Flow of PresentationSupply ChainsCollaboration ExerciseCollaboration ProcessBenefitsThe Thrill of Victory…the Agony of
Defeat ImplementationSummary
Flows Throughout a Supply Chain
ConsumptionCustomersRetailersWholesalersManufacturersSuppliers
Seems Straightforward…….
ProductProductProductProduct
InformationInformationInformationInformation
or is it?
Flows
ConsumptionCustomersRetailersWholesalersManufacturersSuppliers
Distortion of Information Effect
InformationInformationInformationInformation
P&G
Causes of the Bullwhip EffectPrice fluctuationsOrdering periodicallyPromotions….Offering deals which
encourage early buyingProduction schedules based on
forecasts
Recent Supply Chain Study… “Only 7% of companies today are
effectively managing their Supply Chain.
However, these companies are 73% more profitable than other manufacturers.”
Deloitte & Touche Study, October 2003as cited by David Simchi-Levy
Instructions for the Exercise Close your eyes
Turn the paper from front to back
Fold the paper in half
Turn the paper from top to bottom
Fold the paper in half
Tear off the right hand corner
Fold the paper in half Turn the paper over Tear off the left hand
corner Open your eyes and
compare with your neighbor
Communication Exercise Review Why didn’t everyone finish up with the
same end product?
Were the instructions clear?
How could communication have been improved?
Is communication in your Is communication in your
supply chain one way?supply chain one way?
What is Information Visibility? Sharing critical data required to manage the
flow of products, services and information between customers and suppliers
Information that is available but cannot be accessed by the right party at the right time, loses its value quickly.
Sharing Information Major problem: Organizations do not
have a clear view of the final marketplace Capture demand at the point of final
consumption
Even bigger problem!: Lack of trust between supply chain partners Companies must share data beyond their
four walls
Collaboration(CPFR) Definition…
A business process for value chain partners to coordinate plans in order to reduce the variance between supply and demand.
Steps of Collaboration
(Consumer)Sales
Forecast
(Replenishment)Order
Forecast
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
Front-End Agreement Establish a Front-End Agreement
Sponsors Confidentiality Dispute Resolution Scorecard (KPI) Financial Incentives / Penalties
1
Create Joint Business Plan Develop Plans for Handling Promotions Inventory Policy / Changes Thereto Store Openings / Closings Product Line / Category Changes
2
Sales Forecasting Collaboration Trading Partners Share Consumer
Demand Forecasts Create Sales Forecasts
3
Sales Forecasting Collaboration Identify Exceptions to Sales Forecast
Causal Data Consumer Demand Others
4
Sales Forecasting Collaboration Resolve / Collaborate on Exception Items5
Create Sales ForecastCreate Sales Forecast Create Sales ForecastCreate Sales Forecast
Identify Exceptions forIdentify Exceptions forSales ForecastSales Forecast
Identify Exceptions forIdentify Exceptions forSales ForecastSales Forecast
Resolve / Collaborate onResolve / Collaborate onException ItemsException Items
Resolve / Collaborate onResolve / Collaborate onException ItemsException Items
3
4
5
Identify Exceptions for Order Forecast
Consider the Following: Distribution Exceptions Manufacturing Exceptions Horizon Considered
7
Resolve / Collaborate on Exception Items
Closed Loop System for Collaboration8
Create Order ForecastCreate Order Forecast Create Order ForecastCreate Order Forecast
Identify Exceptions forIdentify Exceptions forOrder ForecastOrder Forecast
Identify Exceptions forIdentify Exceptions forOrder ForecastOrder Forecast
Resolve / Collaborate onResolve / Collaborate onException ItemsException Items
Resolve / Collaborate onResolve / Collaborate onException ItemsException Items
6
7
8
Order Generation Creating a PO / Order Start Physical Replenishment Process Results Data is Shared, Typically:
POS Orders / Shipments On Hand Over / Under Stock Forecast Accuracy
9
The Collaborative Process
Joint Business PlanningJoint Business Planning
Common Event CalendarCommon Event Calendar
Joint ForecastJoint Forecast
Manufacturer Forecast DriversManufacturer Forecast Drivers•CapacityCapacity•Order Lead TimeOrder Lead Time•Consumer BehaviorConsumer Behavior•Product AvailabilityProduct Availability•PromotionsPromotions•Raw Materials SupplyRaw Materials Supply
Retailer Forecast DriversRetailer Forecast Drivers•In Stock PositionIn Stock Position•Fill RateFill Rate•Consumer DemandConsumer Demand•Price ChangesPrice Changes•Growth PlansGrowth Plans•Distribution ChannelsDistribution Channels
Manufacturer Retailer
One Is Greater Than Nine
CPFRCPFR
113355778899224466
Let’s Put All of the Step numbers into the CPFR bucket
It Contains a Special Solution
How Is One Greater than Nine?
We Saw the 9 Steps of CPFR
What is the One thing that is Greater than Nine???
