cpfr(4) technology

CPFR® Technology

Henry C. CoTechnology and Operations Management, California Polytechnic and State University

Cornerstones of CPFR®

Internal ProcessesJoint processes Technology

Småros J., and Kary Främling, “Peer-to-Peer Information Systems - An Enabler of Collaborative Planning, Forecasting and Replenishment,” available online from http://www.cs.hut.fi/~framling/Publications/LRN2001.pdf

Technology

Open System Internet Application

Development Methods Secure Communication

Working to a Single Forecast

Common MeasuresPlanningInformation Sharing

Joint processes

Internalprocesses

Scalability through collaborative processes that are flexible, fast to implement and easy to integrate.

Internal processes that produce and use collaborative information.

Technology for secure, reliable and cost-effective information sharing and communication.

Viswanathan, R., “Systematic Collaboration in the Supply Chain Planning, Forecasting, Viswanathan, R., “Systematic Collaboration in the Supply Chain Planning, Forecasting, and Replenishment,” available and Replenishment,” available online from http://www.ise.ufl.edu/Supplychain/done/Day1/Viswanathan/Viswanathan.pptonline from http://www.ise.ufl.edu/Supplychain/done/Day1/Viswanathan/Viswanathan.ppt

Internal Processes

Willing to share informationAble to share information

Collaborative Forecasting (Henry C. Co) 5

Willing to share information Trust – Fear that information (e.g., end-customer

demand, upcoming promotions, and sales forecasts) may leak, or be used against them.

Power – Knowledge is power. Access information (e.g., end-customer demand), gives one power in the supply chain – making this information available to others could lessen this power.

Able to share information Trading partners may have difficulties sharing

information because their internal processes do not correspond and, in some cases, cannot produce the necessary data. For example, several grocery retailers find it impossible to produce item level forecasts for all of their tens of thousands of products, which obviously forms a significant obstacle for CPFR type collaboration.

Joint Processes

ScalabilityInteroperability


Scalability Support for many trading partners,

involving large numbers of products

Interoperability Common standards


Scalability Small-scale pilots may not work be scalable.

Nabisco, for example, admits that it still does not have a scalable enough solution despite being one of the early companies to start CPFR piloting (Frantz, 2000).

Scalability, i.e. support for several users, rapid implementation and easy integration with different types of existing systems, need to be required of collaborative processes and supporting tools.

Common standards Lack of common standards for sharing the type of

information needed for CPFR is today slowing the development down (Angeles, 2000).

Technology

Control and SecurityScalabilityStandardization


Technological Infrastructure Requirements

1. Control and security – should be able to control what information is shared, with whom and be able to rely on the security of the information sharing.

2. Scalability – must support collaboration with many large or small trading partners, and many products; should offer easy integration with different types of existing systems.

3. Standardization – should use open standards in order to allow the network to expand rapidly.

Centralized vs. Decentralized Solutions

Centralized – Electronic MarketplaceDecentralized – Peer-to-peer information systems

http://www.cs.hut.fi/~framling/Publications/LRN2001.pdf

Electronic Marketplace, a.k.a. Exchanges

1. Order matching2. Requisition and routing approvals 3. Financial settlement of orders4. Content management5. Logistics fulfillment services6. CPFR activities.


Exchanges’ Services1. Order matching

Catalogue orders –Fix-priced catalogue items Dynamic pricing – the marketplace matches

orders real-time based on bids and quotes that come into the marketplace

Auctioning Request for proposals – detailed

specifications are put online and bids are consolidated and compared.

2. Requisition and routing approvals – requests are routed to the right manager for approval.

3. Financial settlement of orders


4. Content management – e.g., converting and maintaining catalogue information.

5. Logistics fulfillment services.

CPFR capabilities – forthcoming.

Morgan Stanley Dean Witter (2000), The B2B Internet Report. Collaborative Commerce.


CPG Industry Exchanges New in CPG (2000).

Founded by supplier Transora (www.transora.com) CPGmarket.com (www.CPGmarket.com)

Founded by retailers WorldWide Retail Exchange

(www.worldwideretailexchange.org) GeneralNetXchange (www.gnx.com)


Advantages Efficient matching of demand and supply – Easier to

involve many (even anonymous) players in the trading process. Expands customers base; lowers barriers for sellers to

participate in bidding. Expands supplier base; allows buyers to get better

price. Only investment is the communication link to the

exchanges – Low entry barrier (allows small players to participate in CPFR).

ONE link (to the exchange), rather than several links to several trading partners.

Standardization – Exchanges impose communication standards (open or proprietary).

Value-added services – translation services when trading partners use different message formats.


