Warsaw School of Economics International Logistics Prof Krzysztof Rutkowski

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(No Transcript)
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• Definition of CPFR
• Current challenges
• Benefits
• Implementation
• Case study
• Summary

Agenda
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CPFR is

• "Collaborative Planning, Forecasting and
  Replenishment"
• Collaboration among suppliers, distributors and
  retailers
• Forecast sharing
• Developing one common forecast
• EDI/Internet-based tool

Definition of CPFR
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• Definition of CPFR
• Current challenges
• Benefits
• Implementation
• Case study
• Summary

Agenda
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• Different planning data among retailers and
  manufacturers
• Non-integrated processes and systems
• Excessive response times, costs and inventory
  due to forecast inaccuracy
• Retailer stock-outs, material shortages,
  inventory costs impacting margins, lost sales,
  poor customer service
• Manufacturer inventory costs, obsolescence

Current challenges
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• Definition of CPFR
• Current challenges
• Benefits
• Implementation
• Case study
• Summary

Agenda
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CPFR can

• Increase sales (10-100)
• Reduce inventory and out-of-stocks (at least 10)
• Reduce merchandise returns (5-20)
• Improve forecast accuracy (at least 20)
• Enhance cash flow and profitability
• Contribute to consumer satisfaction

Benefits
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• Definition of CPFR
• Current challenges
• Benefits
• Implementation
• Case study
• Summary

Agenda
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Steps of implementation
Front-end agreement
Joint business plan
Implementation
Sales forecast collaboration
Order forecast collaboration
Order generation/delivery execution
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Step 1 Front-end agreement

• Establishing the guidelines and rules for the
  collaborative relationship
• Agreeing to confidentiality and dispute
  resolution processes
• Establishing financial incentives or penalties
• Commitment to collaboration and aligning of all
  parties around common goals
• Reviewing on an annual basis

Implementation
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Step 2 Joint business plan

• Creation of a joint plan for each product
  category for going to market
• promotions
• inventory policy changes
• store openings/closings
• product changes etc.
• Controlling of the day-to-day activities of
  manufacturing, delivering and selling products
• Revision quarterly or semi-annually

Implementation
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Step 3 Sales forecast collaboration

• Creation of sales forecast by sharing promotion
  calendars plus analysis of POS data and causal
  data
• Identifying exceptions by determining causal
  factors
• Resolving exceptions by collaborative
  negotiations
• Forecast revisions on a regular - usually weekly
  - basis

Implementation
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Step 4 Order forecast collaboration

• Combination of POS data, causal information, and
  inventory strategies
• Harmonizing capacity constraints for
  manufacturing, shipping, receiving, etc.
• Creating an interactive feedback loop
• Resolving exceptions by collaborative
  negotiations
• Reduction of uncertainty by real-time
  collaboration
• Consolidation of supply-chain inventories

Implementation
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Definition of exceptions

Implementation
Source Syncra Systems Inc.
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Step 5 Order generation/delivery execution

• Transformation of the order forecast into a
  committed order
• Generated by either the manufacturer or retailer
• Frozen near-term orders (e.g. two weeks), only
  usage of longer-term information for planning
• Execution of the delivery to retailer

Implementation
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Requirements

• CPFR technology fits in existing applications
• fully open, interoperable, vendor-neutral

Implementation
Source Syncra Systems Inc.
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• Definition of CPFR
• Current challenges
• Benefits
• Implementation
• Case study
• Summary

Agenda
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Metro and PG One way to start

• Problems
• "Bad" communication in the planning area
• Business processes insufficiently defined
• Responsibilities not clearly defined
• Too few, too inexact, too old data
• Objectives
• Increase sales by reducing out-of-stocks
• Decrease costs along the supply chain also by
  reducing inventory, including inventory at
  promotion end
• Learn, test, develop further

Case study
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Elements of CPM

• ( Collaborative Promotion Management)
• Promotion planning
• Forecasting of promotion volumes
• Checking orders and inventories of outlets
• Monitoring promotion sales
• Evaluation after promotion
• Supported by a workflow-tool

Case study
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CPM example 1 Forecast and volumes
Case study
Forecasts a) METRO b) PG In case of exception
Red Light and Email
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CPM example 2 Check order and inventories of
outlets
Case study
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CPM example 3 Monitoring promotion sales
Case study

• Screen shows per product and day
• Forecast Metro und PG
• Quantity receiving
• Quantity sold
• Accumulated quantity sold
• Inventory
• Backlog of deliveries
• Zero sales

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Conclusion

• Cooperating with partner also enhances own
  performance
• Better promotion process
• Possibility to increase sales and decrease
  inventories
• Start small and keep it simple, "stick to it" and
  develop it
• CPFR begins with single steps

Case study
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• Definition of CPFR
• Current challenges
• Benefits
• Implementation
• Case study
• Summary

Agenda
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CPFR changes the supply chain dramatically!

• CPFR is rapidly becoming mainstream
• Low barriers to participation
• Demonstrated benefits
• Instead of the traditional trade-off Now
  simultaneous improving of inventory and reducing
  of out-of-stocks possible
• Win/win situations where customer satisfaction,
  costs and revenues improve simultaneously
• More and more companies successfully launched
  pilots, e.g. Kimberly-Clark, Procter Gamble,
  Metro, Wal-Mart

Summary