An Analysis of Efficient Consumer Response in Fast Food Supply Chains

This report provides a comprehensive analysis of Efficient Consumer Response (ECR) within the fast food supply chain. It delves into the core components of ECR, including continuous replenishment, vendor-managed inventory, and cross-docking, and explores key strategies such as efficient store assortment, efficient replenishment, promotion, and product introduction. The paper examines the working of supply chain management in the fast food industry, highlighting challenges and benefits like cold supply chains and the application of the Internet of Things. Furthermore, it discusses ECR implementation, efficient product replenishment, and information systems, culminating in a case study of McDonald's to illustrate ECR's practical advantages. The report underscores how ECR enhances efficiency, reduces costs, and improves customer satisfaction in the fast food sector.

ERC in Fast Food Supply Chain
Team:
Ganesh
Milan
Rakesh Verma
Professor:
Dr. JörgSchmütz

Abstract: -
Efficient Consumer Response in Fast food Supply chain Management is a
strategy designed to make fast food industry more efficient and responsive to
the consumer’s needs. ECR was originated in USA and later on accepted by all
over the world due to its good response. Implementation of ECR must be done
in proper manner as any of the obstruct can stop whole supply chain
management. This paper discuss the concept of ECR in Fast Food Supply
chain industry and its development and then examine the status of ECR
implementation in various fast food Industry. The various topics such ECR
initiatives transformed the supply chain from a push system to pull system
where channel partners form new interdependent relationships. Quick and
accurate flow of information through the supply chain enabled suppliers and
distributors to anticipate demand requirement far more accurately. Various step
that described in this paper that ECR helps in increasing level of service to
consumer and efficiency in supply chain management.
By implementing of ECR Fast food supply chain industry will get lot of benefits
and A Case study based on Mac Donald’s supply chain that shows how this fast
food industry firm us ECR and get advantage

Contribution Matrix
Introduction Rakesh Verma
ECR in Fast Food Industry

Table of Contents
1. Introduction......................................................................................................................................7
1.1 ECR Components.........................................................................................................................7
1.2 ECR Strategies…………………………………………………………………………………...10
1.3 ECR in Supply Chain Management ……………………………………………………………..11
2. Working of Supply Chain Management in Fast Food Industry……………………………………13
2.1 Fast Food Supply Chain…………………………………………………………………………14
2.2 Issues in Fast Food Supply Chain………………………………………………………………..16
2.3 Benefits of ECR………………………………………………………………………………….18
2.4 Cold Supply Chain……………………………………………………………………………….19
2.5 Internet of Things……………………………………………………………………………….23
3. Implementation in Fast Food Supply Chain...................................................................................25
3.1 Efficient Store Assortment in Fast Food Supply Chain...............................................................25
3.2 Efficient Product Replenishment Fast Food Supply Chain.........................................................30
3.3 Information System ..................................................................................................................31
3.4 Efficient Product Replenishment Fast Food Supply Chain.........................................................32
CASE STUDY MAC Donald’s................................................................................................................35
4. References......................................................................................................................................39

Introduction
1 Background of ECR
Efficient consumer response was first started in United States of America. The consumer
behavior forced the retailers and manufacturer to shift focus promotion driven growth in sales
to value driven growth in sales to value driven growth. The main goal of Efficient consumer
response was to reengineer the way of grocery industry was operating at that time. The
resultant of using ECR was good and well accepted by the retailers and the manufacturer
across all continent. As a result the leading global retailers like Wal-Mart, Tesco, Safeway
etc. started partnership with manufacturers to enhance customer value by making goods
cheaper because of reduction in distribution channels. Through this marketing line get a
concept of ‘Consumer is king’. Later on ECR get more response and attention in Asian
countries
1.1 ECR Components
ECR is a system or philosophy rather than a particular concept and stresses the complete
vertical integration of the marketing channels. The ECR components are logistics and
Marketing.
Figure 1: ECR Components
Continuous Replenishmet
VMI
Cross docking
Synchronized production
Logistic
Components

Continuous Replenishment
In this frequent replenishment takes place from the seller to the retailer or distributor to
maintain a good flow in supply chain and minimize bullwhip effect. To implement continuous
replenishment supplier must set an objective. IT systems must be used by supplier to establish
real time flow information in the supplier chain about sales. These data are important to
predict normal sales and deviation in demand, based on inventory level is decided. This kind
of strategy also needs agreements on promotions.
The associated benefits of CR are reduced inventory, reduced stock out, minimization of
bullwhip effect, improved customer service, reduced administration cost and perception value
in trading partner.
Figure 2: Continuous Replenishment
One of the main concerns is about maintaining full truckload and transportation cost
efficiency As replenishment quantity becomes smaller and it can be minimized by using
smaller trucks or loading more variety per truck.