People Trust Relationships Understanding CPFRCPFR
11One Is Greater Than Nine
“Collaborated” Supply Chain
Component FlowComponent FlowProduct FlowProduct Flow
Component FlowComponent FlowProduct FlowProduct Flow
ManufacturerManufacturer
SupplierSupplier
SupplierSupplier
SupplierSupplier
SupplierSupplier
WholesalerWholesaler DealerDealer ConsumerConsumer
Information Flows to Whichever Supply Chain Partner RequiresInformation Flows to Whichever Supply Chain Partner Requires
Retailer Benefits with CPFR
2%
10%
5%
3%
8%
40%
20%
4%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Better Store Shelf StockRates
Lower Inventory Levels Higher Sales Lower Logistics Costs
Ty
pic
al Im
pro
vem
en
t R
ang
e
Low HighSource: 2001 Syncra Systems, Inc. Study
Retailer Benefits with CPFR
2%
10%
5%
3%
8%
40%
20%
4%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Better Store Shelf StockRates
Lower Inventory Levels Higher Sales Lower Logistics Costs
Ty
pic
al Im
pro
vem
en
t R
ang
e
Low HighSource: 2001 Syncra Systems, Inc. Study
Retailer Benefits with CPFR
2%
10%
5%
3%
8%
40%
20%
4%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Better Store Shelf StockRates
Lower Inventory Levels Higher Sales Lower Logistics Costs
Ty
pic
al Im
pro
vem
en
t R
ang
e
Low HighSource: 2001 Syncra Systems, Inc. Study
Retailer Benefits with CPFR
2%
10%
5%
3%
8%
40%
20%
4%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Better Store Shelf StockRates
Lower Inventory Levels Higher Sales Lower Logistics Costs
Ty
pic
al Im
pro
vem
en
t R
ang
e
Low HighSource: 2001 Syncra Systems, Inc. Study
Retailer Benefits with CPFR
2%
10%
5%
3%
8%
40%
20%
4%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Better Store Shelf StockRates
Lower Inventory Levels Higher Sales Lower Logistics Costs
Ty
pic
al Im
pro
vem
en
t R
ang
e
Low HighSource: 2001 Syncra Systems, Inc. Study
Manufacturer Benefits with CPFR
10%12%
2%
5%
40%
30%
10% 10%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Lower Inventory Levels Faster ReplenishmentCycles
Higher Sales Better CustomerService
Ty
pic
al R
an
ge
of
Imp
rove
men
t
Low HighSource: 2001 Syncra Systems, Inc. Study
Manufacturer Benefits with CPFR
10%12%
2%
5%
40%
30%
10% 10%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Lower Inventory Levels Faster ReplenishmentCycles
Higher Sales Better CustomerService
Ty
pic
al R
an
ge
of
Imp
rove
men
t
Low HighSource: 2001 Syncra Systems, Inc. Study
Manufacturer Benefits with CPFR
10%12%
2%
5%
40%
30%
10% 10%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Lower Inventory Levels Faster ReplenishmentCycles
Higher Sales Better CustomerService
Ty
pic
al R
an
ge
of
Imp
rove
men
t
Low HighSource: 2001 Syncra Systems, Inc. Study
Manufacturer Benefits with CPFR
10%12%
2%
5%
40%
30%
10% 10%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Lower Inventory Levels Faster ReplenishmentCycles
Higher Sales Better CustomerService
Ty
pic
al R
an
ge
of
Imp
rove
men
t
Low HighSource: 2001 Syncra Systems, Inc. Study
Manufacturer Benefits with CPFR
10%12%
2%
5%
40%
30%
10% 10%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Lower Inventory Levels Faster ReplenishmentCycles
Higher Sales Better CustomerService
Ty
pic
al R
an
ge
of
Imp
rove
men
t
Low HighSource: 2001 Syncra Systems, Inc. Study
Anecdotal Evidence: Wal-Mart Wal-Mart has CPFR with approximately
600 trading partners Key contributor to Wal-Mart’s quick
emergence as largest and one of most successful grocery chains in U.S.
Wal-Mart has lowest operating expense and fastest sales growth in grocery industry
The Thrill of Victory… Wal-Mart in the early 1990’s
Office Supply Company that Supplied Wal-Mart and Others
VMI evolved into CPFR with Wal-Mart and Key Suppliers
Smoothed Our Supply Requirements Convinced by Merits and Results
…the Agony of Defeat Key Customer
(Name Withheld to Protect the Guilty) Said they wanted VMI / Collaboration Wouldn’t Commit to any Exchange of
Information Wanted the Benefits, but not Willing to Invest
in the Process Did Not Understand What was Required Trust
CPFR Roadmap Step 1 – Evaluate Your Current State Step 2 – Define Scope and Objectives Step 3 – Prepare for Collaboration Step 4 – Execute Step 5 – Assess Results / Identify
Improvements
Selected Implementation Steps Find a Senior Management Champion Dedicate Resources Select a Pilot Win – Win Potential Dive into the Process
Where Do We Start with Our Supply Chain Partners?
Commitment between partners Assign team members and establish their
roles Decide which part(s) of the nine-step
Collaboration (CPFR) process to utilize Establish key performance indicators
(KPIs) to measure our success
Collaboration:Why It Works
Forecasts are Matched to Supplier’s Capacity
Focuses Attention on Exceptions Mandates Reconciliation of Exceptions Facilitates Flexible Relationships Readily Available Supply Chain Information
(via the Internet)
Dispelling Myths about CPFR CPFR does not require a major investment in
technology CPFR is not an administrative burden CPFR does not require point-of-sale
information CPFR takes too much time and effort to
implement CPFR is rigid. No – you don’t have to follow
all 9 steps CPFR is only a Supply Chain activity. It’s
actually a holistic business approach.
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