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Definition of CPFR Current challenges Benefits Implementation Case study Summary

Definition of CPFR Current challenges Benefits Implementation Case study Summary. Agenda. CPFR is…. "Collaborative Planning, Forecasting and Replenishment" Collaboration among suppliers, distributors and retailers Forecast sharing Developing one common forecast EDI/Internet-based tool.

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Definition of CPFR Current challenges Benefits Implementation Case study Summary

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  1. CPFR - the new edge in logistics -

  2. Definition of CPFR • Current challenges • Benefits • Implementation • Case study • Summary Agenda 26 May 2003

  3. 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 26 May 2003

  4. Definition of CPFR • Current challenges • Benefits • Implementation • Case study • Summary Agenda 26 May 2003

  5. 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 26 May 2003

  6. Definition of CPFR • Current challenges • Benefits • Implementation • Case study • Summary Agenda 26 May 2003

  7. 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 26 May 2003

  8. Definition of CPFR • Current challenges • Benefits • Implementation • Case study • Summary Agenda 26 May 2003

  9. Front-end agreement Steps of implementation Joint business plan Implementation Sales forecast collaboration Order forecast collaboration Order generation/delivery execution 26 May 2003

  10. 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 26 May 2003

  11. 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 26 May 2003

  12. 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 26 May 2003

  13. 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 26 May 2003

  14. Definition of exceptions Implementation Source: Syncra Systems Inc. 26 May 2003

  15. 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 26 May 2003

  16. Requirements • CPFR technology fits in existing applications • fully open, interoperable, vendor-neutral Implementation Source: Syncra Systems Inc. 26 May 2003

  17. Definition of CPFR • Current challenges • Benefits • Implementation • Case study • Summary Agenda 26 May 2003

  18. Metro and P&G – 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 26 May 2003

  19. 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 26 May 2003

  20. ForecastMetro 0 0 20000 45000 45000 18000 19000 20000 CPM example 1: Forecast and volumes Case study Forecasts: a) METRO b) P&G In case of exception: Red Light and Email 26 May 2003

  21. Orders from outlets too low Red Light! • Forecast per product • Actual inventory plus orders • Deviation > 5%: Email • Link to detailed information • Product CPM example 2: Check order and inventories of outlets Case study 26 May 2003

  22. CPM example 3: Monitoring promotion sales Case study • Screen shows per product and day: • Forecast Metro und P&G • Quantity receiving • Quantity sold • Accumulated quantity sold • Inventory • Backlog of deliveries • Zero sales 26 May 2003

  23. 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 26 May 2003

  24. Definition of CPFR • Current challenges • Benefits • Implementation • Case study • Summary Agenda 26 May 2003

  25. 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 26 May 2003

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