The adoption of Efficient Consumer Response

Robert Johnston

2016

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10 pages

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Abstract

The adoption of Efficient Consumer Response (ECR) by the grocery industry has become increasingly important in order to stay competitive. Due to the inter-organizational nature of ECR, its adoption involves various parties with different and conflicting objectives and requires the concerted effort of supply chain members. Thus, third party organizations may be important in ECR adoption, but the exact roles they play have received little research attention. Employing a multiple case study, this study uncovers five roles third parties play and extends a previously published model of ECR adoption to include third parties as mediators in the ECR adoption process. The results are important theoretically for understanding the complexities of inter-organizational systems adoption general, and practically to promote the growth of ECR in particular. .

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Figure 1. Kurnia and Johnston’s first-order model of ECR adoption [14] In the next section, existing models of ECR adoption are presented. Then the multiple case study research method is described and the findings are discussed comprehensively. Finally, the implications of As an example of technological innovation, adoption of ECR can be studied using a ‘factor’ approach or ‘processual approach’ [5, 14, 18]. Early studies of ECR adoption in Australia (see for example, [9, 13]) were based on the adoption model developed by Iacovou [10] in the context of EDI adoption. These studies employed the factor approach. Such studies typically involve conducting a survey to explore various factors that may affect the adoption of ECR based on the individual organization’s experience. The unit of analysis was individual organizations within the Australian grocery industry. Based on this approach, Kurnia and Johnston [14] proposed a so-called a ‘first- order’ model of ECR, as shown in Figure 1. A number of variables in the model, which are categorized into ‘Nature of Technology’, ‘Capability of Organization’ and ‘External Factors’, were found to have a strong correlation with ECR adoption.

Figure 2. Kurnia and Johnston’s second-order model of ECR adoption [14 The second-order model depicts that when inter- organizational interactions are considered some factors identified as external forces in the first-order model are now seen to be part of internal industry interactions. For instance, pressure from trading partners, which is one of the external factors in the first-order model, now becomes part of the internal interactions between organizations and their trading partners, as organizations being pressured by their trading partners may negotiate trading terms to ensure the mutuality of ECR adoption. With this mutuality, cooperation between trading partners can be then obtained, leading to the establishment of partnership and trust over time. Therefore, partnerships and trust between trading partners are also no longer viewed as external factors that are beyond the control of organizations. These factors now become part of the internal industry interactions, which are very much tied in with the political, competitive, economic and _ corporate relations among the industry players [14]. The model has been useful in exploring the experiences of the Australian grocery industry with ECR adoption and explaining the slow adoption rate within the industry [14]. However, other studies of IOS adoption employing case studies discovered some variations in levels of adoption, which cannot be explained by the first-order model of ECR adoption [3, 4]. Factors identified in the first-order model are necessary for adoption, but are not in themselves sufficient to account for the richness of adoption experiences. The inter-organizational nature of ECR requires concerted actions by firms in particular supply chains and perhaps across the entire industry for adoption. As a result, Kurnia and Johnston [14] proposed a ‘second-order’ model of ECR adoption, which is basically a modification of the first-order model, as shown in Figure 2. In this model, the existence and consequences of the inter-organizational context of ECR are explicitly recognized. Processual study over a period of time is required to understand

organization with international branches. A consultant at C2 was interviewed. SB1 is Australia’s leading barcode standards provider. SB1 provides barcode standards, barcode testing services and ECR education. They are a non- profit organization, have been established for over 25 years and have over 14,000 members. The board of SB1 is made up of twelve representatives from different industries including four which are retailers. Several participants were interviewed including the Chief Operating Officer (COO), Executive Quality Systems Manager and the Education and Support Development Manager. Both the COO and Education Manager have extensive experience working in the Grocery Retailing Industry and the Quality Systems Manager has experience in barcode standards. TA2 was set up in 1999 to bring together manufacturers and retailers to develop ECR in Australia. TA2’s business is to promote ECR to

Figure 3. A Revised model of ECR adoption including third party organizations For causal links represented by arrows e and f, figure 3 indicates that the third parties mediate the interaction between the actions of individual supply chain firms and the structure of the collective of firms. This relation between firm action and collective structure has previously been discussed using Gidden’s Structuration Theory [8, 11]. In fact, the roles played by third parties are consistent with the three modalities of interactions proposed by the theory [7, 8, 11], which are interpretive schemes, facilities and norms. In the context of ECR adoption, third parties help organizations share knowledge, facilitate/inhibit the exercise of power of large trading partners over small organizations and establish industry norms (rules) to encourage ECR adoption through their roles as advisors, researchers, educators, and facilitators. For example, for the causal link representing the affect of

7. Conclusions in order to better negotiate trading terms with the retailers. With more recognition of ECR benefits by organizations of all sizes within the Australian grocery industry, the adoption of ECR can be further encouraged. This study has also allowed an existing model of ECR adoption in Australia by Kurnia and Johnston [14] to be made more comprehensive by explicitly showing the mediating roles of third parties in the adoption process. The inter-organizational system nature of ECR has created inherent barriers to its adoption. Its adoption requires commitment from various trading partners within the supply chain, which is difficult to achieve since trading partners usually have different and icting objectives. In Australia, particularly, the grocery industry is dominated by two large, powerful ers who have been interested in pursuing various confl retai ECR initiatives. However, it has been difficu retai ers to adopt ECR since there is general t for the y alow level of trust and cooperation between Australian retai ers and manufacturers Many manu facturers believe that ECR only benefits the retailers and, therefore, are not interested in ECR. Hence, the invo vement of third parties is necessary to the growth of ECR. promote In short, the revised model suggests that third parties intermediate the way the focal organization interacts with its trading partners within the supply chain and the industry. Through these interactions, the nature of the ECR program, the capabilities of the organizations, and the structure of the supply chain and industry can be altered over time and be aligned with the ECR adoption requirements. Thus, the comprehensiveness of the ECR adoption model proposed by Kurnia and Johnston [14] is enhanced by the inclusion of the third parties in the adoption process.