Disadvantages Reduced control – once information is

uploaded to the exchanges, must rely on the exchange to deliver it to the right recipient (and only the right recipient);

Power – Exchanges are likely develop features and capabilities to cater to the needs of large customers;

Exchanges offer standardized solutions, companies have different needs in collaboration.

Transaction and service fees.


Disadvantages Information has to be explicitly

communicated to the administrator of the marketplace, thus making it more difficult to keep catalog information (product info, prices) up to date.

Peer-to-Peer System

Instead of passing through centralized databases and servers, data is exchanged directly between systems.

No need for a 3rd party for setting-up and governing the network.

Inter-face

RETAILER MANUFACTURER

ForecastTable

Shared Data

Inter-face

PromotionsTable

ItemTable

AP

PL

ICA

TIO

N

ForecastTable

PromotionsTable

ItemTable

AP

PL

ICA

TIO

N

ITEMNUMBER

1234567890001

1234567890002

1234567890003…

RTLR’SFORECAST

1200

14000

330

MFR..FORECAST

1150

9000

350

DELTA

50

5000

20

TOLERANCE

100

2000

50

OK?

Internet

Shared Process and Data Model


RetailerWorkstation

WorkstationManufacturer

CPFR Serverwww.supplier.cpfr.com

CPFR Serverwww.retailer.cpfr.com

SMTPS/MIME, SIL

Backend Server AppsData Data

Backend Server Apps

Peer to Peer Scenario Architecture



Example of Retailer-Supplier Setup Supplier configures three connections to access

forecast data from three retailers Each retailer configures the connection to the

supplier, permitting the supplier access to their forecasting information.



Connections set up by mutual agreement; configure what database to use, setup the database tables, and eventually add new database users with appropriate access rights.

Three pieces of information Identifier of the partner Internet address of the partner computer to

connect to/receive connections from Public RSA encryption key that uniquely identifies

and authenticates the partner.


Information Sharing Connections

See PowerPoint on Cryptography


Advantages and Disadvantages Advantages

Control and power No need for a 3rd party for setting-up and

governing the network. All parties have equal status regardless of their

size and can independently choose how to collaborate with other network parties.

Scalability Network setup as needed; no limit on number of

parties, products or product groups. Up-to-date information No participation fees

Disadvantage: Slow standardization

CPFR Interoperability

In Peer-to-Peer Collaboration, trading partners use CPFR applications

ServerServer ClientClient

NetscapeLiveWireInformix 7.2

NetscapeLiveWireInformix 7.2

EnterpriseServer 3.0EnterpriseServer 3.0

WebBrowser

WebBrowser

Sun Sun UltraUltra

HTTPHTTP

A Client-Server Architecture


Prototype Process/Functionality Authenticates users Stores exceptions data Allows selective retrieval of data Displays time-variant data such as supplier

forecast, retailer forecast, POS for 52 weeks Displays detail time-invariant data such as

On-hand, Fill-rate, store information etc for a specific forecast

Displays information in both tabular and graphical form

Displays calendar of events for both sides, for each item

Shows how a level 1 (corporate) forecast can be drilled down to DC and store levels

Shows how a forecast update can take place interactively

Shows how messages associated with an exception can be created, stored and sent.

Next Steps for CPFR and the industry Refinement and publication of process models Define/establish prerequisite EDI feeds if non-existent Define/establish other feeds (manual initially) -

forecast drivers (promotions, price changes, replenishment strategies etc)

Define/establish business rules for exception generation

Develop exception processes based on forecast comparisons

Define/establish procedures for use of CPFR system Develop measurements/business cases Refine technology infrastructure Introduce security - S/HTTP and/or S/MIME Investigate use of open data model

Challenges Organizational readiness Process confirmation Integration of supply chain

collaboration tools with backend applications data models architecture (hub-hub, hub-spoke, hub-

web) Change management

Capabilities Assessment Process Readiness

Forecasting and Replenishment Scorecard Solution Change Management Inter & Intra organization communication

channel readiness

Technology Readiness Data availability Internet Enablement Electronic Commerce

SAP APO Collaborative Planning (CP) and CPFR

APO is the acronym for Advanced Planner and Optimizer


ERP ERP breaks functional silos within the 4 walls

of an enterprise Integrates Streamlines … Intraorganization Processes“One number for business planning across all

departments”

Next step Streamlines Collaborates … Interorganization Processes“One number for supply planning across the entire

supply chain.”


ERP promises concurrent, real time planning, information sharing and value added services for intraorganization processes.

Next step – collaborative commerce to break division barriers separating the distinct links in the supply chain: procurement companies, production companies, … low inventory levels, high inventory turns, improved cash flow … drastic reduction of the dreaded bullwhip effect.


Before Internet Businesses exchange information by

Meetings Phone Mail (slow) Fax EDI (costly and rigid)

The Internet enable businesses to establish low cost, secure, scalable, and dynamic collaborative commerce.


