vision

then

The Sr. ECR Executive Committeehas choices to make.

AlternativesAlternatives

1. Full commitment - industry wide with timelines

2. Commit to the direction - without timelines

3. Options by company - to buy in or opt out

4. Other alternatives

Execution Approach What Execution Approach What Will Keep Us Moving ForwardWill Keep Us Moving Forward

1. Establish incentives for execution

2. Disciplines or penalties for lack of execution

3. Publish scorecards on execution excellence - peer pressure

4. Alternatives

The Path ForwardThe Path Forward

ECRLet’s Move Forward

• To benefit our customers

• To benefit our organizations

• To benefit our industry

From Vision to RealityFrom Vision to Reality

Alison Cameron &

Lucy Abbruzzese

• History…performance issue. The industry’s performance in the implementation of key enablers such as EDI has been less than encouraging.

March 1997…Reality check. Move from involvement to commitment.

IssueIssue

• To realize the full benefits would require:

Implementation of full suite of transaction sets for procurement, settlement, and database synchronization

Critical mass

Efficient Consumer ResponseEfficient Consumer Response

Process Supplier Distributor

Banks

879, 889, 888

855

850

990

Data Entry

Ordering

Shipping

Invoicing

Payment

Price, Promotion,Item Information

AccountsReceivable

Invoicing

ShipmentProcessing

Order Entry

AccountsPayable

InvoiceMatching

ReceiptProcessing

Purchase OrderManagement

Price, Promotion,Item Information

ECR - Product Supply ChainClosed Loop E.D.I.

6

Transportation Transportation

= optional process)(

204

213 214

856

990 204

213214210

861210

810

820

812

• Distributor Perspective

• Manufacturer Perspective

BarriersBarriers

…all parties frustrated

DISTRIBUTOR PERSPECTIVEDISTRIBUTOR PERSPECTIVE

SMALL CO’S MEDIUM & LARGE CO’S

ISSUES COMPLEX IMPLEMENTATION COST/BENEFIT QUESTIONED

LACK OF UNDERSTANDING

ISSUES COMPLEX IMPLEMENTATION BENEFITS RECOGNIZED LACK OF SENIOR MANAGEMENT SPONSORSHIP FOCUSING ON RESOURCES AND PRIORITIES

LACK OF UNDERSTANDING -NOT A TECHNOLOGY TURNKEY SOLUTION BUT A BUSINESS PROCESS SOLUTION

SUPPLIER PERSPECTIVESUPPLIER PERSPECTIVE

SMALL & MEDIUM CO’S LARGE CO’S

ISSUES COMPLEX IMPLEMENTATION NOT COST JUSTIFIED

LACK OF UNDERSTANDING

ISSUES COMPLEX IMPLEMENTATION BENEFITS RECOGNIZED LACK OF SENIOR MANAGEMENT SPONSORSHIP FOCUSING ON EDI RESOURCING AND PRIORITIES

LACK OF UNDERSTANDING -NOT A TECHNOLOGY SOLUTION BUT A BUSINESS PROCESS SOLUTION

Industry Average for EDI Industry Average for EDI Transaction Sets March 1997Transaction Sets March 1997

0

10

20

30

40

50

P.O. INVOICE ITEM MTC. PRICES PROMO

%

EDI Transactions

New Commitment From IndustryNew Commitment From Industry

• New Structure for ECR in Canada

• Assimilate Food and Drug User Group

ECR Sub-committeesECR Sub-committees

E C RC ollab ora tive

F orecs tin gC om m ittee

E C RU n exp la in edD ed u c tion sC om m ittee

U n sa leab leA d visory

S u b -C om m ittee

E C RU n sa leab le

P rod u c tsC om m ittee

E C RE d u cation &

C om m u n ica tion sC om m ittee

E C RS corecard &

B en ch m ark in gC om m ittee

S tan d ard s(G rou p 1 )

S m all C om p an yS o lu tion s(G rou p 2 )

C os t B en e fitA n a lys is

(G rou p 3 )

E D IS u b -C om m ittee

B arcod e /S can d a ta

S u b -C om m ittee

F u rtu reTech & Tren d sS u b -C om m ittee

E d u cation &C om m u n ica tion sS u b -C om m ittee

E C RTech n o log y(E xecu tive )C om m ittee

E C RD S D

C om m ittee

E C RC aseS iz in g

C om m ittee

E C R S teerin g C om m ittee

Mandated to address EDI Issues

• Standards Resolution:

Move to common standard

Move to common version

Efficient Consumer ResponseEfficient Consumer Response

Resolutions:

Determine as an industry the feasibility of moving to a common standard and version.

