Implementing Successful Large Scale CPFR Programs

Transcription

Table of Contents
The VICS CPFR® Committee Advisory Team
2
1. Overview
3
2. Implementing Successful Large Scale CPFR® Programs
6
A. Collaboration and Cross-functional Process Management
6
B. CPFR® Program Scenarios and “Best Practices”
7
C. CPFR® Collaboration Role Alternatives
8
D. Why Some CPFR® Pilots or Programs Stall or Fail
3. Onboarding Trading Partners
11
12
A. Choosing a Strategy
12
B. Senior Management Support and a Formal Announcement
13
C. Requiring Multi-disciplinary Participation in Collaboration
13
D. Training and Engagement Programs for all Levels of the Trading Partner
Organizations
14
E. Making CPFR® the Way You Do Business
15
4. Conclusion
16
The VICS CPFR® Committee Advisory Team
Larry Smith, West Marine, Co-Chair
Jim Flannery, P&G, Co-Chair
Gary Maxwell, Wal-Mart, Co-Chair
Joe Andraski, VICS
Fred Baumann, JDA Software
John Bermudez, Oracle
Jean Biberdorf, HP
Inez Blackburn, VICS
Steve Daugherty, Samsung
Daren Fairfield, Accenture
Ron Ireland, Oliver Wright
Matt Katz, Alix Partners
Kedar Kulkarni, Vtech
Jeff Langenfeld, Wal-Mart
Ira Miller, American Express
Jennifer Prentiss, 7th Online
Todd Shilling, Best Buy
Gayle Stewart, Rogers
Dan Van Hammond, IBM
Michael Reardon, Agentrics
Implementing Successful Large Scale CPFR® Programs
& Onboarding Trading Partners Business Process Guide
2 of 17
© 2007 Voluntary Interindustry Commerce Solutions (VICS)
www.vics.org
1. Overview
Collaborative Planning, Forecasting and Replenishment (CPFR®) initiatives have moved well beyond
pilots to programs governing the majority of sales of large enterprises. In this process, some of the
distinguishing characteristics of successful collaborative programs are becoming clear. The purpose of
this guideline is to document approaches for implementing and sustaining collaborative business
processes, particularly in large scale CPFR programs. The VICS CPFR Committee is publishing this
guideline to support companies investigating collaborative approaches or those wanting to reinvigorate existing CPFR programs.
CPFR is defined as a business practice that combines the intelligence of multiple trading partners in
the planning and fulfillment of customer demand. CPFR links sales and marketing best practices, such
as category management, to supply chain planning and execution processes to increase availability
while reducing inventory, transportation and logistics costs.
CPFR is a strategy for improving supply chain efficiency and effectiveness by making demand
transparency drive the execution of the supply chain participants to maximize value for the endcustomer. Fundamentally, the aim of CPFR is to convert the supply chain from a disjointed, ineffective
and inefficient “push” system to a coordinated “pull” system based upon end customer demand.
Trading partners move to selling through their customer firms (to their end-customers) rather than to
their customer firms. In CPFR engagements, the key performance measures focus on outcomes for
the consumer. All supply chain participants move to understanding that they will achieve sustainable
growth through continually increasing consumer purchases.
The original CPFR guidelines, developed by VICS and its member companies in the late 90s, included
significant emphasis on implementation recommendations. Key among the steps recommended in the
original guidelines was for trading partners to define a plan for their program and to incorporate it into
a formal “collaborative agreement” or “front-end agreement.” A collaborative agreement codifies the
roles and responsibilities as well as the goals and measures of outcomes for each trading partner in
this new inter-company collaborative process. A collaborative arrangement sets the rules of play to
start the collaborative process, but CPFR participants engage in a flexible and dynamic partnership for
continuous improvement.
In practice, CPFR programs have developed permanent structures emanating from the implied or
explicit approach taken by a lead partner. Some programs have been led by a single retailer, or a
single supplier. A lead partner may also adopt a particular technical solution, in which case the
software provider’s approach determines much of the processes employed. We have also seen
consortiums of trading partners developing a common technical solution. The consortiums embrace
shared standards and commit to integration with their partners’ enterprise systems.
CPFR is a strategic framework within which defined methodologies for pursuing business goals involve
multiple functions within trading partner organizations, each working together efficiently and
effectively to improve outcomes. Successful CPFR programs use formalized processes and specific
patterns of business interactions, technology, training, and metrics to enable diverse groups of
participants to work together to achieve end-customer benefits.
The design of a successful
collaboration program also derives from core enterprise strategic goals that have a good fit with
industry and market characteristics as well as the individual competencies of the trading partners.
While the core aim of CPFR is to match supply and demand, holistic CPFR programs extend to key
business drivers such as collaborative product and assortment development and product life-cycle
management.
