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Cpfr

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    • 1. CPFR ® Henry C. Co Reference: CPFR for Beginners, M. Johnson (Syncra Systems) and L. Roth (Kimberly-Clark).
    • 2. Collaborative Commerce <ul><li>Definition - </li></ul><ul><li>Processes, technologies and the supporting standards that allow continuous and automated exchange of information between trading partners </li></ul>Through collaboration, suppliers and retailers can work together to fulfill consumer’s wishes better, faster and at less cost by improving business process efficiency and reducing waste.
    • 3. Data registration Data synchronization Foundational Steps Common Data Standards Electronic Product Code (EPC) – physical carriers Global Data Synchronization (GDS) – enabler for maintaining uniform, standards-based data usable throughout the supply chain.
    • 4. CPFR Drivers Out of stocks = 3.1% loss in sales to retailer Out of stocks = 4-5% loss in sales to manufacturer Forecasting a key cause of out of stocks on warehouse supplied items. Source: Retailer Operating Data, Prism Partner Store Audits, Coca Cola Retail Council Independent Study, 1996
    • 5. Source: Retailer Operating Data, Prism Partner Store Audits, Coca Cola Retail Council Independent Study, 1996 “ This does not take into account other intended purchases lost at time of the visit” Out of Stocks Translate into 3.1% Loss in Sales to Retailer 8.2 6.5 3.4 3.1
    • 6. 8.2 6.5 1.5 5.0 Source: Retailer Operating Data, Prism Partner Store Audits, Coca Cola Retail Council Independent Study, 1996 “ This does not take into account other intended purchases lost at time of the visit” Out-of-Stocks result in 4-5% Loss in Sales to Manufacturer
    • 7. Forecasting a key Cause of Out of Stocks on Warehouse Supplied Items Source: Retailer Operating Data, Prism Partner Store Audits, Coca Cola Retail Council Independent Study, 1996
    • 8. “ Even children can tell you what they want and help you assure that they get it. Imagine your trading partners in that role … and the benefits you could see are not child’s play.” www.intrinsicvaluechain.com
    • 9. <ul><li>Sales history used as a predictor for future demand. </li></ul><ul><li>Forecasts do not include future planning and set programs. </li></ul><ul><li>Manufacturers are not building to retailer/consumer demand. </li></ul><ul><li>Forecasting of promotional, seasonal, and new item remain a critical issue. </li></ul><ul><li>Collaboration occurs most often after the initial order is placed. </li></ul>
    • 10. <ul><li>Difficulties in forecasting </li></ul><ul><ul><li>Influence of promotions </li></ul></ul><ul><ul><li>Changing demand patterns </li></ul></ul><ul><ul><li>Competitive pressures </li></ul></ul><ul><li>Solutions to uncertainty </li></ul><ul><ul><li>Inventory – an expensive method of avoidance </li></ul></ul><ul><ul><li>Cooperative planning between trading partners. </li></ul></ul>
    • 11. What is CPFR ® ? <ul><li>A business practice </li></ul><ul><li>Trading partners working together in planning fulfilling customer demand. </li></ul><ul><ul><li>Links sales and marketing best practices to supply chain planning and execution processes. </li></ul></ul><ul><ul><li>Objective is to increase availability to the customer while reducing inventory, transportation and logistics costs. </li></ul></ul>
    • 12. A Brief History CPFR evolved from Efficient Consumer Response (ECR). ECR: Improve supply chain performance through better coordination of marketing, production, and replenishment activities.
    • 13. <ul><li>Prior to ECR </li></ul><ul><ul><li>Relationships often adversarial . </li></ul></ul><ul><ul><li>Little or no joint planning </li></ul></ul><ul><ul><li>Lack of information sharing results in “unpredictable” ordering patterns, excessive inventories, service failures,…     </li></ul></ul><ul><li>In 1987, P&G and Wal-Mart pioneered in Continuous Replenishment Process (CRP) </li></ul><ul><ul><li>Information sharing </li></ul></ul><ul><ul><li>Joint demand forecasting </li></ul></ul><ul><ul><li>Coordinated shipments. </li></ul></ul><ul><li>CRP is best-known as the Vendor-Managed Inventory (VMI) program. This partnership laid the foundation for ECR. </li></ul>
    • 14. The VMI program <ul><li>P&G makes the main inventory replenishment decisions for Wal-Mart. </li></ul><ul><li>P&G monitors Wal-Mart’s inventory levels (physically or via electronic messaging) and makes periodic re-supply decisions regarding order quantities, shipping, and timing. </li></ul><ul><li>Transactions customarily initiated by Wal-Mart (like purchase orders) are initiated by P&G instead. </li></ul>
    • 15. Successful VMI initiatives <ul><li>VMI is key in grocery industry’s pursuit of “efficient consumer response” and the garment industry’s “quick response.” </li></ul><ul><li>Successful VMI initiatives </li></ul><ul><ul><li>Campbell Soup </li></ul></ul><ul><ul><li>Johnson & Johnson </li></ul></ul><ul><ul><li>European pasta manufacturer Barilla SpA </li></ul></ul><ul><ul><li>Shell Chemical </li></ul></ul><ul><ul><li>General Electric </li></ul></ul><ul><ul><li>Intel, and </li></ul></ul><ul><ul><li>many others. </li></ul></ul>
    • 16. Core elements of ECR <ul><li>Efficient assortment –  Product offerings should be rationalized to better meet customer needs and improve supply chain performance (ex. – Why 100 different SKUs that confuse consumers when 30 SKUs would meet their needs?) </li></ul><ul><li>Efficient product introductions – New products should be introduced in response to real customer needs, and only after the impact on supply chain performance has been considered. </li></ul><ul><li>Efficient promotions – Prices should be kept as stable as possible. The supply chain impact of promotions and market specials should be carefully considered. </li></ul><ul><li>Efficient replenishment – All physical and information flows that link producers to the consumer should be streamlined to cut costs and increase value. </li></ul>http://scm.ncsu.edu/public/cpfr/ last accessed 23 April 2007.
