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CPFR® Overview BISG Board Meeting November 20, 2003

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Presentation on theme: "CPFR® Overview BISG Board Meeting November 20, 2003"— Presentation transcript:

1 CPFR® Overview BISG Board Meeting November 20, 2003
Joe Andraski, Senior Vice President OMI International

2 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

3 Collaborative Commerce Dynamics
Brings the supply chain closer to the consumer Focus on what matters Focuses attention on exceptions Mandates reconciliation of exceptions Supply constraints are real Forecasts are constrained by supplier’s capacity Predicting demand in a vacuum is difficult Facilitates flexible relationships Partnership in order to succeed

4 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

5 Barriers to Collaboration
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

6 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) Webster's definition: Act of working together as in writing a book. Cooperating with the enemy.

7 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

8 The CPFR® Process Model
Seller Collaborative Planning FRONT END AGREEMENT Once JOINT BUSINESS PLAN Qtr. Collaborative Forecasting CREATE SALES FORECAST IDENTIFY EXCEPTIONS RESOLVE EXCEPTIONS Wk, Mo CREATE ORDER FORECAST IDENTIFY EXCEPTIONS RESOLVE EXCEPTIONS Buyer Wk, Mo GENERATE ORDER

9 Consumer Demand Forecast Replenishment Forecast
CPFR® Model Planning Consumer Demand Forecast Forecasting Replenishment Forecast Replenishment

10 Source: © E3 Corporation
CPFR® Value Proposition Value Delivery CPFR® Driver 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 Why are so many companies getting involved and investing the time work on CPFR process. Source: © E3 Corporation

11 CPFR® ROI Benefit Categories
Where do the Benefits Come From? Inventory % Storage Costs % Inventory Expense % Intransit inventory for Rail >1% Reduced 3’rd Party Storage % Sales Benefits % Increased Sales % Improved Margin % Customer Retention % Process Efficiencies 6% Inventory Control % Logistics % Order Management / CSR 2% Purchasing >1% Transportation % Carrier Management >1% Load Planning >1% Truck Tendering/Carrier Selection 1% Truck Cycle Time % Rail Cycle Time % Demurrage >1% Excess Freight Charges % Joe These came from Arena Consulting’s work with Transora Total Benefit 100%

12 Real World ROI Examples
Firms Customer Service Inventory Forecast AMR Retailers Summary Sales +6 to 20% Store Inv down 10 to 40% AMR Suppliers 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/ Suppliers Sales +10 to 20% Logistics Saving 10 to 30% Ace/Manco Sales +12% Improved 10% Tesco/ P&G In Stock 100% DC Stock -75% Conad/Barilla Item Sales +167% 85% Accuracy

13 The Globalization of VICS/GCI CPFR®
Benelux - 3 Delhaize le Lion Royal Ahold Vandemoorte Spain Eroski Europe - 28 Asia - 7 Americas - 70 Switzerland Nestle Canada - 2 Canadian Tire RONA Denmark - 2 Heineken Dansk UK - 11 Argos ASDA Hasbro J. Sainsbury Kingfisher Lever-Faberge UK Somersfield Superdrug Tesco Unilever UK Woolworth’s Taiwan CMC Mexico Groupo Elektra France-2 Carrefour Chanel Argentina Unilever Germany - 4 Bayer Henkel Herlitz Metro Japan - 3 Kao Panasonic YKK Italy - 2 Conad Barilla Israel - 2 Supersol Truva Hong Kong Jusco USA – 66 Firms A&P Ace Hardware Albertson’s Ashley Furniture Bell Sports Best Buy Binney & Smith Black & Decker Broyhill Colgate-Palmolive Compaq CVS Delta Faucet Do It Best Eastman Chemicals Eckert Eli Lilly Federated Flowers Bakeries Fuji Film USA GE Appliances Harley-Davidson Hasbro H.E. Butt Hewlett-Packard Home Depot Inland Paperboard International Paper J.C. Penney John Deere Johnson&Johnson Kimberly-Clark Kraft Lane Levi Liquid Nails Liz Claiborne Manco Mars Master Lock Meijer Merial Mitsubishi USA Nelson New Balance Pacific Coast Feather Pharmavite PlumbPak Procter & Gamble Ralston Purina Rite Aid Saks Sara Lee Schering-Plough Sears & Roebuck Sports Authority Staples Super Valu Target Taylormade Tru Value Hardware Walmart Walgreen’s Warner-Lambert Wicke’s Furniture Japanese Presentation Deleted ? Next to Japan Added from Storch August Presentation and updated. Complements Ahold global map presented earlier.

14 What is VICS? Voluntary Interindustry Commerce Standards Association
The 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

15 VICS CPFR® Committee Advisory Board Working Committees; Metrics,
Business Process, Technology, N-Tier, CTM, and Education and Publicity Check Committee

16 VICS CPFR® Committee Work So Far.
What about your firm? CTM Ver 1.0 2004 2003 Global CPFR® guidelines published B2B marketplaces offer CPFR® services 2002 2001 First CPFR® rollout Roadmap to CPFR® published, with pilot results Leading CompaniesPilot CPFR® 2000 1999 VICS CPFR® Guidelines published 1998 1997 VICS subcommittee develops CPFR® 1st “CFAR” pilot 1996

17 VICS Enables Standards Adoption
Standards Enable Collaborative Commerce VICS Enables Standards Adoption e-Collaboration 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… 7. Collaborative product development 6. Collaborative sales & promotion planning You 5. Collaborative logistics management #3 – Item Synchronization – That is where the owner of the data or the supplier of the item information selects all of those trading partners in the community that they wish to expose this information to…creating a binding connection between that supplier, their items, and the receiver of that information, so that anytime an item is added, changed, or de-listed, all of those receiving parties, like the retailers, distribution centers, and transport companies, can get that information near real-time so that all of our databases match. And that is what we do. Develop common standards, register standards-compliant data and synchronize your item information. Once we do these three things, then the really efficient business can happen (which are 4, 5, and 6); we can start collaborating with purchase orders and invoices, pricing and promotion, and vendor managed inventory. Things which can give tremendous return on investment. Additional notes on Step 1 through 8: 1. Ensures that all players exchange consistent information 2. Ensures that every item in the industry has a unique ID 3. Ensures that trading partners are using consistent item information 4. Automated exchange of purchase orders, price lists, dispatch notices, invoices, payments, etc. 5. Automated exchange of information about product in the supply chain 6. Automated exchange of information about future plans & promotions 7. Exchange and analysis of information about sales patterns and trends; collaborative product development e-Collaboration: Final goal… a better way of doing business. 4. Collaborative Core Business Transactions - Order, Shipment, Payment. 3. Data Synchronization Benefits 2. GLOBALregistry Time / Degree of trust & complexity 1. Common data standards Source: A.T.Kearney for GMA - FMI

18 at the next VICS CPFR® Committee Meeting.
Any Questions ? Find The Answers at the next VICS CPFR® Committee Meeting.


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