KEYNOTE ADDRESS BY MR LIM HNG KIANG, MINISTER FOR TRADE & INDUSTRY, AT THE OPENING OF THE 10TH ANNUAL EFFICIENT CONSUMER RESPONSE (ECR) ASIA PACIFIC CONFERENCE AND EXHIBITION, AT 9.15AM ON TUESDAY, 23OCTOBER 2007, AT THE PADANG BALLROOM, SWISSOTEL THE STAMFORD
Enhancing Consumer Value
Mr Barron Witherspoon, ECR Asia Pacific Council Co-Chair,
Mr David Lim, ECR Singapore Council Co-Chair,
Distinguished Guests,
Ladies and Gentlemen.
Good morning, and a very warm welcome to all, especially our overseas speakers and delegates. This is the second time that this Efficient Consumer Response, or ECR, Asia-Pacific Conference is held in Singapore, and we are happy to host it. I understand that this conference showcases the latest developments in ECR to help meet the needs of the growing Fast Moving Consumer Goods or FMCG industry in the Asia Pacific
FMCG Sector – Opportunities And Challenges
We all know that Asia Pacific’s rapid economic growth has far outstripped those in other regions and is driving robust expansion in the FMCG sector. Markets – such as those in China and India – are opening up and growing rapidly, complemented by favorable demographic and social trends.
Along with the rising middle class, a new breed of global consumers has emerged. These consumers are highly conscious of global market trends. They possess sophisticated tastes, demand greater variety of choices in their purchase. and expect high level services customized to their needs. The demands from this emerging consumer segment has spurred much innovation and vibrancy within the retail industry.
Accompanying these opportunities are challenges which retailers in the FMCG industry need to address very quickly. The mismatch of supply and demand of goods often lead to out-of-stock situations, resulting in customer dissatisfaction and higher supply chain costs. Lack of knowledge about best practices in supply chain management have also resulted in shrinkage or stock loss, especially in new expanding markets. In addition, the rising customization needs of the global consumer are beginning to strain FMCG supply chains.
Importance Of ECR
To capitalize on these exciting regional business opportunities and address the challenges ahead, FMCG companies today are adopting ECR best practices to improve their supply chain operations and enhance customer satisfaction.
I understand that ECR practices have already been adopted in over 40 countries worldwide, including Singapore. ECR is a voluntary supplier-retailer initiative that serves to fulfill consumer needs better, faster and at lower cost. It does so through enhanced demand and category management, such as improvements in shelf layout, assortment, pricing, promotions, new product introductions and new offerings. Companies that adopt ECR benefit from increased service levels, on-time delivery, shorter lead time, and more accurate invoicing. A study[1] commissioned by ECR Europe Academic Partnership and IBM Global Business Services estimated that full adoption of ECR will improve sales by 5% as a result of increased customer satisfaction and loyalty.
Many of the largest international companies today have established dedicated sourcing operations in the Asia-Pacific and made supply chain efficiencies central to their overall strategy. As a result, the Asia-Pacific now plays a major role in the sourcing of almost every category of consumer goods.
ECR Asia, which showcases the latest ECR initiatives for the FMCG retailing industry, will shorten the industry learning curve to meet consumer demands. ECR is currently adopted in more than 10 countries in the Asia Pacific and will certainly grow further, fuelled by the rapid growth of this region’s FMCG industry.
Singapore's Approach And Experience In ECR
In Singapore, the FMCG sector is also burgeoning. Retail revenue is currently more than $19 billion and growing at 3 to 5% annually. Many FMCG companies that play a regional headquarters role. have successfully implemented various ECR initiatives. These include Haw Par, Super Coffee mix, Sime Darby and Khong Guan Biscuits.
To further support the industry’s adoption of ECR, the government, in collaboration with the industry, has adopted a three-pronged approach:
- First, development and implementation of standards to improve supply-chain efficiencies
- Second, clustering to realize the benefits of better integrated supply-chains
- Third, strengthening the infrastructure to support ECR efforts.
Allow me to elaborate.
SPRING Singapore collaborates with ECR Singapore to facilitate the development and implementation of industry-led national standards. Examples of recent collaborations include the successful implementation of the Standard on Cold Chain Management of Milk and Dairy Products, and later of Chilled Pork to improve freshness, taste and quality. More recently in September, the Cold Chain Management Standard was launched for vegetables, to improve quality and productivity, as well as enable regional sourcing. The National Standards Working Group which developed these standards, is now working with SPRING Singapore and major supermarkets to implement them.
Cluster Approach
The cluster approach will enable more benefits to be realized through integration of the supply chain. One example is the implementation of electronic procurement to address out-of-stock issues and enable FMCG companies to apply Continuous Planning, Forecasting and Replenishment. Local supermarket Sheng Siong, for example, with the support of SPRING Singapore has linked up with its key suppliers to improve inventory control using the Electronic Business extensible Markup Language or EBXML standard. This has enhanced the company’s orders, deliveries and productivity. Since the last ECR Asia conference held here in 2002, the majority of the FMCG industry in Singapore has adopted the e-business standard.
Enabling Infrastructure
Technologies – such as EBXML and Radio Frequency Identification, or RFID – have become better and cheaper, and enabled the automation of procurement processes and consequently, increased visibility of stock movements. This has encouraged even more ECR applications.
I understand that RFID technology is now moving from logistics and warehousing to the shop floor. Walmart, for example, has adopted RFID technology to enhance the efficiency of its global distribution network. Closer to home, Samsung-Tesco in South Korea has implemented RFID successfully for warehousing and shopping carts.. I am told that their tag trolleys gather information on customers’ movements, especially in hypermarkets, to help shoppers find products more easily and improve traffic flow.
On the local front, I am heartened to note LHT Holdings Ltd has implemented RFID to help cut manpower costs and time spent tracking their pallets. I will leave it to LHT to elaborate on their project later this afternoon at this conference.
With the success of RFID application locally and overseas, I hope to soon see more of such applications implemented in our stores as well. I urge you to seriously consider this as it would not only improve your operational efficiency but also enhance the image of your company as an early adopter of technology. Interested companies can approach Singapore’s National RFID Centre, a multi-agency initiative set up last year involving the Agency for Science Technology and Research, SPRING Singapore; Economic Development Board and Infocomm Development Authority of Singapore. The Centre provides a platform for our businesses to reap the financial benefits of implementing an RFID system to track, trace and control their stocks.
Conclusion
To conclude, ECR is an important competitive strategy for the evolving FMCG industry as it reduces costs and time. Regional fora such as the ECR Asia provide enterprises, especially SMEs, unique opportunities to learn best practices and gain knowledge of markets. I strongly encourage our SMEs to tap on the new technologies and the latest developments to become more profitable and competitive.
Finally, I commend the organizers for bringing the ECR Asia Conference to Singapore. On this note, I wish you all a pleasant and fruitful day ahead.
Thank you.
[1]Source: The Case For ECR: A review and outlook of continuous ECR adoption in Western Europe by ECR Europe Academic Partnership and IBM Global Business Services.