Vendor Managed Inventory
VMI system came into vogue in 1990’s as a way to decrease supply chain costs. Vendor
managed inventory is not perfect solution to inventory problems. Susan Cohen kulp a
researcher in Harvard University recently finished a study on the relationship between VMI
systems and higher profits. She found that implementations do not always return better results
than a traditional supplier relationship. Her study found that information precision and
reliability, combined with an effective sharing mechanism, were the key factor in obtaining
higher supply chain profits.
Cross Docking
Cross docking is the practice of unloading goods from inbound delivery vehicles and loadings
them directly onto outbound vehicles. By eliminating or minimizing warehouse storage costs,
space requirements and inventory handling, cross- docking can streamline supply chains and
help them move goods to market faster and more efficiently
It is the best with products that need to be transported quickly, such as food, that have already
been sorted and labeled for customer, do not need to have steady demand. Many
manufacturers use cross- docking in their own facilities such as moving finished good directly
from production to an outbound dock without first storing them in the warehouse. In this way
They don’t need to store them in warehouse and this indirectly reduce the labor cost such as
picking and putting away goods and also the use of technologies such as pickups. It has also
some disadvantage as setting up a cross docking terminal requires lots of planning and design
and the process must be monitored to ensure it is working as intended. Another, It also require
enough vehicles like trucks to deliver goods efficiently to customer.

1.2 ECR Strategies
Efficient Consumer Response has been divided into four principle they are as follow:
Figure 3: ECR Strategies
Efficient Store Assortment
It focuses on the objective to optimize the productivity and the store space at the consumer
interface. The optimal assortment can be facilitated with aggregated point of sale data. This
data collected can help retailers and wholesalers determines the basket of good consumer are
purchasing. POS data combined with product databases and demographic studies can help in
facilitate more accurate demand forecast. Manufacturers, retailers and wholesalers all get
benefit from more accurate demand forecast. By making products to stay less in inventory,
lower level of safety stock and ultimately results in less operating cost throughout supply
chain
Efficient Replenishment
Efficient replenishment focuses on delivering the correct product mix to these store shelves
utilising the shortest cycle time from producer to consumer. This is based on a consumer
demand pull system that is monitored through POS data, that prompts the product
replenishment ordering and delivery cycle. The main objective is to optimize time and cost by
ensuring right product at right time, place and quantity. It represents more than half the total
saving projected from ECR implementation.
Efficient store
assortment
Efficient
Replenishment
Efficient
Promotion
Efficient
product
introduction

Efficient Promotion
This initiative focuses on the maximization of the total system efficiency of trade and
consumer promotions. It eliminates inefficient trade promotions by introducing better
alternative trade promotion. Its main concern with rewarding retailers on the basis of how
much product they sell to consumers, rather than how many products they buy from
manufacturers
Efficient Product introduction
It focuses on the effectiveness of new product development and introduction activities. With
an objective to minimize costs and failures rates in introducing new product. Efficiency is
achieved by involving supply chain in new products development. Manufacturer, distributors
and retailers work together to reduce cost of the product and give more advantage to the
customers.
The above ECR strategies seek to provide a concerted approach to integrated planning that
avoids activities that magnify variation in demand which in result stress the supply chain. The
standardization of information and communication helps in saving money and time
1.3 ECR in Supply Chain Management
Efficient Consumer Response is used by food industry aiming to recover competitive
strength. It totally depends on whether the company can survive depends or whether the
company provide customer with maximum value. Efficient consumer response aims to
improve the efficiency of supply chain as back support of retailers, manufacturer and
wholesalers. They can earn maximum profit rather than each pursue their own business goals.
Companies that compose the supply chain can reduce the loss and found increase monetary
profitability by sharing the purpose of customer satisfaction. Reengineering such as
eliminating or adding business operation is performed by inspecting all business operation of
a supply chain of companies by creation whether they provide higher values to consumers.
This is to target better products, better convenience, better quality and to build a better
relationship among companies whether they contribute to providing higher values to
consumer. The first target of efficient consumer response is to re-engineer business processes

figure 4: ECR in Supply Chain Management
and to realize the Information technology, for instance electronic data exchange that is used in
companies for exchanging information in accurate manner and timely between companies.
Reengineering is performed considering final results given to consumer from unified business
processes and that can be done with a good understanding of information technology. ECR
aims to improve product flow by minimizing inventory of a supply chain and make cash Flow
faster
Figure 5:
ECR provides advantage to all member in supply chain. Some advantage resulting from
overall improvement in efficiency and reduce the supply chain cost. It decreases time and
eliminates costs in supply chain of food industry. Specific strategies such as efficient store
assortment, efficient replenishment, efficient promotion and efficient production. Efficient
Manufacturerwholesalerretailer(stores)Consumer
Information Sharing (EDI)
POS DATA
Inventory Data & Hub Inventory Data
Order Placement
Billing & payment Data
Sales & Promotion
Advertisement

