CPFR
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CPFR Presentation Transcript

  • 1. CPFR® Henry C. Co Reference: CPFR for Beginners, M. Johnson (Syncra Systems) and L. Roth (Kimberly-Clark).
  • 2. Collaborative Commerce  Definition - Processes, technologies and the supporting standards that allow continuous and automated exchange of information between trading partners 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. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 2
  • 3. Data synchronization Foundational Steps Data registration 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. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 3
  • 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. Out of Stocks Translate into 3.1% Loss in Sales to Retailer 9 8 8.2 7 6.5 3.4 6 “This does not take into 5 account other intended purchases lost at time 4 of the visit” 3.1 3 2 1 0 % SKU's OOS % of Sales Alter Purch Lost Sales Source: Retailer Operating Data, Prism Partner Store Audits, Coca Cola Retail Council Independent Study, 1996 Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)
  • 6. Out-of-Stocks result in 4-5% Loss in Sales to Manufacturer 9 8 8.2 7 6.5 1.5 6 “This does not take into 5 account other intended 5.0 purchases lost at time 4 of the visit” 3 2 1 0 % SKU's % of Sales Alter Purch Lost Sales OOS Source: Retailer Operating Data, Prism Partner Store Audits, Coca Cola Retail Council Independent Study, 1996 Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)
  • 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 Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)
  • 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.  Sales history used as a predictor for future demand.  Forecasts do not include future planning and set programs.  Manufacturers are not building to retailer/consumer demand.  Forecasting of promotional, seasonal, and new item remain a critical issue.  Collaboration occurs most often after the initial order is placed. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)
  • 10.  Difficulties in forecasting  Influence of promotions  Changing demand patterns  Competitive pressures  Solutions to uncertainty  Inventory – an expensive method of avoidance  Cooperative planning between trading partners. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 10
  • 11. What is CPFR®?  A business practice  Trading partners working together in planning fulfilling customer demand.  Links sales and marketing best practices to supply chain planning and execution processes.  Objective is to increase availability to the customer while reducing inventory, transportation and logistics costs. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 11
  • 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.  Prior to ECR  Relationships often adversarial.  Little or no joint planning  Lack of information sharing results in “unpredictable” ordering patterns, excessive inventories, service failures,…  In 1987, P&G and Wal-Mart pioneered in Continuous Replenishment Process (CRP)  Information sharing  Joint demand forecasting  Coordinated shipments.  CRP is best-known as the Vendor-Managed Inventory (VMI) program. This partnership laid the foundation for ECR. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 13
  • 14. The VMI program  P&G makes the main inventory replenishment decisions for Wal-Mart.  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.  Transactions customarily initiated by Wal-Mart (like purchase orders) are initiated by P&G instead. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 14
  • 15. Successful VMI initiatives  VMI is key in grocery industry’s pursuit of “efficient consumer response” and the garment industry’s “quick response.”  Successful VMI initiatives  Campbell Soup  Johnson & Johnson  European pasta manufacturer Barilla SpA  Shell Chemical  General Electric  Intel, and  many others. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 15
  • 16. Core elements of ECR  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?)  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.  Efficient promotions – Prices should be kept as stable as possible. The supply chain impact of promotions and market specials should be carefully considered.  Efficient replenishment – All physical and information flows that link producers to the consumer should be streamlined to cut costs and increase value. http://scm.ncsu.edu/public/cpfr/ last accessed 23 April 2007. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 16
  • 17.  CPFR extends ECR’s business processes to include:  Information systems for capturing and transferring POS, inventory, and other demand & supply information between trading partners  Formalized sales forecasting and order forecasting processes  Formalized exception handling processes  Feedback systems to monitor and improve supply chain performance http://scm.ncsu.edu/public/cpfr/ last accessed 23 April 2007. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 17
  • 18. ECR Evolved into CPFR  In 1994, Wal-Mart extended CRP by providing its sales forecasts to the vendors. This is called the Co-managed Inventory Program  CFAR, 1995/1996  Wal-Mart initiated a co-managed inventory effort with Warner-Lambert called CFAR.  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. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 18
  • 19.  1996, CPFR® (Collaborative, Planning, Forecasting, and Replenishment) pilot between Wal-Mart and Warner Lambert.  CPFR®  A globally interoperable commerce standard  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).  Adopted by numerous other industries  Apparel, automotive and high tech.  Supported by the Global Commerce Initiative, ECR Europe, ECR Brazil, ECR Colombia and many other international organizations. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 19
