[MUSIC] How are you today? Several philosophies, or management models have appeared to include relationships between manufacturers, and distributors. And we can highlight the efficient customer response, or the ECR, and the category management. What is the efficient customer response? It was first mentioned in 92 in the US, and it came to Europe in 94. It's a joint initiative between the producers and the retailers. To work together to reduce the activities that do not add value in the supply chain. And with a final aim of increasing customer satisfaction. The main aspects to point out are from the supply side of the ACR would be to satisfy the demand. And is focused on reducing the value chain inefficiencies, based on their efficient replenishment. On the demand side we will be talking about the category management. So in the supply chain, now we are looking for chain rationalization, a stock reduction. Time and cost improvements, in order management, handling, warehousing, and logistics. And the best practices in this supply side will be the engineering of the supply chain and the continually replenishment processes, now that they have the goal of reducing the stocks. On the demand area what we are looking for is to better satisfy the final customer needs. And here is where the category management act with three main strategies, would be the efficient assortment that determines the optimum product assortment in a category to satisfy customer needs, is efficient launches and efficient promotions. So for example, some years ago in Spain, Proctor and Gamble launched with carrier food the Lays, the famous chips, that they were categoried between the chips and the snacks. And they launched such a big success, why? Because it was a new product, so for Proctor and Gamble it was good to try this new product in the market and also for. Because it was a premium product that they could charge a much higher. And also it permitted to optimize the shelf. Because you could place two boxes of Lays where you can place just one other packet of chips. So what made this category management to arise in the market is mainly the growing proliferation of new products because managing so many differences is really a very difficult task so that's why it appear. So in category management it is fundamental transformation of the buyer role because it has become now a specialist in logistic, in merchandising and in trade marketing. It's a collaboration process between the producer and the distributor. So category management is the collaboration process between the producer and the distributor In this case a business unit is defined by a category concept. It improved results in terms of value to the customer. In modern collaboration process sometimes we could say that this [INAUDIBLE] make a marketing tool or marketing at the point of sale. It will have to define what is a category. We could say that these are products and services that consumers perceive as complementary or substitute in satisfying a specific need. So for example, we could say the breakfast product, no. When you go to a supermarket, you can find that. In the breakfast section you'll find coffee, tea, biscuits, cereals, but imagine that we are talking from the trade point of view. We could have for example that, talking about coffee, for craft for example coffee is a hot beverage classification whereas for Nestle it's a breakfast. So now we are going to go to the category management stages, no? What do we have to do, now? What aspects are important? First of all we have to define the category now? How the consumer perceives that the products are interrelated or a substitute. Then we need the category role. What's the priority for the distributor from the consumers point of view? Then we'll go into the category assessment. We have to see how many sub-categories are going to have the variety and we need to make research on consumers or market and merchandising in prices and we have to be able, also, to have objectives and to be able to measure the success. So we need to have internal and external measurements. And then we'll go into the category strategy. What can be? We can define different ones. Can be traffic building, can be transaction building, or even a profitability, or cash flow generation, or maintaining the share. There are many strategies. We have to choose one. And, once we have the strategy we go into the tactics, what assortment we are going to use. What's going to be the price, how do I implant, what promotion do I have? And I go then into the implementation, so we establish this strategy, we define the tactics and then we need to implement. So, in that case we have to assign responsibilities, establish account leader I may follow up. And finally of course we need to review the whole category, and the process will start all over again. So see you in the next class where we will learn to overcome the obstacle and to find out what are the key success factors in this collaborative relationship. [MUSIC]
