ASSESSING THE EFFECT OF ECR ON FINANCIAL AND OPERATING PERFORMANCE

A debate has emerged in the literature and trade press whether the adoption of Efficient Consumer Response (ECR), the supply chain management initiatives for the food industry, leads to improved inventory and financial performance. Using regression analysis, the financial performance for adopters of ECR is about 3 to 4% higher than for non-adopters. However, the growth in profit does not appear to come from improved performance for traditional inventory measures (such as inventory turnover, inventory-to-sales, or inventory-to-assets). The driving force behind these improved financial measures can be attributed to changes leading to a shorter cash conversion cycle. In addition, size matters; ECR is more effective due to economies of scale, information technology, and buying power.