SAP APO Collaborative Planning Exchange planning information Browse and update data via a browser Multiple partner access, but restricting

access to authorized data and activities

Consensus planning process Exception-based management One number for supply planning

across the entire supply chain.


Internet-Based Functionalities

1. Consensus-based forecasting2. CPFR compliant collaborative

forecasting3. Vendor managed inventory4. Supplier collaboration.

SAP APO CP Functionality 1

Consensus-Based Forecasting


Pyramid Forecasting SAP APO Demand Planning allows you to create

plans for different business goals (strategic business plan, tactical sales plan, operational supply chain plan, etc.) and integrates them into one consensus plan that drives your business.

Joint Business Planning Across Supply Chain using SAP APO CP’s tools Planning Books (Internet-compatible demand

planning/supply network planning books in SAP) Enhanced Macros


Pyramid Forecasting Parties Involved

Central planning department which creates a consolidated forecast for ALL products

Key account manager who creates a forecast for a specific retailer or wholesaler

Sales department which forecasts its own demand Each party bases its forecast on specific

information.

GOAL – to consolidate the various forecasts into a common time series to be used for planning.


Pyramid Forecasting Process1. Department-specific forecasts

Sales For a combination of product and customer Goals are tactical – maximize sales Focus on promotions, orders, POS data,

competitive info, customer info. Logistics

For a combination of product/item and location

Goals are operational – minimize costs, fulfill orders

Focus on shipments, material and capacity constraints.


Marketing For a combination of product family/market

zone Goals are strategic – increase demand,

reduce stock Focus on promotions and events, causal

relationships, and syndicated POS data.


2. Team meeting held to reach consensus3. Manual adjustments made4. Accuracy of forecast checked against sales

data.

SAP APO CP allows access to SAP APO Planning books through an Internet browser.

Trading partners can view each other’s forecasts, make changes and agree on a consensus-based forecast.

SAP APO Functionality 2

Collaborative Planning, Forecasting and Replenishment (CPFR®)


The CPFR® Reference Model

8 collaboration tasks form an iterative cycle of 4 activities:

A. Strategy & PlanningB. Demand & Supply

ManagementC. ExecutionD. Analysis.

Each activity consists of two collaboration tasks.


CPFR in SAP APO Collaborative Planning

SAP APO Collaborative Demand Planning


VMI over the Internet


Vendor-Managed Inventory Supplier takes the task of

requirements planning for its own products within the retail company. Supplier monitors the buyer’s inventory

levels, physically or via electronic messaging.

Supplier decides on when and how much to replenish inventory.

Supplier sends an advance shipping notice to inform the buyer of materials in transit.


SAP APO CP Enables VMI over Internet VMI requires supplier to be able to track the

amount of its products stocked at the retailer side, and access to the retailer’s sales forecasts.

SAP APO CP enables VMI over the Internet Internet planning book allows users to access the

Supply Network Planning data Business Connector allows users to transmit VMI data

from SAP APO Collaborative Planning to partners’ systems that can receive and process XML messages.

VMI over the Internet Affordable – small retailers can participate in supply

chain planning. Allows retailer to maintain control over the data it is

sending to the supplier and change it if necessary.


SAP APO Business Connector The Business Connector translates EDI messages to XML

messages that can be transmitted over the Internet. Retailer can transmit, via the Business Connector, VMI data

from SAP APO Collaborative Planning to suppliers’ systems. Partners’ systems must have the capability to receive and

process XML messages Making VMI possible via Internet provides small retailers

with an economical alternative to participating in supply chain

planning. It also allows the retailer to maintain control over the data it is sending to the supplier and change it if necessary.

To achieve their goals, participants will be able to access the Supply Network Planning data through Internet planning books.


Supplier Collaboration


EDI in automotive industry Suppliers connected to auto

manufacturers by EDI; Exchange dependent requirements (MRP) Requires large investments.

The Web Low cost Allows smaller companies to participate The only requirement is that partners’

systems must have the capability to receive and process XML messages.


SAP APO Collaborative Planning The dependent requirements in Supply Network

Planning are displayed in supplier specific planning books. A supplier can have access to those aspects of the

planning situation that affect him/her. Users can have access to production plans as well as

dependent requirements. Internet enabled planning books allow users to have an

interactive role; for example, if the delivery of the dependent requirements cannot be made in time, an alternative date can be suggested.

Using the Business Connector, SAP APO Collaborative Planning can directly communicate with partners’ system using XML messages over the Internet. Allows system-to-system communication enabling users

to be involved only in exception situations. Thus, SAP APO Collaborative Planning enables

synchronized planning across business partners.

cpfr(4) technology

Documents

collaborative information

information able

catalogue information

information available

type of information

costeffective information

information willing

access information