    • 17. <ul><li>CPFR extends ECR’s business processes to include: </li></ul><ul><ul><li>Information systems for capturing and transferring POS, inventory, and other demand & supply information between trading partners </li></ul></ul><ul><ul><li>Formalized sales forecasting and order forecasting processes </li></ul></ul><ul><ul><li>Formalized exception handling processes </li></ul></ul><ul><ul><li>Feedback systems to monitor and improve supply chain performance </li></ul></ul>http://scm.ncsu.edu/public/cpfr/ last accessed 23 April 2007.
    • 18. <ul><li>In 1994, Wal-Mart extended CRP by providing its sales forecasts to the vendors. This is called the Co-managed Inventory Program </li></ul><ul><li>CFAR, 1995/1996 </li></ul><ul><ul><li>Wal-Mart initiated a co-managed inventory effort with Warner-Lambert called CFAR. </li></ul></ul><ul><ul><li>Wal-Mart asked Voluntary Interindustry Commerce Standards Association (VICS) to study and develop an industry-wide process around this proprietary practice to create a more productive supply chain. </li></ul></ul>ECR Evolved into CPFR
    • 19. <ul><li>1996, CPFR ® (Collaborative, Planning, Forecasting, and Replenishment) pilot between Wal-Mart and Warner Lambert. </li></ul><ul><li>CPFR ® </li></ul><ul><ul><li>A globally interoperable commerce standard </li></ul></ul><ul><ul><li>Value chain partners co-ordinate plans to reduce the variance between supply and demand and share the benefits of a more efficient and effective supply chain (Ashcroft 2003). </li></ul></ul><ul><li>Adopted by numerous other industries </li></ul><ul><ul><li>Apparel, automotive and high tech. </li></ul></ul><ul><ul><li>Supported by the Global Commerce Initiative, ECR Europe, ECR Brazil, ECR Colombia and many other international organizations. </li></ul></ul>
    • 20. <ul><li>1998, VICS released first CPFR® guidelines at Retail Supply Chain Business Conference . </li></ul><ul><li>Guidelines provide holistic approach to collaborative supply chain management among a network of trading partners. </li></ul><ul><ul><li>Begins with agreement between trading partners to develop a market specific plan, based on sound category management principles that collaboratively leverage each partner’s resources, using one of four deployment scenarios. </li></ul></ul><ul><ul><li>Together the trading partners develop a single shared demand forecast plan and then a supporting order forecast plan. </li></ul></ul><ul><ul><li>Finally, the order forecast plan is converted into actual orders. </li></ul></ul>
    • 21. <ul><li>CPFR ® Premise </li></ul><ul><ul><li>Allow trading partners time to react </li></ul></ul><ul><ul><ul><li>A supplier can build inventory well in advance of receiving a promotional order and carry less safety stock at other times. </li></ul></ul></ul><ul><ul><ul><li>A retailer can alter the product mix to reduce the impact of supply problems. </li></ul></ul></ul><ul><li>Nine-step process </li></ul><ul><li>Adopted by leading retail and consumer goods Internet trading exchanges such as </li></ul><ul><ul><li>WWRE, GNX, Transora, and Novopoint </li></ul></ul><ul><ul><li>UCCnet and ebXML have incorporated this collaborative commerce process model into their open standards infrastructure environment. </li></ul></ul>
    • 22. <ul><li>CPFR ® Roadmap and many research and case studies of pilot projects published under guidance of the VICS CPFR ® Committee </li></ul><ul><li>The Committee provides leadership and standards on implementing CPFR ® </li></ul><ul><li>About 500 companies now active at some level of CPFR® implementation (AMR Research) </li></ul><ul><li>VICS CPFR® Matrix, 2001 </li></ul><ul><ul><li>A list of firms engaged in VICS CPFR® trading partnerships published by MoonWatch Media Inc. </li></ul></ul><ul><ul><li>Two listings, one sorted by seller (supplier) and the second by buyer (retailer) </li></ul></ul><ul><ul><li>Related systems vendors and public exchanges have been included to provide further resources that support VICS CPFR® trading partnerships. </li></ul></ul>
    • 23. CPFR ® Initiative Participants SARA LEE Federated Dept. Stores Mead School & Office Kimberly Clark JCPenney VF Corp. Staples
