ECR in the UK Dutchman Paul Polman, now CEO of Unilever, did a stint as general manager of Procter..

ECR in the UK Dutchman_Paul_Polman,_now_CEO_of_Unilever,_did_a_stint_as_general_manager_of_Procter_
&_Gamble_UK._Whilst_admiring_the_UKs_advanced_retailing_systems,_he_saw_opportunities_for_all_four_pillars_of_ECR:_range,_new_items,_promotions_and_replenishment._The_
following_is_ extracted_from_ the_ text_of_
a_ speech_he_made_ to_ the_Institute_of_Grocery_
Distribution_in_October_2009. Range The_average_store_now_holds_35_per_cent_more_than_5_years_ago,_yet_a_typical_consumer_
buys_just_18_items_on_a_trip._A_quarter_of_these_SKUs_sell_fewer_than_six_units_a_week!_
The_number_of

ECR in the UK Dutchman_Paul_Polman,_now_CEO_of_Unilever,_did_a_stint_as_general_manager_of_Procter_
&_Gamble_UK._Whilst_admiring_the_UKs_advanced_retailing_systems,_he_saw_opportunities_for_all_four_pillars_of_ECR:_range,_new_items,_promotions_and_replenishment._The_
following_is_ extracted_from_ the_ text_of_
a_ speech_he_made_ to_ the_Institute_of_Grocery_
Distribution_in_October_2009. Range The_average_store_now_holds_35_per_cent_more_than_5_years_ago,_yet_a_typical_consumer_
buys_just_18_items_on_a_trip._A_quarter_of_these_SKUs_sell_fewer_than_six_units_a_week!_
The_number_of_SKUs_offered_by_manufacturers_
and_ stores_has_become_ too_large_ and_
complex._My_company_is_equally_guilty_in_this_area._No_question,_we_make_too_many_
SKUs._I_can_assure_you_we_are_working_on_it._Actually,_our_overall_SKU_count_in_laundry_
is_already_down_20_per_cent_compared_to_this_time_last_year._Whats_more,_business_is_
up._Clearly,_we_have_an_opportunity_to_rationalise_our_ranges._As_long_as_we_do_this_in_
an_ECR_way__focusing_on_what_consumers_want__we_will_all_win._The_consumer_will_see_
a_clearer_range._Retailers_and_manufacturers_will_carry_less_inventory_and_less_complexity._The_result_will_be_cost_savings_across_the_whole_supply_chain_and_stronger_margins.
New items There_were_16,000_new_SKUs_last_year._Yet_80_per_cent_lasted_less_than_a_year._You_dont_
need_ to_ be_ an_ accountant_ to_ imagine_
the_ costs_ associated_ with_ this_ kind_
of_ activity._ And_look_how_this_has_changed._Since_1975,_the_number_of_new_SKU_introductions_has_
increased_eightfold._Yet_their_life_expectancy_has_shrunk_from_around_five_years_in_1975_
to_about_nine_months_now._We_can_hardly_call_this_progress.
Promotions In_promotions_its_the_same_story._Take_laundry_detergents._This_is_a_fairly_stable_market._
Yet_were_ spending_ 50_per_cent_more_
on_promotions_ than_ two_years_ ago,_with_consumers_buying_nearly_30_per_cent_more_of_their_volume_on_promotions._This_not_only_
creates_an_inefficient_supply_chain,_or_in_some_cases_poor_in-store_availability,_but,_more_
importantly,_has_reduced_the_value_of_the_category_and_likely_the_retailers_profit._Were_
all_aware_of_the_inefficiencies_promotions_cause_in_the_system,_such_as_problems_in_production,_inventory_and_in-store_availability._They_all_create_extra_costs,_which_ultimately_
have_to_be_recouped_in_price._But_theres_a_higher_cost._As_promotions_are_increasing,_
they_are_decreasing_customer_loyalty_to_both_stores_and_brands_by_16_per_cent_during_
the_period_of_ the_promotion._We_commissioned_
a_ report_by_ Professor_Barwise_of_ the_
London_Business_School._He_called_it_Taming_the_Multi-buy_Dragon._The_report_shows_
us_ that_over_70_per_cent_of_laundry_promotional_investment_goes_on_multi-buys._The_
level_of_investment_on_multi-buys_has_increased_by_60_per_cent_over_the_last_three_years._
Theres_been_a_50_per_cent_increase_behind_brands_and_a_doubling_of_investment_behind_
own_labels._Contrary_to_what_we_thought,_most_of_this_volume_is_not_going_to_a_broad_
base_of_households._It_is_going_to_a_small_minority._Seventy-one_per_cent_of_all_multi-buy_
volume_is_bought_by_just_14_per_cent_of_households._Just_2_per_cent_of_multi-buy_volumegoes_to_55_per_cent_of_households._We_really_are_focusing_our_spending_on_influencing_
and_rewarding_a_very_small_minority_of_people_indeed.
Replenishment Based_on_the_escalating_activity_Ive_just_[referred_to],_costs_are_unnecessarily_high._There_
are_huge_cost_savings_also_here,_up_
to_6_per_cent,_by_ removing_ the_non-value-added_
SKUs_and_inefficient_new_brand_and_promotional_activity.

Questions

1 Cutting_down_on_range,_new_items_and_promotions_is_presumably_going_to_lead_to_
everyday_low_prices._Discuss_the_implications_to_the_trade-off_between_choice_and_
price.

2 Procter_&_Gambles_major_laundry_brand_in_the_USA_is_Tide._This_is_marketed_in_some_
60_pack_presentations,_some_of_which_have_less_than_0.1_per_cent_share._The_proliferation_of_these_pack_presentations_is_considered_to_have_been_instrumental_in_increasing_
Tides_market_ share_from_ 20_ to_ 40_
per_ cent_ of_ the_US_market_ in_
recent_ years._ Clearly,_ this_ is_ a_major_
issue_ within_ P&G._What_ are_ the_
logistics_ pros_ and_ cons_ of_ SKU_proliferation?