store assortment ensure that store space is utilized efficiently to increase retailer and supplier
profitability However, all the strategies described above in strategies are used in the
development of supply chain management in that ECR plays an important role.
2 Working of Supply Chain Management in Fast food Industry
In Food industry consumer always expect exotic food. This has extended the supply chain
geographically and across many more parties (producers, distributors, manufacturer, logistic
partner), making the supply chain longer and more complicated. Sometimes this parties are
under pressure to get their products to the market quickly, safely and in the best possible
condition that is a big challenge for them.
Figure: 6 Food Supply Chain
In a food supply chain process the raw materials is collected from the farm. Then, the raw
material is sent to the production site or in the manufacturing industry where the food is
processed following the steps viz. washing, drying, crushing, mixing, cutting, and so on.
Then, the food is packed according to the requirement. After then, the food is kept in the
stock. According to the demands in the market finished food products are dispatched to the
grocery store and HORECA (hotel, restaurant and café). The transportation of good in
between certainly follows the cold supply chain (logistics + temperature control). The supply
chain operations are controlled separately and without considering the trade-offs between
parameters such as demand, delivery frequency, stock-level and delivery time, transport and

cost. This affects the product throughput time, the product quality, the volume of products
being wasted.
There are certain things that should be kept in mind while relating the various actors of the
supply chain which could be basically called the strategies. (Heidi C. Dreyer et al.)
 Strategic decision regarding customer category and principles for prioritizing
customers including geographical areas must be taken first, including ambitions
regarding availability, delivery times and frequency
 There is a need to integrate production planning and demand planning, both on long
and short term
 Key performance indicators (KPI) must be defined and supported by a measurement
system
 An e-based system for administrative as well as planning and control processes in the
SC must be established, including decision support tools for order management
 Define a control model for allowing sharing of capacity and resource with local and
regional companies and with flexibility of moving between the processes of
manufacturing
 Define differentiated expected lead times and delivery frequency for each customer,
applying a high turnover and direct delivery for sensitive and quality products
 Seek to apply vendor managed inventory (VMI) principles where possible, supported
by customer access to stock levels and demand in real-time
 Utilize distributor/cross docking operations and plan production accordingly
 Apply electronic bidding for transport/logistics and decision support in dispatching
model/transport service
2.1 Fast Food Supply chain
Fast food supply chain has become the great issues in today’s decades and always had
because it is related to the direct health of the consumers. Fast food supply chain deals with
not only providing the food in precise time but also deal with the supply of food in right
quantity, at right price and at high quality.
There are multiple steps in the process, therefore making it difficult for the fast food
restaurant to always keep a keen eye on the entire network. From a consumer’s perspective,

the burden of producing a quality meal often rests on the end retailer or fast food restaurant.
However, to ensure that the quality requirement is met, all suppliers involved in the supply
chain network need to adhere to same quality assurance standards.
Figure: 7 Simplified fast food processes
In the fast food supply chain there are n number of suppliers. For example, let us assume
Supplier 1 is the supplier for all the fresh vegetables and fruits like lettuce, cucumber,
cauliflower, bananas, mangoes, oranges and so on.
Supplier 2 is the supplier for animals and diary products like meats, fish, milk, eggs and so
on.
Likewise, there could be supplier who supplies drinks and cold beverages or other necessary
food accessories.
Then, there is a centrally located outlets in every fast food supply chain where the food is
stored in a required temperature. It is also the center house from where the food is distributed
to the retailers. Retailers in fast food supply chain are the restaurants and café. In this step, the
foods are served to the customers. The process may include storing the food in appropriate
temperature, cooking, baking, steaming, frying and so on and the final steps are decorating
and servicing. So fast food supply chain starts from supplying raw materials till the food is
served on the table of consumer.

2.2 Issues in Fast Food Supply Chain Management
1. Difficulty in fulfilling consumer transparency demand
Consumers want detailed information on how their food is handled right from the farm
until when they make their Big Mac purchase. It may seem like an unrealistic
expectation, but studies show that consumers are more likely to trust a brand, the more
transparent they are with their manufacturing, distribution, or supply chain network
practices. This increasing demand adds another layer of complexity and sometimes
additional costs. For the fast food retailer interested in gaining total control over the
entire network, one possible solution would be to go into the supplier businesses
themselves so that they can manufacturer their ingredients. Another possible solution
would be to have systems that allow for more visibility through the supply chain
process from upstream to downstream.
2. Creating a Truly Standardized Supply Chain May be a Wishlist Item
Creating a standardized process especially for franchised fast food operations gets a
little tricky. One has probably experienced a situation where one fast food restaurant
location from the same chain tastes a little better the other. This is because while all
franchise businesses try to operate under one umbrella of quality standards, what
happens in the actual fast food establishment is often up to the management in that
physical location. For example, there may be the policy of using same oil for 3 times
but for the sake of getting more profit one may use it more than once resulting in low
quality. Standardization in fast food establishments can be difficult to implement when
aiming at ensuring the same quality and service levels every time.
3. Inventory Management for Items with Low Shelf Life
Most fast food restaurants deal with food ingredients that have a low shelf life. As a
result, suppliers need to ensure that deliveries are on-time and at the right freshness

