CPFR® Overview
BISG Board MeetingNovember 20, 2003
Joe Andraski, Senior Vice President OMI International
What This Session Covers.
• Collaborative Commerce Dynamics
• Collaborative Commerce Barriers
• CPFR® Process Model
• CPFR® Benefits
• Globalization of CPFR®
• VICS & VICS CPFR® Committees
• Standards Enable Collaborative Commerce
Collaborative Commerce Dynamics
Brings the supply chain closer to the consumer Focus on what mattersFocuses attention on exceptionsMandates reconciliation of exceptionsSupply constraints are realForecasts are constrained by supplier’s capacityPredicting demand in a vacuum is difficultFacilitates flexible relationshipsPartnership in order to succeed
Collaborative Commerce Initial Paradigm Shifts
Greater sharing of data and responsibility
Common goals and metrics
Forecasts aligned, & time phased across supply chain
Managed by shared exception criteria
Committed forecast ---> frozen orders
Pre-notification of issues in meeting consumer demand
Capitalize on trading partner strengths, resources & systems ---> 4 CPFR® scenarios
Barriers to Collaboration
Internal AlignmentSilo MentalitySilo CompensationNot Invented here mentality
Business Practices Out of Sync With RealityLegacy SystemsPersonal Comfort ZonesLack of LeadershipUninformed Opinions
CPFR® Definition
A shared process of creation between two or more parties with diverse skills and knowledge delivering a unified approach that provides the optimal framework for customer satisfaction.
Voluntary InterIndustry Commercial Standards (VICS)www.vics.org
www.cpfr.org
What about CPFR® in Collaborative Commerce?
First step for consumer-centric supply chain reality.
Initial alignment of retailers & their suppliers to consumer-based demand.
Built Industry Consensus on Real World Benefits
of Collaboration.
Visibility & focus on sources not symptoms of
supply chain inefficiencies.
Beginning of Collaborative Value Creation
FRONT END AGREEMENT
JOINT BUSINESS PLAN
CollaborativePlanning
CREATE SALES FORECAST
IDENTIFY EXCEPTIONS
RESOLVE EXCEPTIONS
CollaborativeForecasting
CREATE ORDER FORECAST
IDENTIFY EXCEPTIONS
RESOLVE EXCEPTIONS
GENERATE ORDER
Buyer
The CPFR® Process Model Seller
CPFR® Model
Planning
Forecasting
Replenishment
Consumer Demand Forecast
Replenishment Forecast
CPFR® Value Proposition
Increased Sales
Reduced Operations Cost
Reduced Inventory
Improved Relations
Improved In-Stock Shared insights to Demand
Seasonality/Regionality Promotional Causality
Lower Product Returns Reduced Expediting Costs Optimized Production Cycles
Less “Just-In Case” Stock Build to Order vs. Build to
Stock
Jointly solve problems vs. blaming other party
Value Delivery CPFR® Driver
Source: © E3 Corporation
CPFR® ROI Benefit Categories
Inventory 41%Storage Costs 22%Inventory Expense 17%Intransit inventory for Rail >1%Reduced 3’rd Party Storage 13%
Process Efficiencies 6%Inventory Control 1%Logistics 2%Order Management / CSR 2% Purchasing >1%
Sales Benefits 34% Increased Sales 25%Improved Margin 1%Customer Retention 8%
Transportation 19%Carrier Management >1%Load Planning >1%Truck Tendering/Carrier Selection 1%Truck Cycle Time 6%Rail Cycle Time 10%Demurrage >1%Excess Freight Charges 2%Total Benefit 100%Total Benefit 100%
Where do the Benefits Come From?Where do the Benefits Come From?
