Collaborative Planning Forecasting & Replenishment

1. COLLABORATIVE PLANNING, FORECASTING AND REPLENISHMENT CPFR GROUP : C2 Shreshtha Rath U111125 Budhadev nayak U111134 Parul Verma U111151 Rachna Bagaria U111154 Sampat Patnaik U111162 Manu Vats U111167

2. COLLABORATIVE COMMERCE Processes, technologies and the supporting standards 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, faster and at less cost by improving business process efficiency and reducing waste. Definition -

3. 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 COLLABORATIVE COMMERCE : INITIAL PARADIGM SHIFTS

4. Manufacturer Retailer Forecast Drivers In stock position Fill Rate Consumer Demand Price Changes Growth Plans Distribution Channels Common Event Calendar Joint Forecast Retailer Manufacturer Forecast Drivers Capacity Order Lead time Consumer Behaviour Product Availability Promotions Raw material supply Joint Business Planning Generate joint forecast Generate joint forecast Drive replenishment Drive MRP THE COLLABORATIVE PROCESS

5. CPFR

6. INTRODUCTION A business practice Trading partners working together in planning fulfilling customer demand. Links sales and marketing best practices to supply chain planning and execution processes. Objective is to increase availability to the customer while reducing inventory, transportation and logistics costs.

7. CPFR evolved from Efficient Consumer Response (ECR) ECR: Improve supply chain performance through better coordination of marketing, production, and replenishment activities Prior to ECR Relationships often adversarial Little or no joint planning Lack of information sharing results in “unpredictable” ordering patterns, excessive inventories and service failures .   A BRIEF HISTORY

8. In 1987, P&G and Wal-Mart pioneered in Continuous Replenishment Process (CRP) Information sharing Joint demand forecasting Coordinated shipments CRP is best-known as the Vendor-Managed Inventory (VMI) program. This partnership laid the foundation for ECR 1996 , CPFR ® (Collaborative, Planning, Forecasting, and Replenishment ) pilot between Wal-Mart and Warner Lambert A BRIEF HISTORY (contd.)

9. THREE MODES OF CPFR Basic CPFR: a limited number of business processes integrated between a limited number of supply chain partners Advanced CPFR goes beyond data exchanges to synchronise forecasting information systems and coordinate planning and replenishment processes Developed CPFR: will typically involve a greater number of data exchanges between two partners, and may extend to suppliers taking responsibility for replenishment on behalf of their customer

10. 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

11. 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

12. 8 collaboration tasks form cycle of 4 activities. Each activity consists of two collaboration tasks. CPFR® REFERENCE MODEL

13. The consumer is the ultimate focus of all efforts Buyers” (retailers) and “sellers” (manufacturers) collaborate at every level Joint forecasting and order planning reduces surprises in the supply chain The timing and quantity of physical flows is synchronized across all parties Promotions no longer serve as disturbances in the supply chain CPFR: KEY TENETS

14. Establish the ground rules for the collaborative relationship. Determine product mix and placement, and develop event plans for the period. 1. STRATEGY & PLANNING

15. Setting the business goals and defining the scope for the relationship Assigning roles, responsibilities, checkpoints and escalation procedures Participating companies identify executive sponsors, agree to confidentiality and dispute resolution processes. Develop a scorecard to track key supply chain metrics relative to success criteria, and establish any financial incentives or penalties. 1.1 COLLABORATION ARRANGEMENT

16. Defines the process in practical terms Identifies the roles of each trading partner and how the performance of each will be measured Spells out the readiness of each organization and the opportunities available to maximize the benefits from their relationship Formalizes each party’s commitment and willingness to exchange knowledge and share in the risk OUTPUT : Memorandum of understanding

17. 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. 1.2 JOINT BUSINESS PLAN

18. J oint calendar for promotions, inventory policy changes, store openings/closings, and product changes for each product category, etc. Clearly identifies the roles, strategies, and tactics for the SKUs that are to be brought under the umbrella of CPFR. Cornerstone of the forecasting process. OUTPUT : joint business plan

19. 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

20. Consumption data is used to create a sales forecast. This consumption data differs depending on the product, industry, and trading partners: Retailer POS data Distribution center withdrawals Manufacturer consumption data Important to incorporate information on any planned events (ex. – Promotions, plant shut downs, etc.) 2.1 SALES FORECASTING OVERVIEW