and quality level. If it takes a tomato about five days to go bad; if deliveries are not
just-in-time or as needed, they may end up with ingredients that go to waste.
Additionally, fast food purchases are considered on-demand orders. That means one
wants to have a burger suddenly with no pre-planning or even lead time. Fast food
restaurants forecasting methods may be bogged down to lose estimations based on
history. They need to play a delicate balancing act of ensuring that they stock enough
ingredients but not too much that it goes to waste before it can be used.
4. Limited Time Offers Requires Robust Promotion Planning
Before most fast food chains decide to add a new menu item, they often test it out with
a few selected locations and promote the product as a limited time offer. The
psychology behind something that’s new and limited often causes a spike in sales for
that product. Most chains, however, track these purchases and use a historical analysis
to determine if the item is something that should be added to the menu. For this
process to go smoothly, there is a need for robust promotion planning analysis
and product management, which includes inventory management and capacity
planning. Fast food restaurants also, need to look at the bigger picture when launching
new products. The introduction of a new product that is doing well may be cause for
pulling a more obsolete or low sales item off the menu.
5. Difficulty in Tracking and Responding to Demand Signals in Real-Time
The Fast food industry is highly saturated and a fiercely competitive market. For fast
food establishments to be successful, they need to employ different methods for
tracking demand signals in the market place. This presents a pull approach to demand
management. Essentially, the basic concept is if you give customers the products that
they want, then you don’t have “push” products that you want to sell to them. They
will naturally demand the products because they already match with their needs. In the
fast food industry, consumer demand often evolves with time. There was a time when
fast food restaurants didn’t have other healthier options such as salads. Today, due to
the increase in more health-conscious consumers, most fast food restaurants now have
healthier menu items to serve a demographic that may go elsewhere. (Oti-Yeboah H.
2017).

2.3 Benefits of ECR
Supply Chain without ECR
In push strategy, the material is pushed to the supply chain from the initial raw material end to
the customer end on demand forecasts. At the end of the supply chain, the finished goods
await customers’ orders. Push process operate in an uncertain environment in which customer
demand is not yet known.
Supply Chain with ECR
Figure: 9 Supply Chain with ECR
In pull strategy, customer order pulls material into the supply chain. However, the catch here
is that the customer should be willing to wait during the time the product is being processed in
Consumer
Supplier
production
Supplier
Warehouse Point of sale
Outlet
warehouse
Push
Figure: 8 Supply chain without ECR
Consumer
Supplier
production
Supplier
Warehouse Point of sale
Outlet
warehouse
Pull
Demand driven flow of goods
Seamless flow of information

the supply chain. A major advantage of this strategy is that in an ideal scenario, there would
be zero inventories all through the supply chain (Singh S. UJM. 2017).
When the ECR is not introduced on the supply chain then the supply chain follows the push
strategies whereas when the same supply chain follows the ECR then supply chain changes
into the pull strategies. When the ECR is not introduced in FSC then there is no information
exchange between supplier and consumer directly. Information flows through each actor of
the supply chain and finally reach from customer to the supplier and then only orders are
processed. In contrary, when the ECR are introduced then the sharing of information took
directly between consumer and supplier and the order is processed within short period of time
(Harvard Business School, 3.18.2002).
Benefits to different actors of supply chain
 Benefits to manufacturers
Because of ECR manufacturers can get benefits from various point of view. They are:
1. Efficient production
2. Demand synchronization
3. Less goods shortages
4. Stronger brand position
5. Durable trade relations
 Benefits to Retailers
Because of ECR retailers can have the following benefits:
1. Greater loyalty of consumer
2. Better market research
3. Better relations with suppliers
4. Improvement in chain efficiency
 Benefits for Consumers
Because of ECR consumers can have the following benefits:
1. Greater selection and comfort
2. Buying according to the needs
3. More fresh and cheaper products
4. Delivery on precise time
2.4 Cold supply chain
The cold chain is the way of distribution of goods in a controlled temperature including the
transport as well as the storage.