Real World ROI ExamplesFirms Customer Service Inventory Forecast
AMR RetailersSummary
Sales +6 to 20% Store Inv down 10 to 40%
AMR SuppliersSummary
Shipment +2 to 10% Del. Cycle cut 10 to 40%
Metro/Herlitz In Stock + 50%Sales +4%
Down 15%
Canadian Tire/25 Suppliers
Sales +30%Fill Rate +1%
Down 10% Improved
Sainsbury/Nestle
In Stock + 30%Supplier Fill +24%
Exp/Short Sav. £ 2.8 Million
TruValue/ 7 Suppliers
Sales +10 to 20% Logistics Saving 10 to 30%
Improved
Ace/Manco Sales +12% Improved 10%
Tesco/ P&G In Stock 100% DC Stock -75% Improved 10%
Conad/Barilla Item Sales +167% 85% Accuracy
The Globalization of VICS/GCI CPFR®
UK - 11ArgosASDAHasbroJ. SainsburyKingfisherLever-Faberge UK SomersfieldSuperdrugTescoUnilever UKWoolworth’s
France-2CarrefourChanel
Benelux - 3Delhaize le LionRoyal AholdVandemoorte
SpainEroski
Denmark - 2HeinekenDansk
Canada - 2Canadian TireRONA
Germany - 4BayerHenkelHerlitzMetro
SwitzerlandNestle
MexicoGroupo Elektra
Hong KongJusco
Japan - 3KaoPanasonicYKK
Israel - 2SupersolTruva
ArgentinaUnilever
USA – 66 FirmsA&P Ace Hardware Albertson’s Ashley Furniture Bell SportsBest Buy Binney & Smith Black & Decker Broyhill Colgate-PalmoliveCompaq CVS Delta Faucet Do It Best Eastman ChemicalsEckert Eli Lilly Federated Flowers Bakeries Fuji Film USAGE Appliances Harley-Davidson Hasbro H.E. Butt Hewlett-PackardHome Depot Inland Paperboard International Paper J.C. Penney John DeereJohnson&Johnson Kimberly-Clark Kraft Lane LeviLiquid Nails Liz Claiborne Manco Mars Master LockMeijer Merial Mitsubishi USA Nelson New BalancePacific Coast Feather Pharmavite PlumbPak Procter & Gamble Ralston PurinaRite Aid Saks Sara Lee Schering-Plough Sears & RoebuckSports Authority Staples Super Valu Target TaylormadeTru Value Hardware Walmart Walgreen’s Warner-Lambert Wicke’s Furniture
Europe - 28 Americas - 70Asia - 7
Italy - 2ConadBarilla
TaiwanCMC
What is VICS?Voluntary Interindustry Commerce Standards
AssociationThe mission of the VICS Association is to take a
global leadership role in the ongoing improvement of the flow of product and information about the product throughout the entire supply chain in the retail industry.
VICS Members include the leading Global Retail and Consumer Goods Manufacturers with a combined liquidity that exceeds $1.2 Trillion
Participation in VICS Committees enables firms and their trading partners to leverage the benefits of Collaborative Commerce
VICS CPFR® Committee
Advisory BoardWorking Committees;
Metrics, Business Process, Technology, N-Tier,CTM, and Education and Publicity
VICS CPFR® Committee Work So Far.
1996
1997
1998
19992000
2001
1st “CFAR” pilotVICS subcommittee develops CPFR®
VICS CPFR® Guidelines published
First CPFR® rolloutRoadmap to CPFR® published, with pilot results
Leading CompaniesPilot CPFR®
Global CPFR® guidelines publishedB2B marketplaces offer CPFR® services
2002
2003
2004
What about your firm?
CTM Ver 1.0
The Industry:UCCnet, UCC, EAN, FMI, GMA, Transora, WWRE,
ECCC, GCI, Wal-Mart, Kraft, Colgate, Wegmans, P&G,
Ahold, Sterling Commerce, IBM, Microsoft, UDEX, etc…
2. GLOBALregistry
3. Data Synchronization
4. Collaborative Core Business Transactions - Order, Shipment, Payment.
5. Collaborative logistics management
6. Collaborative sales & promotion planning
7. Collaborative product development
1. Common data standards
e-Collaboration
Time / Degree of trust & complexity
Ben
efit
s
You
Source: A.T.Kearney for GMA - FMI
Standards Enable Collaborative CommerceVICS Enables Standards Adoption
Any Questions
Find The Answers at the next VICS CPFR® Committee Meeting.