VICS 4010

Within the 4010 Standard you must make choices regarding the sub-sets of the standards you will use.

UCS - traditional grocery standards- currently used by most of the grocery companies

VICS - traditional general merchandise standard- Hudson Bay, Sears, Wal -Mart utilize

X12 - used by companies that have special requirements- Shopper’s, Canadian Tire

UCS - limited transaction set- for example, transportation transactions are not supported

VICS - very highly used in North America- Release 4010 has grocery requirements added- each’s, inner packs, variable weight, etc.

X12 - individual company oriented- not a recognized industry standard

PositionAdopt the 4010 VICS Standard.Change the use of: Purchase Orders from 875 to VICS Standard 850

Invoices from 880 to VICS Standard 810

• Strategy For Common Standard

Ensure that VICS met all business requirements of traditional UCSDevelop common Canadian implementation guide based upon VICS 4010Develop web based “knowledge network”Develop small company solutions program

Efficient Consumer ResponseEfficient Consumer Response

For future Releases after 4010 the food and drug industry agreed to evaluate the Release as an industry and make a common decision regarding it’s adoption.

Strategy For Common Version

All purchase order and invoice transactions in the food and drug industry must be executed via EDI no later than May 31, 1999.

Note: There are organizations that have strategically moved to an evaluated receipt program. In this case the timeframe for invoices will not apply.

Efficient Consumer ResponseEfficient Consumer Response

• Communications

Series of seminars to educate industry

Implementing 4010: Moving Towards the Year 2000

June 2,1998 Toronto; June 14, Calgary; June 18, Montreal and June 24, Halifax

Efficient Consumer ResponseEfficient Consumer Response

• Created web based knowledge network with ECR information, committee minutes, structure

Efficient Consumer ResponseEfficient Consumer Response

Senior Manager, Graphics and ComplianceSenior Manager, Graphics and Compliance

The Quaker Oats Company of CanadaThe Quaker Oats Company of Canada

Tom McAllisterTom McAllister

7 12345 12345 9

( 01) 90614141000418 ( 15) 991230

( 00) 0 0413245 123456789 4

Universal Universal Product CodeProduct Code

Shipping Container Shipping Container Code 14 in Code 14 in Interleaved 2 of 5Interleaved 2 of 5

Shipping Container Shipping Container Code 14 in Code 14 in UCC/EAN-128UCC/EAN-128

Serialized Shipping Serialized Shipping Container CodeContainer Code18 in UCC/EAN-12818 in UCC/EAN-128

ECR Barcode SuccessesECR Barcode Successes

• 50% rise in first Pass Scan Rate resulting in 50% rise in first Pass Scan Rate resulting in tens of millions of dollars of savings.tens of millions of dollars of savings.

UPC POS First Pass Scan Rates 1995-1998

0%

20%

40%

60%

80%

100%

1995 1996 1997 1998

Year

FP

SR

% FPSR

99% TargetRate

SCC-14 Implementation in the Grocery Industry

0%10%20%30%40%50%60%70%80%90%

100%

1995 1996 1997 1998

Year

%

• Defined deadline and implementation Defined deadline and implementation momentum of SCC-14 movingmomentum of SCC-14 moving toward critical mass.toward critical mass.

ECR Barcode SuccessesECR Barcode Successes

• Simplifying Case IdentificationSimplifying Case Identification

• Better Inventory ControlBetter Inventory Control

• Significant Error ReductionSignificant Error Reduction

• Speeds up Receiving ProcessSpeeds up Receiving Process

• Simplifies Database ManagementSimplifies Database Management

Benefits of SCC-14Benefits of SCC-14

SCC-14 and the Food and SCC-14 and the Food and Drug Implementation Guide Drug Implementation Guide

40104010

•Canadian ECR recommends the use of the Canadian ECR recommends the use of the EDI qualifier “UK” for all new product EDI qualifier “UK” for all new product identification application.identification application.

–Provides link between the UCC/EAN global Provides link between the UCC/EAN global numbering formats (U.P.C., EAN & SCC-14) andnumbering formats (U.P.C., EAN & SCC-14) and EDI.EDI.

–Permits transfer of the SCC-14 information via Permits transfer of the SCC-14 information via EDI transaction sets. (e.g. 856 ASN, 810 Invoice, EDI transaction sets. (e.g. 856 ASN, 810 Invoice, 850 PO etc.)850 PO etc.)