A REVIEW OF RAPID RESPONSE PROGRAMS: ECR, CRP, VMI, CPFR, JIT II

Over the past ten years, several customers and suppliers have sought to redesign their product flow, and consequently their production and distribution operations, through greater information sharing. These initiatives are commonly referred to as rapid response programs (PRRs) in the literature. PRRs are, therefore, logistical services based on cooperation and sharing of customer demand information with its supplier.

There are currently several types of PRRs, each with a different acronym: ECR, CRP, VMI, CPFR, QR, etc. Usually these initiatives are implemented at the manufacturer-retailer level, as shown in Figure 1, although they can also be implemented at the manufacturer-supplier level, as is the case of JIT II.

Retail Manufacturer (ECR, CRP, CPFR, CR, VM) Manufacturer-Supplier (JIT II)

CRP - Continuous Replenishment Program - Continuous Replenishment Program ECR – Efficient Consumer Response – Efficient Consumer Response CPFR – Collaborative Planning, Forecasting and Replenishment – ​​Cooperative Planning, Forecasting and Replenishment VM - Vendor Managed Inventory - Inventory Managed by the Supplier QR – Quick Response – Quick Response JIT II – Just in Time

Figure 1 – Summary of Main PRRs Currently Developed in Different Supply Chains

These different types of relationship between customers and suppliers can be analyzed on a continuum. At one extreme is the sharing of information, at the other, the consignment of stocks (cf. Figure 2). Information sharing enables suppliers to plan and make more efficient decisions. In consignment, the supplier is the owner of the inventories and is responsible for managing them until they are used by the customer.

Figure 2 – Different Types of Relationship between Customers and Suppliers

In sharing information, the supplier can use it in two ways: (1) to improve forecasting and programming in policies pushed for inventory management, especially in production, and (2) to operationalize the principles of continuous improvement of STP (Toyota Production System) processes in distribution, leading to frequent resupply of small quantities at the exact moment, that is, lean resupply.

At the extreme of information sharing, the adoption of information systems is one of the most important elements. EDI and the Internet are fundamental for an agile and accurate data transfer; bar codes and optical scanning for greater information consistency; decision support systems to integrate inventory management, production and distribution operations.

Below, each of the main PRRs are presented and commented on.

Quick Response (QR)

In the basic Quick Response strategy, suppliers receive the data collected at the customer's points of sale and use this information to synchronize their production operations and inventories with the customer's actual sales. The customer continues to place orders individually, but the point-of-sale data is used by the supplier to improve its forecasting and scheduling.

Quick Response emerged in the US textile and apparel industry and, in addition to production, also has impacts on distribution operations: products are no longer stored in distribution centers, but moved through cross-docking facilities. In this new operating arrangement, products can be shipped pre-labeled and placed on hangers. All these actions are aimed at reducing the response time of the flow of products, and consequently allowing a reduction in stock levels.

Figure 3 - Representation of the Flow of Products and Information in the QR

Continuous Replenishment (CR)

In the basic Continuous Replenishment strategy, also called rapid response, suppliers receive data from the point of sale to prepare shipments at regular intervals and ensure that customer inventory fluctuates between certain maximum and minimum levels. These inventory levels may vary due to seasonal demand patterns, promotions and changing consumer tastes.

Procter&Gamble and Wal*Mart pioneered the adoption of CRP for their Pampers diaper resupply. Although the term CRP appeared before the term ECR – Efficient Consumer Response, more recently some authors point to CRP as one of the five actions of the ECR program.

Efficient Consumer Response (ECR)

ECR's basic strategy originated in the US food industry. Manufacturers and supermarkets would commit to cooperating in five main areas: real-time information sharing, category management, continuous replenishment, activity-based costing, and standardization.

Continuous replenishment would allow you to manage inventories in a “just in time” way. As with QR, with ECR products are no longer stored in distribution centers, but moved quickly through cross-docking facilities. In addition, sharing information would ensure the most appropriate sequence for assembling shipments, as well as the best mix of products.

Category management consists of grouping products with the same marketing characteristics in order to coordinate the definition of sales targets and pricing policies. A key difference between ECR and QR is that through category management, suppliers and customers no longer use promotional strategies intensively. It is known that these strategies provoke speculative movements of anticipation of retail purchases, creating excessive inventories in the chain.

