1. CPFR: Collaborative Planning, Forecasting and Replenishment Henry C. Co Sources: CPFR for Beginners, M. Johnson (Syncra Systems) and L. Roth (Kimberly-Clark). CPFR Roadmap, The Voluntary Interindustry Commerce Standards Association (VICS) CPFR Committee.

2. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)2 Synchronizing the Supply Chain  Synchronizing the supply chain from raw materials to the consumer offers the greatest opportunity to improve profitability and provide greater value to the consumer… CPFR provides the process to link business plans and ensure synchronization.  Key driver: better understanding of consumer purchases. Point-of-sale information provides the ability to track current purchases and develops more accurate sales forecasts… for managing our supply chain. Mark Jamison, Kimberly-Clark

3. SARA LEE Federated Dept. Stores Schnuck Markets Mead School & Office Kimberly Clark JCPenney with support from...

4. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)4 The CPFR Opportunity  CPFR: 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.

5. CPFR Benefits CPFR Benefits: Demand CPFR Benefits: Supply

6. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)6 CPFR Benefits: Demand 1. 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 fruition on business plan, base, and promotional forecasts. Continual CPFR meetings strengthen this relationship. 2. 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.

7. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)7 3. Category Management Before beginning CPFR, both parties inspect shelf positioning and exposure for targeted SKUs to ensure adequate days of supply, and proper exposure to the consumer. This scrutiny will result in improved shelf positioning and facings through sound category management. 4. Improved Product Offering Before CPFR implementation, the buyer and seller collaborate on a mutual product scheme that includes SKU evaluation and additional product opportunities.

8. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)8 CPFR Benefits: Supply 1. 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 vs. either stand-alone VMI/CRP or other industry tools. 2. Inventory Reductions CPFR helps reduce forecast uncertainty and process inefficiencies. How much inventory does your company hold to “cover up” for forecasting errors or a trading partner’s inability to have the product available in a timely manner? With CPFR, product can be produced to actual order instead of storing inventory based on forecast.

9. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)9 3. Improved Technology ROI Through the CPFR process, technology investments for internal integration can be enabled with higher quality forecast information. Your company will benefit by driving internal processes with common, high-quality data. 4. Improved Overall ROI As other processes improve, the return on investment from CPFR can be substantial. 5. Increased Customer Satisfaction With fewer out-of-stocks resulting from better planning information, higher store service levels will prevail, offering greater consumer satisfaction.

10. The CPFR Process Step 1: Front-end agreement Step 2: Joint business plan Steps 3-5: Sales forecast collaboration Steps 6-8: Order forecast collaboration Step 9: Order generation/delivery execution Source: “CPFR for Beginners,” M. Johnson (Syncra Systems) and L. Roth (Kimberly-Clark)

12. Step 1: Create Front-End Agreement. 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.

13. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)13 Distributor / Retailer Manufacturer / Supplier VP Merchandising VP Sales ------------------------------------------------------------------------------------------------------------------------- Confidentiality Goals & Objectives Measurement of Success Discussion of Competencies, Resources, and Systems Responsible People & Departments Information Sharing Service & Ordering Commitments Resolution of Disagreements 13

14. Step 2: Create Joint Business Plan. The project teams develop plans for promotions, inventory policy changes, store openings/closings, and product changes for each product category.

15. Distributor / Retailer Manufacturer / Supplier Buyer Sales Manager -------------------------------------------------------------------------------------------------------------------------------- Corporate Strategies Partnership Strategies Category Roles and Objectives Exception Criteria Item Management Profile 15

16. Steps 3-5: Sales Forecasting Collaboration. Trading partners share consumer demand forecasts, and identify exceptions that occur when partners' plans do not match, or change dramatically. They resolve exceptions by determining causal factors, adjusting plans where necessary.

17. Distributor / Retailer Manufacturer / Supplier forecast analyst sales analyst -------------------------------------------------------------------------------------------------------------------------------- consumer demand causal data exception “triggers” collaboration loop decision support data event calendar 17

18. Steps 6-8: Order Forecasting Collaboration. Trading partners share replenishment plans, identifying and resolving exceptions.

19. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)19 Distributor / Retailer Manufacturer / Supplier inventory planner sales / forecast analyst -------------------------------------------------------------------------------------------------------------------------------- order building algorithms exception “triggers” collaboration loop decision support data event calendar 19

20. Step 9: Order Generation. Results data (POS, orders, shipments, on-hand inventory) is shared, and forecast accuracy problems, overstock/understock conditions, and execution issues are identified and resolved.

21. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)21 Order Generation Distributor / Retailer Manufacturer / Supplier inventory planner inventory planner -------------------------------------------------------------------------------------------------------------------------------- “Frozen Forecast” based on time fence 21

22. The VICS CPFR Roadmap How do I get started?

23. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)23  The VICS CPFR Roadmap provides ready-to- use templates that can be customized for different partnerships. The Roadmap also provides a checklist for each step to ensure all critical items have been completed. 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

24. Step 1 Evaluate Your Current State.

25. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)25  Where does your company stand today? Does your company have a culture that values cooperation and communication between its departments and with its trading partners? Has your company implemented other industry best practices? Is using information technology to solve business challenges a company priority?  Develop Your Company’s CPFR Vision  Are Your Trading Partners Ready for CPFR?  Develop a Business Case to take to your Partners

26. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)26 Develop Your Company’s CPFR Vision  What are your company’s objectives for CPFR?  What areas of the organization will be impacted, and how?  How will success be measured?  What will be the scope of the project?  Which product lines will be included?  How many stores and DC’s will be included?  How many trading partners will you bring on board in order to have a significant impact?  What is the level of technical sophistication of your company and your trading partners?  What is the long-term market position of your trading partners?  What corporate stance will you develop for press releases?  How will you document the vision?

27. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)27 Are Your Trading Partners Ready for CPFR?  Can your trading partner relationships be characterized as open and trusting?  Do you and your trading partner have complementary strengths and weaknesses?  Does your trading partner have the appropriate commitment and resources required to make CPFR successful?  Does your trading partner have experience with CPFR with another partner?  Can your trading partner quantify the potential internal and external benefits?

28. Step 2 Define Scope and Objectives.

29. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)29 1. Gaining commitment from your trading partner. 2. Assigning team members and establishing their roles. 3. Selecting products and locations that will be included in the process. 4. Deciding which part(s) of the nine- step CPFR process to test. 5. Establishing key performance metrics to measure the initiative’s success.

30. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)30 Team Members, Roles and Responsibilities RoleResponsibilitiesTypical Position Buyer Typical Position Seller Sales Collaboration The sales collaboration team is responsible for establishing sales forecasts, promotion plans, collecting and reporting sales results. The team is also responsible for recommending and implementing changes to the replenishment system. Category, Manager Buyer, Replenishment Analyst Sales Representati ve (Account Relationship Owner) ReplenishmentThe replenishment team determines the order forecast, and collects actual order and inventory information. Inventory Analyst (Re-) Buyer Customer Service Manager, Forecast Analyst, Order Management Analyst Collaboration Technology The collaboration technology team sets up the collaboration environment, monitors technology effectiveness, and evaluates technical rollout requirements. IT Coordinator, Project Manager, Systems Manager IT Coordinator, Project Manager, Systems Manager

31. Step 3 Prepare for Collaboration.

32. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)32  In Step 3, the project team studies the details of the CPFR business process, and identifies the technology and additional resources required to support it.  Sales and replenishment team members develop ground rules for managing exceptions and changes.  Collaboration technology team members install and configure the information systems (purchased, developed, or simple spreadsheets and e-mails) used to support collaboration between partner pilot teams.  At the end of this step, collaboration is ready to begin.

33. Step 4 Execute: Performing the Pilot.

34. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)34  In Step 4, the sales and replenishment collaboration teams begin to exchange forecasts with each other, modifying them to respond to changing conditions.  The collaboration technology team gains experience managing the environment, and prepares for rollout to a large number of locations and projects after the pilot is complete.

35. Step 5 Assess Results and Identify Improvements.

36. Collaborative Planning, Forecasting, and Replenishment (Henry C. Co)36  In Step 5, the team and its management review its progress, report results to their respective organizations, and make preparations for broader CPFR rollout.