CONTROLLING THE SUPPLY CHAIN AT RETAIL SPEED
Whether they’re pooling loads or promoting best practices, Thai retailers are now recognising that consolidation and collaboration have been powerful strategies that have fuelled their collective success.
When I first became involved in the Thai retail market 18 years ago, it was heavily dominated by foreign retail brands seeking rapid expansion and quick returns. There were many trade conferences and working groups but these were overshadowed by senior expatriate executives and consultants. Nearly all the material was presented in English with jargon not easily understood by the few local Thai professionals attending.
However, earlier this month I attended the 14th Efficient Consumer Response Thailand Conference and Exhibition — one of the most professional trade events I have ever been to — and it was delivered almost entirely in Thai.
Early days of ECR Thailand: During the late 1990s the local ECR movement was still in its infancy. Some case studies on collaboration showed that cooperation was ‘‘not impossible’’ between trading partners — but still taboo between competitors. Some industry sceptics predicted the voluntary standards and projects being set up by ECR Thailand would not last and the industry would slide back to the familiar model of cutthroat competition with multiple non-aligned standards.
I was working at the time for a large international retailer that pulled out of Thailand 12 years ago. Its executives felt the market had become saturated and there were no further development opportunities. They were wrong and I stayed.
A recent Nielsen survey shows an explosion in growth of all Thai retail formats from 2008 until early this year: Hypermarkets have increased from 176 stores to 263 (49% growth); supermarkets and personal-care have grown by 63% from 898 stores to 1,464; and medium and small formats (convenience) from 7,273 to 11,930, at 64% the fastest-growing sector).
How? Common standards have been adopted across virtually all retailers, creating efficiencies with manufacturers, service providers and IT companies. Major retail groups, while competing in the market, have collaborated on many of the fundamental factors behind the logistics supporting the whole chain, making it efficient and scalable.
Pallet power: I had started with the intent to summarise the various conference presentations, but have found myself wanting to extol ECR Thailand (www.ecrthailand.com) for what it has achieved and the contributing factors behind its success.
One of the most significant achievements of the past decade is the introduction of the standard four-way logistics pallet. This has led to the creation of a major pallet-hire pool industry that allows products to be loaded efficiently at a manufacturer on the same pallet that it is transported on to national distributors and then, without reloading, to retail stores.
Although some retailers are moving to repack products into standard roll cages, the standard pallet has above all other factors enabled the explosive growth and efficiencies on which highvolume and efficient modern trade retailing is based.
Even today, as supposedly advanced Australia extols its logistics prowess, it has two main competing retailers who can’t agree on a standard pallet that could be used by common manufactures and service providers. Thailand has done it and is now moving on to common standards in retail-ready packaging and returnable alternatives to the single-use, throwaway logistics carton.
Another fascinating topic discussed involved the forthcoming Asean Economic Community (AEC), which will lead to a free flow of skilled labour among Asean countries among other change. Although implementation challenges lie ahead in addressing the disparity of resource availability and costs, significant benefits can be gained.
Unsung industry heroes: The organising committee of the ECR organisation in Thailand deserve special credit, in particular its driving force, a low-key executive who has dedicated herself to the ideal of cross-business improvement and industry collaboration.
Over the past 12 years Khun Pochaman Pasawan has worked with quiet determination to set the vision and select the stakeholders most able to influence change, with remarkable outcomes. The result has been a business sector that is booming and a critical mass of Thai management skills able to bring it to the next level.
The retail and fast-moving consumer goods industry has much to thank Khun Pochaman for. But now that the national agenda of common standards and collaboration has its own momentum, she is setting her sights on bringing the valuable lessons learned in Thailand to the Asean business community.
With the long-term involvement of ECR Thailand, the Thai retail supply chain community has come of age and achieved a long-awaited level of independent maturity. Under the leadership of Khun Pochaman, ECR Thailand now commands centre stage in the FMCG and retail trade in that it has delivered on its mission.