sven eppert and thomas kapfhamer 26 may 2003 warsaw school of economics international logistics prof...

Warsaw School of EconomicsInternational Logistics

Prof Krzysztof Rutkowski

CPFR

- the new edge in logistics -

Sven Eppert and Thomas Kapfhamer

26 May 2003

CPFR- the new edge in logistics - 26 May 2003

- 2 -Sven Eppert and Thomas Kapfhamer

1. Definition of CPFR

2. Current challenges

3. Benefits

4. Implementation

5. Case study

6. Summary

Ag

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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

Defin

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PFR





3. Benefits

4. Implementation

5. Case study

6. Summary

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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

Cu

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3. Benefits

4. Implementation

5. Case study

6. Summary

Ag

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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

CPFR can…

Ben

efits





3. Benefits

4. Implementation

5. Case study

6. Summary

Ag

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da



Steps of implementation

Imp

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Front-end agreement

Joint business plan

Sales forecast collaboration

Order forecast collaboration

Order generation/delivery execution



Step 1: Front-end agreement

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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



Step 2: Joint business plan

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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



Step 3: Sales forecast collaboration

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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



Step 4: Order forecast collaboration

Imp

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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



Definition of exceptions

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Source: Syncra Systems Inc.



Step 5: Order generation/delivery execution

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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



Requirements

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

Source: Syncra Systems Inc.





3. Benefits

4. Implementation

5. Case study

6. Summary

Ag

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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

Metro and P&G – One way to start

Case

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(= 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

Elements of CPM

Case

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CPM example 1: Forecast and volumes

Case

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Forecasts:

a) METRO

b) P&G

In case of exception: Red Light and Email

0 0 20000 45000 45000 18000 19000 20000ForecastMetro



CPM example 2: Check order and inventories of outlets

Case

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Forecast per product Actual inventory plus orders Deviation > 5%: Email

Link to detailed information

Product

Red Light!Orders from outlets too low



CPM example 3: Monitoring promotion sales

Case

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Screen shows per product and day: Forecast Metro und P&G Quantity receiving Quantity sold Accumulated quantity sold Inventory Backlog of deliveries Zero sales



Conclusion

Case

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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





3. Benefits

4. Implementation

5. Case study

6. Summary

Ag

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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

CPFR changes the supply chain dramatically!

Su

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sven eppert and thomas kapfhamer 26 may 2003 warsaw school of economics international logistics prof...

Documents

thomas kapfhamer cpfr

logistics slide

sven eppert

new edge

consumer satisfaction

summary agenda slide

annual basis slide

inventory costs