This document discusses quick response (QR) and efficient consumer response (ECR) in retail supply chains. It defines QR as providing goods to retailers in exact quantities based on demand within short lead times to minimize inventory. ECR aims to further integrate retailers and suppliers through information sharing and joint planning. Examples are given of QR in fast fashion industries, where trends change rapidly and inventory becomes obsolete quickly, requiring rapid replenishment. The document also discusses trends in the grocery industry toward more centralized distribution and automation to reduce costs and improve availability.

1. Quick Response and ECR
1

2. Aims
• Quick conclusions from last week –
positioning and market changes
Quick Response
• Definition and scope
• Drivers
• Enablers
• Examples – fashion and grocery sectors
• ECR introduction – model structure
2

3. 3
Product / Market Focus
Product range
Pricing services
Facilities
Location
Store design
Promotion
Customer-handling
Distribution
Product-handling
Services
Facilities
Buying quantitative
Range control
Cost Focus
Product / Market Focus
Sainsbury’s
Aldi, Lidl,
Waitrose
Co-op
Asda
Change over time,
Companies such as Tesco attack
different segments via own label etc

5. Inefficiencies

6. IGD.com

7. IGD – Top Themes
• Product ranging and buying optimisation
• Progress towards recovery
• Shopper behaviour – price sensitivity
• Food price inflation
• Online retailing – continued growth
• Own label development
• Sustainability issues
• Company restructuring
• Different format opportunities
• Customer led innovations
7

8. Trends?
1. Austerity: Government spending cuts will begin to impact
individuals
2. Confidence: Those who have so far escaped economic /
financial troubles may now be hit
3. Inflation: Rising global commodity prices / currency changes
will be manifest in-store
4. Credit: Shoppers will be unwilling / unable to fund
consumption through debt
5. Demand: Low confidence / rising prices / lack of credit will
mean weak volume demand

9. 9

10. Why are Supermarkets Expanding
into Non-Food?
• Higher margins than food ranges
• Higher priced - assist total cash sales
• Customer interest - additional customers into the store
• Christmas trading opportunities
• Less mature - technical innovation and increased
spending
• Overall growth in grocery markets - 3%, non food areas
averaging 13%
• 32% of sales is non-food.
• Traditional categories such as health and beauty,
household, petcare, news and magazines, and tobacco,
have been sold in supermarkets for some time.

11. Which supermarkets are the main
players in Non-Food Retailing?
Tesco’s
• Aims to be as big in non-food as it is in food
• Claims 6% share of UK Non-food market
• Non-food business amounts to £7 billion
• Includes clothing (4 brands:-Value,Tesco, Florence &Fred, Cherokee),
electrical, home and leisure, toys
Asda
• Some superstores dedicate up to 40% of selling space to non-food
• Recently launched jewellery, homeware/furniture, wellbeing, and
prescription eyewear.
• Launched first standalone “George” clothing store in 2003
Sainsbury
• Launched new-range of general merchandise in 2003 for all stores
Marks and Spencer
• Non-food range primarily of clothing
• “Home concept” in some stores including furniture, cookware, crockery,
gift items, cosmetics and jewellers

12. 12
Retail Grocery Distribution
Evolution
Increasing
Automation &
Centralisation:
Centralised
Stock & MIS
systems:
Delivery direct
from supplier &
limited RDC
development:
Development
of Systems &
loss of Store
Authority :
Key savings
Changes in
Retailer : Supplier
relationships:

13. 13
Retail Grocery Distribution
Evolution
• Stage 1 : Store Control 1970’s - direct delivery,
inventory control at branch, weekly deliveries,
5 weeks stock at store.
• Stage 2 : Depot Control Early 1980’s - stock
control to Regional Distribution Centres
(RDC’s). Lead times. consolidation and
computerised replenishment systems; stock

14. 14
Retail Grocery Distribution
Evolution
• Stage 3 : Head Office (HO) - Late 1980’s - IT
systems, replenishment control - order
frequency, lead times, - 1 - 3 weeks stock in
stores. Ordering - EPOS.
• Stage 4: Just-in-Time (JIT) / quick response
1990’s, supplier links, further lead time
reductions. Small consignment orders,
restructuring.
• Integration companies - Efficient Consumer
Response (ECR) and CPFR.