Figure: 10 Cold supply chain
Since, transportation of food is very critical issues because various short of food requires the
specific temperature. For example, Fresh vegetables, fruits, dairy product required
temperature between 2 to 4 degree Celsius, frozen meat requires the temperature between -16
to -20 degree Celsius, deep freeze requires the temperatures between -28 to -30 degree Celsius
for transferring sea food and so on. The distribution in cold chain has not one solution model
and every time the risk and complication should be taken into consideration during
transportation of foods from one point to other point.
• All depends upon the on the type of distribution, loading settlement, unloading
possibilities, costs and temperature range to be kept. The study of these factors allows
the safest and the most cost-effective model. The cold chain management concerns the
creating of the integrated model of distribution focused on some key factors i.e.
product properties, performance characteristics, distribution channels, and places of
origin and destination of the product. The fig below shows the schematic areas
included in the cold supply chain. Product properties concern their physical
characteristics and special requirements for temperature and humidity during
transport, handling and storage. Places of origin and destination of the product
describe the place of the final production of the consumption of products sensitive to
temperature fluctuations. The features of distribution channels correspond to methods
and information allowing the right choice of the means of the transport of products in
controlled temperature. Even the small change in the temperature may result in the
spoil of the food because it breaks the overall supply chain. In food supply chain it
should not be break at any point otherwise whole chain gets damaged hence it is some
time called the Unbreakable Cold Supply Chain (Szymczykv k. (2016), ICCMIT).

Figure: 11 Cold chain infrastructures
Cold Chain Compliance
There are certain measures that should be taken into consideration during cold supply chain
processes. For the safety propose of the food following things should be taken into cares as
shown in the figure.
Figure: 12 Cold Chain Compliance

Cold chain followed certain technologies that can be learned through training. It has several
automated devices having sensors and operating ways involved and thus required need some
operating skills required. Monitoring should be done for the storage areas and checked all the
storage equipment used are of proper quality or not. During loading and unloading
temperature of food materials should be maintained. Packaging should be followed by several
test, proper design and of high quality. Incase of damage of any operating equipment
maintenance should be done immediately (Szymczykv k. ICCMIT, 2016).
Old Technologies of Food Transportation
The oldest model of distribution in the cold chain is the transport by vehicles equipped with
refrigeration units which can control the temperature inside the vehicle compartment. The
solution is the most frequently used in door to door delivery and in mass transportation. But
the problem was the there was no any temperature controlled medium during loading and
unloading and from the economical point of view, the model of direct distribution is not
beneficial because the process to have loaded vehicle has its limitation.
Current Technologies Used
The current technologies use mostly automated equipment and sensors. The technologies now
used eliminates the existed problem of old system.
Radio Frequency Identification (RFID)
Radio Frequency Identification (RFID) is a form of wireless communication that uses radio
waves to identify, track objects, and data collection technology. An RFID system tags and
reader that communicate with each other by radio waves. RFID tags are so small and require
so little power that they don’t even need a battery to store information and exchange data with
readers. The RFID system helps in tracking solution for example, to ensure that meat and
poultry products are kept in optimal condition throughout the supply chain. For instance,
manufacturers can attach passive (or RAIN) RFID tags to bins holding a product associated
with a lot number. Every time a bin passes through an RFID portal, its tag is read, and data is
collected and sent to a database, thus creating an audit trail or chain-of-custody. The audit trail
contains valuable information about that product which line produced it and when? Which

machines were used? With this information readily available, manufacturers can quickly and
efficiently mitigate a recall. Now, instead of pulling every single product from store shelves, it
is possible to pinpoint and pull just the batch that contains the affected products. (Patel N. et
al, 2015)
2.5 Internet of Things (IOT)
There is an imperative need for ensuring food quality across the supply chain. Achieving the
objectives of food quality partly relies on physical traceability throughout the chain. As a
result, the management of the supply chain, more significantly the cold chain related to the
manufacture, distribution and sale of perishable, and condition-sensitive products are seen as
high priority applications. The application of IOT in food supply chains (FSCs) is one of the
promising killer applications. Covering from precision agriculture, to food production,
processing, storage, distribution, and consuming, so-called farm-to-plate, IOT solutions
provide promising potentials to address the traceability, visibility and controllability
challenges. Safer, more efficient, and sustainable FSCs are expected in the coming days. For
instance, food companies that use IOT connected testing equipment can confirm food quality
as it leaves the factory or warehouse. Any temperature fluctuations can trigger alerts that
automatically adjust the truck's refrigeration. If the system is not able to auto-correct, an alert
can be sent to the food supplier, who can replace bad goods before they arrive at the
customer's dock. And by using an IoT-based fleet management solution to enable continual
visibility into connected trucks, trucking managers can optimize routing and ensure on-time
delivery of the new goods via an alternate vehicle. In the end, the customer receives quality
goods on time and is never aware there was an issue. Plus, the sensor-enabled refrigeration
system can send alerts to the manufacturer, pinpointing the exact part that broke down and
facilitating faster replacement and fixes (Xiaorang Z. et al. 2015, EMIM).
Mobile Tracking
 The analysis of storage and shelving is a step towards creating a more efficient cold
storage facility, which is often overlooked, especially in refrigerated storage
environments. Transitioning to a smarter storage solution can help identify waste
areas, from poor product visibility to heavy congestion in aisles and help companies

