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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
en
da
CPFR- the new edge in logistics - 26 May 2003
- 3 -Sven Eppert and Thomas Kapfhamer
CPFR is…
"Collaborative Planning, Forecasting and Replenishment"
Collaboration among suppliers, distributors and retailers Forecast sharing Developing one common forecast EDI/Internet-based tool
Defin
itio
n o
f C
PFR
CPFR- the new edge in logistics - 26 May 2003
- 4 -Sven Eppert and Thomas Kapfhamer
1. Definition of CPFR
2. Current challenges
3. Benefits
4. Implementation
5. Case study
6. Summary
Ag
en
da
CPFR- the new edge in logistics - 26 May 2003
- 5 -Sven Eppert and Thomas Kapfhamer
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
rren
t ch
alle
ng
es
CPFR- the new edge in logistics - 26 May 2003
- 6 -Sven Eppert and Thomas Kapfhamer
1. Definition of CPFR
2. Current challenges
3. Benefits
4. Implementation
5. Case study
6. Summary
Ag
en
da
CPFR- the new edge in logistics - 26 May 2003
- 7 -Sven Eppert and Thomas Kapfhamer
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
CPFR- the new edge in logistics - 26 May 2003
- 8 -Sven Eppert and Thomas Kapfhamer
1. Definition of CPFR
2. Current challenges
3. Benefits
4. Implementation
5. Case study
6. Summary
Ag
en
da
CPFR- the new edge in logistics - 26 May 2003
- 9 -Sven Eppert and Thomas Kapfhamer
Steps of implementation
Imp
lem
en
tati
on
Front-end agreement
Joint business plan
Sales forecast collaboration
Order forecast collaboration
Order generation/delivery execution
CPFR- the new edge in logistics - 26 May 2003
- 10 -Sven Eppert and Thomas Kapfhamer
Step 1: Front-end agreement
Imp
lem
en
tati
on
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
CPFR- the new edge in logistics - 26 May 2003
- 11 -Sven Eppert and Thomas Kapfhamer
Step 2: Joint business plan
Imp
lem
en
tati
on
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
CPFR- the new edge in logistics - 26 May 2003
- 12 -Sven Eppert and Thomas Kapfhamer
Step 3: Sales forecast collaboration
Imp
lem
en
tati
on
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
CPFR- the new edge in logistics - 26 May 2003
- 13 -Sven Eppert and Thomas Kapfhamer
Step 4: Order forecast collaboration
Imp
lem
en
tati
on
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
CPFR- the new edge in logistics - 26 May 2003
- 14 -Sven Eppert and Thomas Kapfhamer
Definition of exceptions
Imp
lem
en
tati
on
Source: Syncra Systems Inc.
CPFR- the new edge in logistics - 26 May 2003
- 15 -Sven Eppert and Thomas Kapfhamer
Step 5: Order generation/delivery execution
Imp
lem
en
tati
on
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
CPFR- the new edge in logistics - 26 May 2003
- 16 -Sven Eppert and Thomas Kapfhamer
Requirements
Imp
lem
en
tati
on
CPFR technology fits in existing applications- fully open, interoperable, vendor-neutral
Source: Syncra Systems Inc.
CPFR- the new edge in logistics - 26 May 2003
- 17 -Sven Eppert and Thomas Kapfhamer
1. Definition of CPFR
2. Current challenges
3. Benefits
4. Implementation
5. Case study
6. Summary
Ag
en
da
CPFR- the new edge in logistics - 26 May 2003
- 18 -Sven Eppert and Thomas Kapfhamer
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
stu
dy
CPFR- the new edge in logistics - 26 May 2003
- 19 -Sven Eppert and Thomas Kapfhamer
(= 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
stu
dy
CPFR- the new edge in logistics - 26 May 2003
- 20 -Sven Eppert and Thomas Kapfhamer
CPM example 1: Forecast and volumes
Case
stu
dy
Forecasts:
a) METRO
b) P&G
In case of exception: Red Light and Email
0 0 20000 45000 45000 18000 19000 20000ForecastMetro
CPFR- the new edge in logistics - 26 May 2003
- 21 -Sven Eppert and Thomas Kapfhamer
CPM example 2: Check order and inventories of outlets
Case
stu
dy
Forecast per product Actual inventory plus orders Deviation > 5%: Email
Link to detailed information
Product
Red Light!Orders from outlets too low
CPFR- the new edge in logistics - 26 May 2003
- 22 -Sven Eppert and Thomas Kapfhamer
CPM example 3: Monitoring promotion sales
Case
stu
dy
Screen shows per product and day: Forecast Metro und P&G Quantity receiving Quantity sold Accumulated quantity sold Inventory Backlog of deliveries Zero sales
CPFR- the new edge in logistics - 26 May 2003
- 23 -Sven Eppert and Thomas Kapfhamer
Conclusion
Case
stu
dy
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
CPFR- the new edge in logistics - 26 May 2003
- 24 -Sven Eppert and Thomas Kapfhamer
1. Definition of CPFR
2. Current challenges
3. Benefits
4. Implementation
5. Case study
6. Summary
Ag
en
da
CPFR- the new edge in logistics - 26 May 2003
- 25 -Sven Eppert and Thomas Kapfhamer
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
mm
ary