15. What is Quick Response (QR)?
Fioritos (1998) defines quick response as follows:
• ‘Quick response (QR) is a vertical strategy where
manufacturers provide retailers with goods or services in the
exact quantity required, on a continuous basis within
minimum lead times, resulting in minimum inventory levels
throughout the pipeline.’
• (Source: Fioritos R, Retail Buyers’ Perceptions of Quick
Response Systems, International Journal of Retail and
Distribution Management, Vol 26, No 6)
• Extension of JIT – whole value added system – JIT more
function specific

16. 16
Key Characteristics
– A state of flexibility,
– Highly diverse range of products and services
– Exact quantity, variety and quality
– In response to real-time consumer demand
– Demand driven decisions at the last possible
moment,
– Short lead times from design to final customer
– Highly competitive, volatile and dynamic
markets

17. 17

18. The aims of QR are:
• To reduce the waiting time of inventory within
the supply chain
• To prepare products in response to demand
• To eliminate unnecessary stock
• To reduce stockouts
• To eliminate bottlenecks from the supply chain
• To remove unnecessary tasks and automating
where possible

19. Aims
• Finish QR concepts
• Grocery v industry examples
• ECR introduction and framework
• Category management introduction?
19

20. To support these aims retailers need to improve
efficiency in:
• Order management
• Inventory replenishment
• Physical handling and transportation
• The exchange of information.
• By working together, suppliers and retailers may
harmonise their order management and inventory
replenishment systems,
• By integrating their systems retailers can maximise their
availability for sale at minimal cost.

21. Review – Intro to Quick Response (QR)
• Time based competition becoming more
important
• Data captured at the retail end (product,
customers, demand) exploited at all levels and
used to manage finance & risk.
• Greater emphasis placed on integration
particularly in international marketplace.
• Technology fundamental to supply chain
efficiency requires investment at all levels.
21

22. 22

23. 23

25. DEBATE: Changing Priorities? –
Accenture Reports 2010

26. BUT - This month
ASDA ‘faster fresh’ at a glance
• Faster Fresh to get fresher,
higher quality products to
stores
• Eight chilled distribution
centres, 7,000 products and
407 suppliers
• Increased shelf life on 1572
products by an average of one
day
• Cut number of chilled loads to
stores by 3.7%, reduced road
miles
• Conclusion – wider potential
Customer service times are typically shorter than replenishment lead times.
t 1
Cus tomer
Reques ted
Delivery
t 0
Cus tomer
Servic e Time
(1)
Delay
in assessing network structure 26
t 3+y
time
Cus tomer
Order
Replenishment Lead T ime (3)
Cus tomer
Feasible
Delivery
Replenishment Order
P roc essing Time (y)
A different approach to managing availability is required.

27. Other Reading
• Fernie book – Chapters 5 & 6 (QR in
Fashion industry)
• Also relevant to future SCM lectures –
introduction to agility
27

28. 28
3 Stages to Development of QR
Stage 1. Introduction of basic technologies:
• SKU level scanning;
• Standard barcode;
• Use of standard EDI to transmit order and payment details
Stage 2. Internal process reengineering:
• Cross-docking
• Automatic replenishment systems
• Advances shipping notes (ASN)
Stage 3. Collaboration:
• Real time data sharing
• Integrated supply chains
• Product tracking
• Flatter company structures

29. 29
Retailer & Supplier Benefits

30. 30
Fashion Industry
• UK – most competitive market in Europe
• Multiples 70% total (M & S 12%)
• Competition from off-shore manufacturers
• Better choice, increased availability, lower prices
• Need for greater differentiation and efficiency
• UK – excess inventories, long lead times,
unwanted goods, markdowns or stockouts

31. 31
Fashion Market - Characteristics
• Fixed calendar of yarn and fabric exhibitions, fashion
shows, and trade fairs
• Retailers’ time-table of selecting ranges and garments
• Yearly buying cycle, purchasing 6 month in advance of
launch
• Two main seasons pa with smaller phases
• Historical sales basis for forecasts
• Difficulties with different styles and long planning
horizon
• Goods manufactured in Far-East – problems with re-manufacture
whilst in fashion
• Use of secondary local suppliers to back-up stocks at
short notice despite increased cost

32. Fashion Market
• Short life cycles
• High volatility
• Low predictability
• High impulse purchase
Critical lead times:
• Time to market
• Time to serve
• Time to react
32

33. 33
Inventory Planning in Clothing Supply Chain
Zara – shorter, more frequent cycles, more responsive to actual sales,
avoid markdowns and obsolescence

34. 34
QR in Fashion Industry
• Share information on style, colour size
• Details on order schedule and deliveries
• Postpone design, style and colour decisions to
reduce stock and wrong decisions
• Reduce risk of forecasting error (min lead time)
• Greater visibility of products to improve customer
service
• Increased product information to reduce handling,
shorted order cycles and improve accuracy
• Pass efficiency savings to consumer

