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Retail chains embrace EAN standards
Sanjay Krishnan in Mumbai
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May 05, 2005

Well, if you thought that organised retailing was organised, think again.

Here are a couple of instances of why what you think may be wrong:

We experience the above fairly often. So often that we do not think of it as a problem, but these instances represent lost business opportunities for, both, the manufacturer and the retailer. While you the customer -- you are supposed to be 'King', remember -- have had to make do with a brand of shampoo you did not want or with a smaller pack of toothpaste

So did you get served what you wanted? The answer is a resounding 'No.'

ECR movement

All this though is set to change. Thanks to a movement called 'The Efficient Consumer Response (ECR) India.' The ECR movement was started in the fast moving consumer goods (FMCG) sector in India in late 1999. A body called EAN India facilitated the formation of a core group by bringing together retailers/manufacturers and other potential supply chain trading partners.

EAN India itself is an affiliate of GS1 (formerly EAN International), Belgium, which has 101 EAN organisations representing 155 countries across the world.

It represents a collaborative effort between the industry and government at bringing international best practices and standards into India. Over one million companies across the world use EAN.UCC standards.

With over 5 billion barcodes being scanned each day at retail point of sale outlets worldwide, EAN.UCC standards have now become the de-facto standards in retail.

EAN is the European Article Numbering System.

According to K Radhakrishnan Chairman, ECR India, the ECR forum in India is working towards making EAN the international standard barcode, mandatory for all products sold in India after March 2006.

In July 2000, ECR India was set up as a non-profit 'Association of Persons' (AOP), and today 36 companies representing a fairly large mix of retailers and manufacturers are part of this.

Good for customers

Names that are part of ECR include marquee ones like Johnson & Johnson, Hindustan Lever Ltd [Get Quote], Procter & Gamble, Godrej [Get Quote], Nestle [Get Quote], PricewaterhouseCoopers, Foodworld and EAN India. The companies that are part of ECR India today represent 80 per cent of the consumer products sold and manufactured in India.

The ECR movement, when it takes off, can have a huge upside for everyone.

This is why.

The ECR has constituted four working groups under its aegis whose efforts are expected to eventually impact the way business is done between manufacturers, suppliers and retailers. The eventual beneficiary -- the customer.

Says, Narendra Ambwani, Co-chairman, ECR India and Managing Director, Johnson & Johnson: "There is only one person who pays for all the inefficiencies of the supply chain side -- the consumer. The consumer today is at the receiving end and if what we are planning comes together then expect prices to come down."

According to Ravi Mathur, CEO of EAN India, a report was prepared a year ago on the guidelines to be adopted in organised trade. "We also commissioned ACNielsen Research to conduct an out-of-stock study for us. Now we have asked them to broaden the scope of their study and include more retailers and more SKUs (stock keeping units) in their study. The ACNielsen findings should be with us in the next one month."

An SKU is a specific number designating one specific product.

The complexities

To understand the complexity and the clutter of SKUs, consider this. A supermarket like Foodworld in the south has close to 8,000 SKUs at any given point in time. A hypermarket at the same time is estimated to have an average of around 20,000 SKUs.

Also to ensure that retailers and manufacturers and suppliers are connected real time, EAN India has tied up with Global Xchange Services to provide a Web-enabled service and ensure synchronisation of data.

According to Mathur, such a service will enable manufacturers to immediately know what kind of stock is moving at the retailers and immediately make efforts to replenish them.

While this would automatically ensure that the customer is never faced with an out of stock situation -- the automisation would also mean that every time there is a change effected in the dimension of the packaging of the product or for that matter a change in the product itself, the retailer is immediately kept informed.

"So many times it happens that once the dimensions of a product change the retailer is not kept informed. This would mean that when the product arrives it creates problems at the retail end insofar as shelf space is concerned. That apart, once there is seamless information flow between the various stakeholders in the chain, we expect the customer to be much better serviced," Johnson & Johnson's Ambwani points out.

The retailers and suppliers in India are expected to subscribe on a yearly basis to this common platform hosted by Global Xchange Services, which will act as an application service provider.

"The payback or RoI (return on investment) is expected to be less than a year and the system should be cost effective," Mathur says.

According to K Radhakrishnan, chairman ECR India who is also the vice president, Foodworld Supermarkets Limited, the only two big retailers who have not yet joined the ECR forum are Tata-controlled Trent and the South African retail giant Shoprite.

 "The coding enables standardisation and ensures that there is no confusion. We are planning to start working with the small manufacturers also to make them compliant," he points out.

At this point in time a data synchronisation pilot project is going on between Johnson & Johnson and Spencer Retail in Chennai to check out the efficacy of the system.

Global Data Synchronisation (GDS) is a global, Internet-based initiative enables companies to exchange accurate, up-to-date, standards-compliant supply chain information. It has been identified as one of the single biggest reasons for inaccuracies in Out-Of-Stocks (OOS) management and is being aggressively pursued by global companies

According to Johnson & Johnson's Ambwani, "For this initiative to succeed we need to have total transparency between the manufacturer and supplier. Right now it is estimated that out of stock situations bring down efficiencies between 30 and 40 per cent. If we can implement this then this percentage should hover between 5 per cent and 10 per cent."

Benefits to manufacturers too

The process also has spin-off benefits for manufacturers. Manufacturers who start using the EAN systems have the potential of being discovered by big retail chains abroad like the Wal-Marts and K-Marts of the world.

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