21. Analyze current joint business plan Analyze the potential effects of the current joint business plan on future retail sales Analyze causal information Analyze the potential effect of causal factors on future retail sales based on historical events and the resulting sales impact Collect and analyze consumption data Point-of-Sale ( PoS ) data, warehouse withdrawals, manufacturing consumption SALES FORECASTING STEPS

22. Identify planned events Store openings or closings, promotions, or new product introductions This comprehensive list of events will be used to populate a shared-event calendar Update shared event calendar Align events from each trading partner, resulting in a common plan Agree upon this short-term event plan SALES FORECASTING STEPS

23. Gather exception resolution data Gather sales forecast exception resolution data from previous iterations Generate sales forecast Generate the forecast for a given period with forecasting tools that use all relevant information and guidelines. Either partner or both partners may generate the sales forecast, depending upon the scenario SALES FORECASTING STEPS

24. Single sales forecast generated by one or both parties Used as a baseline for the creation of an order forecast, as well as other supply chain activities. OUTPUT

25. Sales forecast, causal information, inventory policies, etc. are used to generate a specific order forecast Actual volume numbers are time-phased and reflect inventory objectives by product and receiving location The short-term portion of the forecast is used for order generation. The longer-term portion is used for planning 2.2 ORDER PLANNING/FORECASTING OVERVIEW

26. The order forecast allows the seller to allocate production capacity against demand while minimizing safety stock.            The real-time collaboration reduces uncertainty between trading partners and leads to consolidated supply chain inventories.                        Inventory levels are decreased, and customer service responsiveness is increased. A platform for continual improvement among trading partners is established. OUTPUT : Time-phased , netted order forecast

27. 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

28. Committed orders by the buying organization (the retailer) and delivery shipments from the vendor The buyer receives and stocks products, records sales transactions, sends order acknowledgment and makes payments Buyer and seller agree on a “time fence” where forecasts are frozen Near-term orders are fixed; Long-term ones are used for planning ORDER GENERATION OUTPUT

29. 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

30. 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

31. Monitor plan vs. execution to identify deviations and exceptions . Trading partners resolve exceptions by determining causal factors, adjusting plans where necessary. Forecast accuracy problems, overstock/stock-out conditions, and execution issues must be identified and resolved in a timely manner. EXCEPTION MANAGEMENT

32. Internal Alignment Silo Mentality Silo Compensation Not Invented here mentality Business Practices Out of Sync With Reality Legacy Systems Personal Comfort Zones Lack of Leadership Uninformed Opinions BARRIERS TO COLLABORATION

33. CPFR BENEFITS

34. Enhanced Relationship Implicitly, CPFR strengthens an existing relationship and substantially accelerates the growth of a new one Buyer and seller work hand-in-hand from inception through the actual result Greater Sales The close collaboration needed for CPFR implementation drives the planning for an improved business plan between buyer and seller. The strategic business advantage directly translates to increased category sales CPFR BENEFITS: DEMAND

35. Category Management Before beginning CPFR, both parties should scrutinize and inspect shelf positioning activities This scrutiny will result in improved shelf positioning and facings through sound category management Improved Product Offering Before CPFR implementation, the buyer and seller collaborate on a mutual product scheme that includes SKU evaluation and additional product opportunities CPFR BENEFITS: DEMAND

36. Improved Order Forecast Accuracy CPFR enables a time-phased order forecast that provides additional information, greater lead time for production planning, and improved forecast accuracy Inventory Reductions CPFR helps reduce forecast uncertainty and process inefficiencies With CPFR, product can be produced to actual order instead of storing inventory based on forecast CPFR BENEFITS: SUPPLY

37. Improved Technology ROI T echnology investments for internal integration can be enabled with higher quality forecast information Driving internal processes with common, high-quality data. Improved Overall ROI As other processes improve, the return on investment can be substantial. Increased Customer Satisfaction With fewer out-of-stocks resulting from better planning information, higher store service levels will prevail, offering greater consumer satisfaction CPFR BENEFITS: SUPPLY

38. CPFR ® BENEFITS

39. CPFR® ROI BENEFIT CATEGORIES

40. SARA LEE Federated Dept. Stores Mead School & Office Kimberly Clark JCPenney VF Corp. Staples CPFR ® Initiative Participants

41. GROUP : C2 Shrestha Rath U111125 Budhadev nayak U111134 Parul Verma U111151 Rachna Bagaria U111154 Sampat Patnaik U111162 Manu Vats U111167