achieve many other storage goals at their refrigerated storage facility. Mobile racking
uses conventional selective pallet racks mounted on carriages and moving on running
rails and guide rails embedded directly into concrete floor. A more efficient mobile
storage system and inventory layout enables highly accessible and visible products
that can speed up the time it takes for employees to place orders. Well organized
storage can also reduce touches, reducing lead times significantly. By implementing
mobile racking, companies can save enough space to accommodate other services
such as packing, labelling or high-pressure processing activities without having to
renovate or add docks. Mobile racking is the storage solution with the highest density
and maximizes the capacity of your high – cost cold storage to reduce waste energy.
An organized warehouse leads to a safer, more enjoyable work environment that
encourages employee engagement, especially in a challenging cold chain (Ooi N.
(2019).
Figure: 13 Mobile Tracking

3. Implementation of ECR in fast food supply chain
As we have briefly explained in chapter xx, there are four main strategies of ECR
implementation: efficient store assortment, efficient product replenishment, efficient product
promotion and efficient product Introduction. In this section, we are going to discuss about
implementation part of these ECR strategies. In ECR surveys conducted by John Harris,
Swatman and Kurnia (1999) mentioned several key technology-based initiatives that must be
undertaken to rationalize the distribution chain and achieve a successful ECR implementation.
The initiatives include:
 Category Management
 Enabling technologies
 Electronic Data Interchange (EDI)
 Cross-Docking (Flow-Through Distribution)
In the process of implementation of ECR, above mentioned ECR initiatives play a vital role to
achieve the targeted goal of ECR implementation.
3.1 Efficient Store Assortment in fast food supply chain
Efficient assortment at store level can induce more effective use of distribution center space
and send better signals to manufacturers, allowing them to produce a mix of products and
package sizes that matches final demand. In case of fast food supply chain, items can be
assorted in Raw Materials, Work in Progress and Finished goods.
Raw Materials
Raw materials are those ingredients which are used to make fast food. For McDonald’s, raw
materials are buns, beef patties, chickens’ patties, paper cups, salad ingredients, packaging et
cetera. These raw materials are further categorized into:
 frozen,
 chilled and
 ambient and stored in suitable temperature compartment.

Work-in-process
Work-in-progress are the stocks that are in the process of being made into finished product. A
Big Mac consists o a bun, two beef patties, lettuce, cheese, pickles, onions, sauce and a small
amount of seasoning. The restaurant will only combine these items just before the customer
orders them, so the Big Macs are hot and fresh when served.
Finished Products
Finished products are fast food ready for immediate sale to a customer. Different fast food
restaurants have different menus specially designed according to the taste of customers
considering the religious and cultural sentiment in different geographical locations.
Category management
Under category management, individual items are grouped into categories defined based on
consumer needs and perceptions. Each category has own role based on priority and
importance in the overall business plan and objectives.
Category management is the central element in the ECR strategy for efficient assortment
(Category Management Subcommittee of ECR best practices Operating Committee and the
Partnering Group, Inc.). In the early 1990s, the Partnering Group (TPG), a consulting firm,
has developed a T PG’s process, which is now considered as traditional form of category
management, consists of eight steps:

Figure: 14 Category Management Process
Step 1: Defining categories
This is the first step in the category management process and plays a very important role. The
focus of category management is on customization of product offerings in a category on the
basis of shop’s profile and its location in order to meet ever changing customer needs.
Figure: 15 McDonald’s Food Menu
Information about raw materials as per the menus of each fast food restaurants flow to
distributors and to the suppliers. This helps for efficient assortment of materials at each level

