Solutions to the most important problems of modern FMCG supply chains in Poland

Trends in the development of the global market are mainly revealed in the processes of progressing globalization of economic activity, in the increasing diversity of products, and the continuous shortening of their life cycles. The rapid development of advanced information technologies and the increasingly broad integration processes of enterprises do not recognize borders or linguistic-cultural barriers. In this situation, the high quality of goods and their price are not the only determinants guaranteeing sales efficiency. Increasingly, time and the level of customer service are the deciding factors. Enterprises participating in the supply chain strive to shorten the flow of goods and information, reduce costs, and increase the efficiency of operations. The result of these efforts is to be an increase in the level of customer service.

The pursuit of greater operational efficiency, better customer service, and more effective reaction to the changing market situation forces entrepreneurs to take a number of actions to improve the functioning of supply chains. These actions must be supported by a wide range of tools for improving organizational structures and processes.
Enterprises in the fast-moving consumer goods (FMCG) sector operate in an environment of intensifying competition. This circumstance causes the generated margin to be relatively low, which implies the need to take actions to reduce the operating costs of these enterprises. However, neither instruments supporting operational activity nor management on the scale of a single enterprise allow for such achievements, which requires searching for new concepts of operation.
Wanting to meet market challenges, enterprises must pay special attention to the environment in which they operate. The connections and the level of cooperation of enterprises with their partners, both with suppliers and recipients, are becoming the exponent of market success. It is becoming a fact that entire supply chains are competing (all links from the supplier of raw materials and production components through manufacturers, logistics service providers, settlement units to trading companies that participate in delivering a given product to the final customer), and not individual entities. In this situation, an effective supply chain becomes a determinant of gaining a competitive advantage [2].

One of the possible solutions is a concept finding its application in supply chains of fast-moving consumer goods, which was developed in the 1990s in the United States – Efficient Consumer Response (ECR).
The ECR concept, to be effective, must be modified depending on market conditions. These conditions can be captured in two dimensions: global and sectoral. Progressing globalization, caused by cheaper communication, cheaper transport, and faster processing and transmission of information, favors technological, IT, and organizational innovations. Based on these innovations, new relationships, new material, information, and financial flows are created in supply chains [5].

ECR is a concept improving supply chains primarily in the fast-moving consumer goods sector. Therefore, the conditions for its implementation should be considered in the perspective of this sector. The development of the fast-moving consumer goods sector is determined by many factors, of which the most important are: product availability on the store shelf (as the basic effect of supply chain effectiveness), effective promotion management (as a key factor in attracting consumer attention). These factors cause an increased number of products, which poses a challenge for inventory management, for which the supplier is increasingly responsible. The supplier, in turn, expects access to information directly from the market to effectively meet the changing processes from push to pull. Further determinants in the consumer goods sector are: on the one hand, pressure for partnership cooperation, and on the other, constant pressure to reduce supply chain costs. Consumers have less and less financial resources allocated to consumption needs, which is why there is a decline in real prices, as well as a weakening of customer loyalty. This means that ultimately, entities in supply chains are forced to look for new solutions to improve their market position [8].

2. The ECR concept and an effective supply chain

The ECR concept is mainly promoted and implemented through national ECR organizations, bringing together production, trading, and service enterprises under the slogan of a common pursuit to satisfy consumer needs better, faster, and at lower costs.
Efficient Consumer Response is defined as a set of methods and tools aimed at increasing the efficiency of the supply chain. Its goal is a better response to consumer needs, with simultaneous maximum utilization of the possibilities of cost reduction in the entire supply chain through the cooperation of trading partners. ECR consists of involving all participants in the supply chain in cooperation, based on fast and accurate information from points of sale transmitted in an agreed IT standard. This information is the basis for market analysis, planning of production processes, distribution, and mutual settlements of all links in the supply chain, starting from raw material suppliers and ending at the retail store. ECR enables an increase in the level of consumer service while simultaneously lowering costs, finding application in the fast-moving consumer goods sector [4].

The ECR concept is a collection of solutions and instruments that are selected and implemented depending on the specificity of the market and the potential of the enterprises forming the chain, while maintaining the most important message, i.e., the partners’ common pursuit of improvement and synchronization, and thus increasing the efficiency of demand and supply management in the entire supply chain.
The benefits that can be achieved through the implementation of the ECR concept in supply chains are very significant, although specific results may be varied and dependent on the specific case. With low and constantly decreasing margins in the retail industry, one cannot fail to be interested in a method that gives huge possibilities for cost reduction in the supply chain.

The results of research conducted by the consulting firm Coopers & Lybrand among the largest manufacturers, material suppliers, and retailers show that ECR creates opportunities to lower costs in the chain, leading to an average reduction in final product prices of approx. 6.0%. The aforementioned reduction is possible thanks to a decrease in the chain’s operating costs by 5.2% and a reduction in inventory levels by 42%, which is equivalent to a further cost reduction of 0.9%. Subsequent ECR initiatives are constantly expanding the potential for savings that can be achieved in the chain through the implementation of ECR solutions. For example, the optimization of loading units can increase the achieved savings to a level of 7.3%. Bearing in mind that the market for fast-moving goods, and in particular food, is extremely competitive, it is very likely that the entirety of financial benefits will be reflected in a drop in product prices on the consumer market (regardless of the improvement in the level of customer service and reaction to their needs). The main beneficiaries of the ECR concept therefore seem to be consumers. For example, in the USA, price differences between Wal-Mart stores and Cash & Carry wholesalers as well as discount and specialty stores are disappearing [3].

Shaping the efficiency of business operations is based both on solving everyday problems and on creating innovations that shape the future. The applied technical and organizational solutions, if they prove effective, are quickly adapted by an increasing number of companies and over time cease to play the role of differentiating and building a competitive advantage. Therefore, the essence of innovation is going beyond accepted standards, material boundaries, and also the boundaries of existing habits and experiences. The basis for operational efficiency today and in the future is solving current problems and creating innovative ventures [7].
Among the methods and instruments of ECR are those that have the features of significant innovations. These include the Radio Frequency Identification (RFID) system. However, there are also those whose application is not associated with major innovative investments, but only allows for a more effective way to counteract emerging everyday problems (e.g., losses).