  • 20.  1998, VICS released first CPFR® guidelines at Retail Supply Chain Business Conference.  Guidelines provide holistic approach to collaborative supply chain management among a network of trading partners. 1. 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. 2. Together the trading partners develop a single shared demand forecast plan and then a supporting order forecast plan. 3. Finally, the order forecast plan is converted into actual orders. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 20
  • 21.  CPFR® Premise  Allow trading partners time to react  A supplier can build inventory well in advance of receiving a promotional order and carry less safety stock at other times.  A retailer can alter the product mix to reduce the impact of supply problems.  Nine-step process  Adopted by leading retail and consumer goods Internet trading exchanges such as  WWRE, GNX, Transora, and Novopoint  UCCnet and ebXML have incorporated this collaborative commerce process model into their open standards infrastructure environment. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 21
  • 22.  CPFR® Roadmap and many research and case studies of pilot projects published under guidance of the VICS CPFR® Committee  The Committee provides leadership and standards on implementing CPFR®  About 500 companies now active at some level of CPFR® implementation (AMR Research)  VICS CPFR® Matrix, 2001  A list of firms engaged in VICS CPFR® trading partnerships published by MoonWatch Media Inc.  Two listings, one sorted by seller (supplier) and the second by buyer (retailer)  Related systems vendors and public exchanges have been included to provide further resources that support VICS CPFR® trading partnerships. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 22
  • 23. CPFR® Initiative Participants Staples SARA LEE JCPenney Federated Dept. Stores Kimberly Clark Mead School & Office VF Corp.
  • 24. CPFR® Initiative Participants Apparel Group May Department Stores Benchmarking Partners Inc. Mead School & Office Corning Consumer Products Nabisco DAMA Project Nestle-Canada Ernst & Young LLP Pillsbury Federated Department Stores Procter& Gamble Fieldcrest Cannon QRS Goody’s Family Clothing Sara Lee Hewlett Packard Schnucks JC Penney Spiegel Johnson & Johnson Staples Kimberly-Clark Uniform Code Council Kmart Wal-Mart Levi Strauss & Co. Warner-Lambert Lucent Technologies Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)
  • 25. The CPFR® Opportunity  A set of guidelines supported and published by the Voluntary Inter-industry Commerce Standards (VICS) Association  Trading partners share their plans for future events, and then use an exception-based process to deal with changes or deviations from plans.  By working on issues before they occur, both partners have time to react.  A supplier can build inventory well in advance of receiving a promotional order and carry less safety stock at other times.  A retailer can alter the product mix to reduce the impact of supply problems. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 25
  • 26. CPFR Benefits More effective inventory management Improved customer service Improved profitability
  • 27. Typical CPFR® Benefits Typical Retailer Benefits Improvement Better Store Shelf Stock Rates 2% to 8% Lower Inventory Levels 10% to 40% Higher Sales 5% to 20% Lower Logistics Costs 3% to 4% Typical Manufacturer Benefits Improvement Lower Inventory Levels 10% to 40% Faster Replenishment Cycles 12% to 30% Higher Sales 2% to 10% Better Customer Service 5% to 10% Source: AMR Research (2001) Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 27
  • 28. CPFR Benefits: Demand 1. Enhanced Relationship  Implicitly, CPFR strengthens an existing relationship and substantially accelerates the growth of a new one.  Buyer and seller work hand-in-hand from inception through fruition on business plan, base, and promotional forecasts.  Continual CPFR meetings strengthen this relationship. 2. Greater Sales  The close collaboration needed for CPFR implementation drives the planning for an improved business plan between buyer and seller.  The strategic business advantage directly translates to increased category sales. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 28
  • 29. 1. Category Management  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.  This scrutiny will result in improved shelf positioning and facings through sound category management. 2. Improved Product Offering  Before CPFR implementation, the buyer and seller collaborate on a mutual product scheme that includes SKU evaluation and additional product opportunities. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 29
  • 30. CPFR Benefits: Supply 1. Improved Order Forecast Accuracy  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. 2. Inventory Reductions  CPFR helps reduce forecast uncertainty and process inefficiencies.  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?  With CPFR, product can be produced to actual order instead of storing inventory based on forecast. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 30
  • 31. 1. Improved Technology ROI  Through the CPFR process, technology investments for internal integration can be enabled with higher quality forecast information.  Your company will benefit by driving internal processes with common, high-quality data. 2. Improved Overall ROI  As other processes improve, the return on investment from CPFR can be substantial. 3. Increased Customer Satisfaction  With fewer out-of-stocks resulting from better planning information, higher store service levels will prevail, offering greater consumer satisfaction. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co) 31