of supply chain. The Partnership among restaurants, distributors and suppliers plays vital role
for successful implementation of efficient product assortment.
Step 2: Assigning role to categories
Under this step, retailers usually determine the priority level and then assign a role for the
category based on a cross category comparison considering liking and disliking of consumers,
and market trends. Basically, here retailers develop the base for allocating resources for the
entire business. The best practices in category management report suggests a set of four
consumer centric categories roles as follows:
 Destination categories - the retailer is the customer's first choice for specific products
 Routine categories - the retailer is the preferred supplier of the routine needs of
targeted consumers
 Seasonal categories - the retailer is a major supplier for a particular time or season
 Convenience categories - the retailer is the supplier of fill-in products.
Each fast food outlet may have one or more special item that fall into the destination
categories. For example, some customer may go to the same fast food outlet every time to eat
particular fast food item.
Step 3: Assessing category performance
Category assessment is the scrutiny of a category as well as sub-categories, brands, and items
to figure out their potential for growth. This step involves collection of historical data and
analysis of the same and relevant information and then development of insights to manage
categories. Four kinds of information would help category managers to assess the opportunity
for a specific category. They are consumer information, market information, retailer
information, and supplier information.
Using the BCG share-matrix as shown in figure xx, evaluation of each category can be done
and examining the customers buying behavior and perception, need of creating new menu is
find out.

Figure: 16 BCG share-matrix of fast food
Step 4: Category scorecard
Measuring category performance is the fourth step in the category management process in
which the retailer develops bottom-line and benchmark to measure the performance of the
categories. It involves setting measurable targets in terms of sales, volume, margins, and gross
margin return on investment (GMROI).
Step 5: Category strategies
Under this stage of category management business process, retailers develop marketing and
product supply strategies that determine the category role and performance objectives. The
basic purpose behind developing strategies is the retailer’s intention to capitalize on category
opportunities through creative and optimum utilization of available resources assigned to a
category.
Step 6: Category Tactics
Categories tactics are used to determine the optimal category assortment, pricing promotions,
and shelf penetration, essential to ensure that strategies put are on right track. All the tactical
moves depend on variables like product, price, place and promotion. The decisions such as

category level pricing, assortment mix, location of the shelf, allocation of shelf space and
running promotions are taken at this stage.
Step 7: Category plan Implementation
This step is used to implement the category business plan through a systematic schedule and
list of responsibilities. Implementing category plan as per the objectives laid down, is the path
to the success of category management. In a short, implementing category plan on the part of
a retailer requires to decide what, where, when a task to accomplish and by whom.
Step 8: Category Review
This is the final step in a typical category management business plan. Category review
enables a retailer and concerned supplier to gauge the performance of a category and identify
key areas of opportunity and threats to overcome by adopting alternate plans.
Ultimately the Category Management ensure efficient fast food supply chain through the
efficient product assortment.
3.2 Efficient Product Replenishment in fast food supply chain
In fast food supply chain, product replenishment starts from POS that is fast food restaurant,
where restaurant manager forecast and place the order of required raw materials.
Efficiency can be achieved through improved physical distribution systems and efficient
information system.
Improved Physical Distribution Systems
Improvement in the physical distributing system are being made through intrafirm
reengineering of warehouse and logistics operations and through the redesign of processes
that link separate firms (King R.P. and Phumpiu P. F., 1996).

Figure: 17 McDonald supply chain in India
The entire effectiveness of supply chain is based on the concept of “pull-supply” chain. The
restaurant issues orders to the distribution center which, in turn, routes the order to the
suppliers and only then does the supplier produce it.
Accurate demand forecasting is very challenging job. If it is not done correctly either
restaurant have to face shortage of raw materials or food may be waste. Therefore, for
efficient replenishment accurate demand forecasting is very Important. McDonald India has
implemented 31Q-system for demand forecasting where 3 stands for the three years that the
fast food chain will keep checking its plans, 1 represents the details forecast of next year and
Q symbolizes the quarterly monitoring of these forecasts. Usually, the restaurants give a
three-day to one-week forecast to the Distribution Center. The DC, in turn, has a three-months
rolling forecast with supplier which enable them to plan their production schedules
meticulously (Sharma K. 2013).
Cross-ducking and new product-picking technologies facilitate to speed up the flow of raw
food from the suppliers to the fast food outlets.
3.3 Cross-ducking in fast food supply chain
The management of food supply chain networks is complicated by consideration of the
specific product and process characteristics. It is different from other product supply chains

due to the continuous and significant change in food quality as the product moves
downstream. Fresh produce supply chains are attracting increased attention due to
considerations of freshness and safety (Agustina D., Lee C.K.M., Piplani R., 2014).
Figure: 18 The cross-dock system for food supply chain
Implementing a cross docking warehouse for perishable product distribution expedites the
distribution, shortens the delivery cycle time, and improves customer satisfaction. Therefore,
cross docking is one of the important initiatives of ECR implementation in fast food supply
chain.
3.4 Information system
Efficient information system is backbone of every supply chain. Specially in fast food supply
chain, it is more critical because of perishable goods. Fast food outlets have to frequently
place the orders probably some items need to order everyday basis. Therefore, information
system should be very reliable and efficient to ensure the trouble-free fast food supply chain.
Different information technologies such as intranet, extranet, EDI, Computer Assisted
Ordering (CAO), Continuous Replenishment Practices (CRP) etc. used in the supply chain.

