2. CPFR (Collaborative Planning, Forecasting And
Replenishment)
Processes, technologies and the supporting System that allow
continuous and automated exchange of information between trading
partners.
Through collaboration, suppliers and retailers can work together to fulfill
consumer’s wishes better.
Definition -
A formal business process for value chain partners to coordinate plans in order
to improve efficiencies and increase sales and service.
3. THREE MODES OF CPFR
Basic CPFR: a limited number of business processes integrated between a
limited number of supply chain partners
Advanced CPFR deals beyond data exchanges to
synchronise forecasting information systems and
coordinate planning and replenishment processes
Developed CPFR: involve a greater number of data exchanges between two
partners, and may extend to suppliers taking responsibility for replenishment
on behalf of their customer
4. • To Identify major challenges with forecasting accuracy.
• Improve service levels and inventory optimization.
• Develop business plan.
Requirments: before CPFR
• Evaluate Your Current State.
• Define Scope and Objectives.
• Prepare for Collaboration.
• Are Your Trading Partners Ready for CPFR?
• Develop a Business Case to take to your Partners
• Execute
• Performing the Pilot.
When to Use CPFR?
5. 1. Front-End Agreement
2. Joint Business Plan
3. Create Sales Forecast
4. Identify exceptions
5. Resolve exceptions
6. Create Order Forecast
7. Identify exceptions
8. Resolve exceptions
9. Generate Order
Once
Qtr.
Wk,Mo
Wk,Mo
Collaborative Planning
Collaborative Forecasting
Collaborative
Replenishment
Seller
Buyer
Sales Forecast
Order Forecast
CPFR PROCESS
6. 8 collaboration tasks form
cycle of 4 activities. Each
activity consists of two
collaboration tasks.
CPFR® REFERENCE MODEL
7. Establish the ground rules for
the collaborative relationship.
Determine product mix and
placement, and develop event
plans for the period.
1. STRATEGY & PLANNING
8. • Setting the business goals and defining the scope for the relationship
• Assigning roles, responsibilities, checkpoints and escalation procedure.
1.1 Collaboration Arrangement
1.2 Joint Business Plan
• Trading partners exchange information on corporate strategies and business plans to
develop a joint business plan.
• Identifies the significant events that affect supply and demand, such as promotions,
inventory policy changes, store openings / closings, and product introductions.
9. Sales forecasting:
Projects demand at the point of sale
Order planning/forecasting:
Determines future product order &
delivery requirements based upon the
sales forecast.
Takes into account inventory positions,
transit lead times, shipment quantities,
and other factors.
2. DEMAND & SUPPLY MANAGEMENT
10. • Place orders, prepare and deliver
shipments, receive and stock
product on retail shelves, record
sales transactions and make
payments.
• Order generation— Transitions
order forecasts into firm demand
• Order fulfillment — Producing,
shipping, delivering, and stocking
the products
3. EXECUTION
11. • Monitor planning and execution
activities for exception conditions
• Aggregate results, and calculate key
performance metrics
• Share insights and adjust plans for
continuously improved results
4. ANALYSIS
12. • Trading partners calculate key performance metrics (e.g., in-stock level,
forecast accuracy targets, etc.)
– To evaluate achievement of business goals, uncover trends, or develop
alternative strategies;
– To share insights and adjust plans for continuous improvement.
• Generate and agree to a list of exception items for your CPFR initiative.
– Develop a process to resolve sales forecast exceptions.
PERFORMANCE ASSESSMENT
15. • A set of guidelines supported and published by the Voluntary Inter-
industry Commerce Standards (VICS) Association
• Trading partners share their plans for future events, and then use an
exception-based process to deal with changes or deviations from plans
• By working on issues before they occur, both partners have time to react
– A supplier can build inventory well in advance of receiving a
promotional order and carry less safety stock at other times
– A retailer can alter the product mix to reduce the impact of supply
problems
THE CPFR® OPPORTUNITY
16. • Superdrug operates more than 700 stores throughout the United Kingdom,
offering its customers an average of more than 6,000 product lines with over 900
stores.
• Johnson & Johnson is a global American pharmaceutical, medical devices and
consumer packaged goods manufacturer founded in 1886. Johnson & Johnsons
brands include numerous household names of medications and first aid supplies.
Challenges:
• Major challenge was related to trimming inventory so that it would more closely
match sales.
• In addition, Superdrug wanted to improve forecast accuracy and looked forward to
an improved relationship with their trading partner—in this pilot’s case, J&J.