    • 24. CPFR ® Initiative Participants Apparel Group Benchmarking Partners Inc. Corning Consumer Products DAMA Project Ernst & Young LLP Federated Department Stores Fieldcrest Cannon Goody’s Family Clothing Hewlett Packard JC Penney Johnson & Johnson Kimberly-Clark Kmart Levi Strauss & Co. Lucent Technologies May Department Stores Mead School & Office Nabisco Nestle-Canada Pillsbury Procter& Gamble QRS Sara Lee Schnucks Spiegel Staples Uniform Code Council Wal-Mart Warner-Lambert
    • 25. The CPFR ® Opportunity <ul><li>A set of guidelines supported and published by the Voluntary Inter-industry Commerce Standards (VICS) Association </li></ul><ul><li>Trading partners share their plans for future events, and then use an exception-based process to deal with changes or deviations from plans. </li></ul><ul><li>By working on issues before they occur, both partners have time to react. </li></ul><ul><ul><li>A supplier can build inventory well in advance of receiving a promotional order and carry less safety stock at other times. </li></ul></ul><ul><ul><li>A retailer can alter the product mix to reduce the impact of supply problems. </li></ul></ul>
    • 26. CPFR Benefits More effective inventory management Improved customer service Improved profitability
    • 27. Typical CPFR ® Benefits Source: AMR Research (2001) 5% to 10% Better Customer Service 2% to 10% Higher Sales 12% to 30% Faster Replenishment Cycles 10% to 40% Lower Inventory Levels Typical Improvement Manufacturer Benefits 3% to 4% Lower Logistics Costs 5% to 20% Higher Sales 10% to 40% Lower Inventory Levels 2% to 8% Better Store Shelf Stock Rates Typical Improvement Retailer Benefits
    • 28. CPFR Benefits: Demand <ul><li>Enhanced Relationship </li></ul><ul><ul><li>Implicitly, CPFR strengthens an existing relationship and substantially accelerates the growth of a new one. </li></ul></ul><ul><ul><li>Buyer and seller work hand-in-hand from inception through fruition on business plan, base, and promotional forecasts. </li></ul></ul><ul><ul><li>Continual CPFR meetings strengthen this relationship. </li></ul></ul><ul><li>Greater Sales </li></ul><ul><ul><li>The close collaboration needed for CPFR implementation drives the planning for an improved business plan between buyer and seller. </li></ul></ul><ul><ul><li>The strategic business advantage directly translates to increased category sales. </li></ul></ul>
    • 29. <ul><li>Category Management </li></ul><ul><ul><li>Before beginning CPFR, both parties inspect shelf positioning and exposure for targeted SKUs to ensure adequate days of supply, and proper exposure to the consumer. </li></ul></ul><ul><ul><li>This scrutiny will result in improved shelf positioning and facings through sound category management. </li></ul></ul><ul><li>Improved Product Offering </li></ul><ul><ul><li>Before CPFR implementation, the buyer and seller collaborate on a mutual product scheme that includes SKU evaluation and additional product opportunities. </li></ul></ul>
    • 30. CPFR Benefits: Supply <ul><li>Improved Order Forecast Accuracy </li></ul><ul><ul><li>CPFR enables a time-phased order forecast that provides additional information, greater lead time for production planning, and improved forecast accuracy vs. either stand-alone VMI/CRP or other industry tools. </li></ul></ul><ul><li>Inventory Reductions </li></ul><ul><ul><li>CPFR helps reduce forecast uncertainty and process inefficiencies. </li></ul></ul><ul><ul><li>How much inventory does your company hold to “cover up” for forecasting errors or a trading partner’s inability to have the product available in a timely manner? </li></ul></ul><ul><ul><li>With CPFR, product can be produced to actual order instead of storing inventory based on forecast. </li></ul></ul>
    • 31. <ul><li>Improved Technology ROI </li></ul><ul><ul><li>Through the CPFR process, technology investments for internal integration can be enabled with higher quality forecast information. </li></ul></ul><ul><ul><li>Your company will benefit by driving internal processes with common, high-quality data. </li></ul></ul><ul><li>Improved Overall ROI </li></ul><ul><ul><li>As other processes improve, the return on investment from CPFR can be substantial. </li></ul></ul><ul><li>Increased Customer Satisfaction </li></ul><ul><ul><li>With fewer out-of-stocks resulting from better planning information, higher store service levels will prevail, offering greater consumer satisfaction. </li></ul></ul>

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