Electronic Data Interchange (EDI)
Improvement in the flow of orders, billing, and product information are being based in
increased use of Uniform Communication Standard (UCS) transactions sets for EDI (King
R.P. and Phumpiu P. F., 1996). EDI allows instantaneous, paperless transmission of data
within and between firms. Ultimately EDI helps to improve the food supply chain system.
Figure: 19 EDI in fast food supply chain
Fast food restaurants can share the point-of-sale data, orders placement/ receipt data, store
inventory data with distribution center and distribution center can share billing and payment
data, shipment et cetera with fast food outlets.
Computer Assisted Ordering (CAO) is one-way firm-level data can be used to increase
efficiency. CAO has long been used in warehouse operations to generate orders based on
current inventory, movement projections, and order costs (King R.P. and Phumpiu P. F.,
1996).

Continuous Replenishment Practices (CRP) are an interfirm approach to using data more
efficiently. Under CRP, the customer shares data on item movement and inventory with the
supplier. The supplier uses this information to write orders for the customers in a way that
minimizes replenishment costs subject to maintenance of an acceptable service level for the
customers.
Food safety
Food safety is one of the main concerns of food supply chain. Once harvested or produced,
the food should be stored, delivered, and retailed so that they could reach to the final
customers by due date. Implementing ECR in food supply chain can maintain the quality of
the food supplied throughout the supply chain. One of the initiatives of ECR is food
traceability in food supply chain.
Fresh product traceability
Fresh products, such as meat, fish, fruit and vegetables are shipped from manufacturers to
retailers on pallets identified with EAN.UCC Logistic Labels. The SSCC is the basis for their
traceability. Standard trade item grouping of fresh products should also carry the GTIN and
Lot Code in EAN.UCC-128 bar codes, which form the basis for their traceability.
However, when split into bulk sales display or cut into portions, fresh products may be at risk
of losing the traceability link with the standard trade item groupings from which they
originate and consequently the pallet on which they were delivered. To counter this problem,
fresh products divided into bulk sales display or cut into portions may have individual
identifiers, which when associated to their respective GTIN form the basis or traceability
when linked via cutting, processing and/or packing records to the standard trade groupings
and pallets of origin.
It is therefore recommended for the retail trade to design and deploy traceability systems
linking fresh products in bulk sales displays or cut into portions to their standard trade item
groupings and pallets of origin.

Architecture of ECR implementation in fast food supply chain
Figure:20 Architecture of ECR implementation in fast food supply chain
Figure:xx shows the integrated view of ECR in fast food supply chain. Efficient new product
introduction tries to maximize effectiveness and minimize costs and failure rates in
introducing new products. Fast food industry like McDonald’s design special recipe
considering the religious and local sentiment. Efficient Product Promotion promote fast food
restaurants (franchise) to sell more food and it also gives offers to customers. The category
management supports the activities of Efficient New Product Introduction and Efficient
Product Promotion by categorizing items used in fast food industry and it also helps in
efficient product assortment in every level of fast food supply chain so that efficient
replenishment can take place. Cross-ducking and product-picking technologies facilitate to

speed up the flow of raw food toward downstream. Supplier Relationship Management
(SRM) is very important in fast food industry like McDonald’s because their performance
entirely depend on supplier’s efficiency. Effective communication is another important
success facture in supply chain. New IT technologies, mobile applications, EDI, CAO have
been using in food supply chain.
ECR in fast food supply chain ensure the elimination of expensive interim storage facilities,
overstocking, out-of-stock situations and provide data to forecast the production volumes
which helps to reduce food waste.
elimination of expensive interim storage facilities, overstocking, out-of-stock situations and
the estimation of production volumes
A case example: McDonald’s Supply Chain
Figure: 21 McDonald’s Supply Chain (source: box around the world, 2015)

McDonald’s is a limited menu restaurant is characterized by speed of operations. McDonald’s
is the world leading retailer with more than 33,000 restaurants in 118 countries serving more
than 67 million customers each day (Sharma K., 2013). McDonald’s supply chain is entirely
outsourced without any legal contact with suppliers. Some unique features of this supply
chain managements are lean management, multi-layered supply-chain, cold chain, Hub and
Spoke system.
McDonald’s E-Procurement
In the process of procuring a product, McDonald’s franchise restaurant places an order
through E-MAC digital. The order is sent to the suppliers. Suppliers order is processed and
managed by the logistics. The logistics sends the order of the products to the franchise
restaurant. All the above steps are handled and executed by the E-MAC digital.
Figure:22 McDonald’s E-Procurement

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