Finally, standardization would seek to establish norms and routines for the operation of the flow of products and information, through standardization of means of transport, procedures for releasing and receiving vehicles and electronic data exchange. Activity-based costing would allow quantifying the operational improvements achieved with ECR.

Figure 4 - Representation of Continuous Resupply in an ECR Program between a retailer and a beer maker

Collaborative Planning, Forecasting and Replenishment (CPFR)

The CPFR constitutes an extension of the CRP/ECR, in which manufacturers and retailers share systems and the sales forecasting process. The primary objective is to identify which company generates the most accurate sales forecasts for a given SKU, in a given geographic region, over a given planning horizon.

CPFR is an initiative initially developed by Nabisco (food manufacturer) based on the assumption that access to data collected at customer points of sale is insufficient for manufacturers to fully benefit from CRP in all their operations.

Vendor Managed Inventory (VMI)

VMI tends to occur when the bargaining power of suppliers is greater than that of their customers. The idea is that by managing stocks in the chain, suppliers will be able to better program their operations, motivated by high opportunity costs of holding stocks or because their production and distribution operations are intensive in fixed costs.

However, consignment can occur at VMI, if the customer's bargaining power is greater than that of the supplier or as a way of convincing customers. In consignment, the chances of conflict in the customer-supplier relationship tend to be minimized when the customer indicates a greater predictability of consumption of the consigned product, when the opportunity costs of maintaining inventories are known and when there are well-defined service level expectations. .

Initiatives such as VMI are, in essence, pushed inventory policies, even if the information is global (eg stores in a retail chain or a customer's warehouses) and control is centralized (eg manufacturer or supplier). Briefly, the VMI routine involves:

• Review the stock position of each SKU at each store in the retail chain;
• Check the current availability of the SKU in stock at the manufacturer, due to previously released production orders and lagged response time;
• Project net inventory needs by SKU by store in the retail chain (NL = sales forecast – (inventory on hand + scheduled and not received receipts) = sales forecast – stock position);
• Check that projected net requirements fall below safety stock levels;
• Schedule shipments by SKU by store for the next periods.

It should be noted that in the VMI future net requirements are projected until the next review and sales forecasts are not simply generated. The logic of DRP (Distribution Needs Planning) is similar to VMI insofar as net needs are projected by each store. The main difference is that the replacement parameters are defined locally in the DRP, while in the VMI the control is centralized.

Just in Time II (JIT II)

JIT II would consist of the logical extension of the JIT production regime outside the company. In JIT II, ​​the supplier would provide an employee to work on its client. This employee is known as in-plant and would make decisions related to production scheduling and input acquisition, in addition to dedicating part of his time to simultaneous engineering projects.

In-plant replaces the buyer and planner roles at the customer and the seller role at the supplier. To this end, both companies must initially re-evaluate their roles prior to the implementation of JIT II. JIT II was developed by Bose Corporation with the aim of strengthening communication between buyer and seller, reducing waste and redundant efforts, in addition to improving the supplier's responsiveness.

CONCLUSION

In general terms, one of the main advantages of PRRs is the supplier's knowledge of customer demand. This knowledge can indirectly lead to the reduction of response times, through the improvement of forecasts and the scheduling of operations; and can lead directly to knowledge of replenishment quantities through quick reaction to demand. If the supplier makes the replacement decision, knowledge of the demand can lead to a reduction in the variability in the replacement quantity over time.

BIBLIOGRAPHY

BOWERSOX, DJ, CLOSS, DJ, 1996, Logistical Management – ​​The Integrated Supply Chain Process. 1 ed. New York, McGraw-Hill.

LAMBERT, DM, STOCK, JR, ELLRAM, LM, 1998, Fundamentals of Logistics Management. 1 ed. New York, Irwin-McGraw Hill.

SIMCHI-LEVI, D., KAMINSKY, P., 2000, Designing and Managing the Supply Chain – Concepts, Strategies and Case Studies. 1 ed. New York, McGraw-Hill.

SILVER, E., PYKE, D., PETERSON, R., 2002, Inventory Management and Production Planning and Scheduling, 3rd Edition, New York: Wiley & Sons.