35. Market Changes
• Primark – increasing market share ‘fashion at cheaper
prices’
• Buy one year and replace with next design next year.
• Pressures to keep prices low
• International sourcing – China and India – issues
regarding responsiveness
• Copying of latest designs – ‘some legal issues’
• Other – traditional grocers entering market – more
standard goods, Asda overtaken M & S to become
largest clothing retailer in UK (competitive advantage
on cost rather than fashion)

36. 36
Decreasing Shelf Life
Decreasing Shelf Life – Several Categories
• Basic good – 25%
• Seasonal goods – replaced 2 or 3 times
pa – 45%
• Fashion goods - >4 changes p.a –
increasing share – greater variety and
more frequent changes

37. Examples
M & S
• Known for slow reaction to changes in
demand in 80’S / 90’s
• Strong investment in supporting technology
over recent years – visibility, RFID
Zara
• Textbook example
• Vertical integration
Primark
• Fashion v discount scenario – lean v agile? 37

38. Marks and Spencer: Stock Management
• “The biggest mistake was too much stock. We made the decision
on winter stock levels in April and May. We increased buying by
10% for winter stock. The market wasn’t there. We have never
seen the market turn down on us as fast as it did”.[]
• “We reduced forward orders. This damaged the balance of
ranges, as popular goods sold out, we lacked the injection of fresh
merchandise and had to clear unsold goods. Hence drearier
shelves and higher costs of clearance. Further pressure came from
the strength of sterling. This benefited our competitors, but
disadvantaged us through our heavy reliance on the UK as a
supply base”. [Peter Salsbury, Chief Executive, Marks &
Spencer,].
• Overpricing and poor service behind falling sales, customers
unhappy about drop in quality due to overseas sourcing.

39. How have M & S achieved QR by implementing new technology?

41. Zara – Typical model for QR in Fashion Industry
• Zara is widely used as a model for responsive supply
chains within the fashion sector.
• Competitive advantage is achieved by the regular
introduction of new lines.
• Frequent product changes and modern designs promote
exclusivity.
• The model is based on a ‘make to order’ system which
allows stock to be made available during the season
which it is sold.
• The alignment of supply to demand enables markdowns
to be reduced to approximately half the industry average

42. 42
Zara
• Design led – new stock every 2 weeks
• Store space important issue
• Value for money clothing
• Own production facility
• Reacts to latest trends and demands
• Average UK fashion retailer: 60% buying budget
6 months before season, 90% at start, ie 10%
during season
• Zara: 20% before, 50% at start, ie 50% during
• Success based on design and production flexibility

43. Production and sourcing
• Single global product range
• Cross-functional teams
• Responsive EPOS data from all stores
• Imported cloths – flatter demand patterns
(economies of scale) in-house (eg dyeing, cutting,
labelling)
• Others network of small contractors, dedicated
contracts, specialisms, Spain production –
automated factories,
• 3 weeks production cycle – industry norm months 43

44. Zara: time-based competition in a fashion market
44

45. DC
• 500k sq m!
• Electronic tagging
• Hand-held pcs
• RFID
• Automated routing
• Despatch – 8 hours from arrival
45

46. Top Shop – Philip Green
• Retailers are locked in a battle to try to get key catwalk trends
from the drawing board to the shelves as quickly as possible.
• Zara's fast fashion model had so revolutionised the industry
• "We certainly knew about Zara and were extremely impressed
by them. They're very quick to get designer-influenced
products into their stores, so when we heard they were coming
to the UK we knew it would be a big challenge for us," says
Top Shop's Shepherdson.
• Changing stock frequently means customers come back to
check what's new and that means added sales. The Zara
shopper drops in 17 times a year, the High Street average is
just four.

47. 47
Fashion v Grocery
• Fashion – dynamic, high margins, short selling
seasons
• Food – more stable, low margins, high inventory turns
• Food – most complex
• Fashion – longest
• QR – (reduce inventory, lead time, forecast error) ie
Fashion industry
• Food – efficient replenishments, reduced order cycles,
efficient product ranges, improved space allocation
and efficient product introductions (ECR)

48. Conclusion
• QR has revolutionised how retailing supply chain work
• Companies have achieved the conflicting objectives of reducing
cost whilst improving service simultaneously
• Technology and wider partnerships across the supply chain are
key enablers
• Greater visibility through systems such as RFID can keep stock
moving and align stocks more closely to demand
• Quick response is not the universal solution for all clothing
retailers; emphasis may be on lean cost saving methods where
sales are more steady
• Profit benefits largely for retailer, with suppliers taking most of
“cost burden”
• Shared information and shared benefits appear an unrealistic
ideal.
• High level of distrust between supply chain members, denies one
fundamental requirement of QR,
• Same lack of trust could explain why category management, has
not yet been adopted.