Super Drug and Johnson and Johnson Company in Brief:
17. Implementation:
• Superdrug chose J&J not only due to compatibility of systems, people and
strategy, but most importantly, due to the similar culture of the two
companies.
• Before launching the pilot, Super drug developed a clear blueprint of the
trading partners’ roles and responsibilities to make sure that their own
strategy and structure were aligned with the CPFR process.
• They also developed a detailed plan to capture both the benefits and the
costs of the pilot. Superdrug began the pilot process in April 2000 and by May
2000 the front-end agreement and joint business plan were agreed to and
signed between the two companies.
18. Benefits:
• Many problems were avoided since Superdrug was able to highlight future issues
and resolve them with their trading partner.
• CPFR also gave Superdrug access for the first time to a range of previously
unavailable data such as suppliers’ sales and order forecasts.
• Superdrug also found that communications were improved with their supplier
through the weekly conference call, which resulted in J&J’s profile within Superdrug
being raised, and conversely, Superdrug’s profile was raised within J&J.
19. Measurable results:
• 13 percent average reduction in Stock, at Superdrug’s distribution
centre, for the lines that were collaborated on.
• Warehouse availability increased by 1.6 percent.
• Superdrug’s forecast accuracy, which they thought was good before the
trial began, saw an improvement of 21 percent.
• Superdrug also saw RDC cover (Present Stock On Hand/Last Week’s
Sales) reduced by 23 percent for those J&J’s product lines that were
subject to CPFR. Moreover, RDC cover during the pilot period increased
by 11.8% for those product lines not subject to CPFR.
20. • Procter & Gamble has operations in more than 140 countries with worldwide net sales
greater than $78.9 billion.
• Procter& Gamble’s seven Global Business Units include baby care, beauty care, fabric &
home care, feminine protection, food & beverage, health care, and tissues & towel.
Procter & Gamble
Objectives
• Procter & Gamble’s CPFR focus is to build on the current success of the Continuous
Replenishment Program (CRP).
• P&G is deploying CPFR to enable creation and integration of consumer demand data
• The primary objective of these pilots is 100% product availability on the store shelf, while
simultaneously reducing inventory requirements in the retail stores, customer distribution
centers, and P&G plants.
21. Methodology
The key understanding is that CPFR is not a technology. It is a process.
To test and deploy new processes, CPFR pilot partners agreed to three core activities:
1. Document and map the current supply chain processes for product and data flow.
2. Assess the current CPFR capability.
3. Create a joint action plan to address improvement opportunities.
Supply Chain Lead-Time Mapping of Product and Data Flow
• All of the processes were mapped, and the time lag between processes and triggers was
measured from the point that a package was scanned at retail to the point new product was
replenished on the shelf.
CPFR Capability Assessment –
• The CPFR Capability Assessment was developed and used in some pilots to assign a numeric
value to each of the CPFR key processes.
• The actual scoring verified the understanding from the supply chain mapping, and directed
the creation of a CPFR process improvement plan.
22. Joint Action Plans and Testing
• This step combined the first two steps into a test plan.
• It was documented and approved by the team sponsors, and the process improvement
testing and documenting began.
• Historical POS data was collected on the test category (limited number of SKUs) and the POS
data was continuously analyzed using actual orders and shipments
Resources Involved
P&G:
1. Overall corporate champion/sponsorship team.
2. CPFR Project Managers: Business and Technical
3. Customer Business Development Team: Sales Account Executive, Logistics, Systems and Retail
Operations Managers.
4. Data Analysts: Two analysts for formatting and evaluating the 830 order forecasts and the POS
datareceived separately.
5. Category Demand Planner
23. Learning and Results
• All CPFR pilots recognized the need for a partnership founded both on trust and on
the ability and willingness to share information on processes and systems.
• A joint learning process would lead to understanding how to improve difficult-to-
improve business results.
• It would not be a quick action to increase sales.
• The companies involved in the P&G pilots are all competitors within their respective
marketplaces, yet have agreed to associate their involvement in the CPFR pilot with
P&G.
• This demonstrates the importance that each company has placed on the value of
CPFR to its future success.
• Once the processes are understood and institutionalized, a critical mass of
partnership involvement between manufacturers and retail distributors will be
essential.
24. CPFR is a great concept that has
revolutionized business practices by
integrating the organization with its trade
partners more effectively to realize mutual
benefits. Buyers benefit from reduced
prices, better forecasting, collaborative
relationships to get better service levels and
synchronized operations.
Conclusion