This CPFR implementation and onboarding guideline will identify, develop and document standardized
processes for educating trading partners in collaborative best practices, obtaining cultural and
organizational buy-in, and establishing appropriate levels of inter-company trust leading
3 of 17
www.vics.org
to sustained shared business planning and execution.
The CPFR model’s strategic framework
identifies multiple ways of establishing roles (who does what) and approaches (what is the focus of the
collaboration).
The purpose of this guideline is to support lead partner companies and their
collaboration partners in establishing and sustaining successful large scale CPFR programs.
The CPFR reference model includes four key task areas delineated for collaboration between trading
partners: strategy and planning, demand and supply management, execution, and analysis. This
guideline discusses approaches to CPFR program development, focusing on the areas of formalized
CPFR strategy and planning. What will you get out of it? Specific suggestions on how to build a great
CPFR program that aligns with your core enterprise strategies and incorporates your strengths and
capabilities with those of your trading partners to mutually improve performance.
Collaborative trading partner programs utilizing the VICS CPFR model support the activities of
determining sku-level product placement, sales, profit and inventory levels by location and delivery.
This process involves a vast amount of information and input from multiple parties. Retailers, vendors
and their suppliers must work together to build and modify assortment and replenishment plans based
upon financial plans, strategic partnerships, historical sell-through data, market trends, promotional
plans and production schedules.
How do we increase the value of supply chains? We need to improve the value proposition for the
consumer. Desirable products, the consumer’s trust that a particular retailer is the place to shop,
convenience and accessibility, warranty and return policies, service, prices and advice are all aspects
of the consumer value equation. Improving retail instocks and lowering logistics costs have been the
core goals of supply chain improvement programs, including CPFR. But collaboration sets the stage
for trading partners to improve the consumer value equation well beyond logistics and instocks.
4 of 17
www.vics.org
The CPFR Model
5 of 17
www.vics.org
2. Implementing Successful Large Scale CPFR® Programs
A.
Collaboration and Cross-functional Process Management
Successful CPFR programs utilize an end-customer-centric body of outcomes around which
trading partners and entire industries can commit to significant performance improvements and
consumer benefits. Fundamentally, this consumer centricity binds corporate strategies to
expanding collaborative practices. Top management leadership and support is critical for CPFR
programs, particularly because organizations usually have to change and adapt to both internal
and external collaborative practices. Organizations with rigid silos in sales and operations or in
merchandising, inventory management and logistics are less likely to collaborate as trading
partners because their internal disciplines are not aligned. For instance, if a supplier does not
have a formal sales and operations planning process it is unlikely that collaboration between its
sales organization and a customer’s inventory management organization will produce
sustainable improvements in order fulfillment. Similarly, if a retailer’s merchandising, inventory
management and logistics organizations do not have a formal planning process it is unlikely that
collaboration between its inventory management organization and the supplier’s sales
organization will produce sustainable improvements in the supplier’s order fulfillment. In our
experience, success in internal collaborations develops organizational capacity for trust and the
skill sets for managing business processes across traditional silos that is necessary for effective
external collaborations.
Prior to the initiation of a CPFR program, it is not unusual that the only contact a supplier and a
retailer might have outside of the traditional buyer-seller relationship is that between a
supplier’s customer service clerk and a retailer’s order expediter. CPFR programs require the
front line supply chain contacts to be powerful collaborative champions of their respective
organizations. We see suppliers appointing Six Sigma Master Black Belts as their supply chain
point persons, and senior sponsors from both organizations attending routine collaborative
meetings. While the amount of contact appropriate will vary across tiers of trading partner
relationships, intense CPFR relationships often require that functional counterparts in logistics,
demand management, transportation and finance have direct interface. We recommend that
you bring these participants together in “quarterly” planning meetings hosted by each firm’s
executive sponsors.
Best practice organizations have been moving rapidly toward cross-functional team approaches
precisely because of the growing recognition of the role of collaboration in improving
performance. Organizations are becoming structured around cross-functional supplier-facing
teams and cross-functional customer-facing teams. This is precisely why we see many leading
retailers co-locating merchandising and inventory management teams and increasingly crosspathing associates between these disciplines as a requirement for advancement. The result is
significantly better skill-sets in these associates, as well as a clear requirement for the capability
to act and manage collaboratively. Parallel organizational changes are appearing in leading
supplier companies.
The organizational implications of CPFR programs were particularly well addressed in the CPFR
guideline for Retail Event Collaboration (2004). Effective business-to-business collaboration
demands a reorientation of resources – from functional silos to an interdisciplinary focus. For
major accounts, many manufacturers establish cross-functional, customer-specific teams.
Logistics, planning and financial resources are co-located with sales personnel to provide a
single face to the customer. For smaller accounts, cross-functional teams are assigned to a
geography or channel.
6 of 17
www.vics.org
A CPFR program requires people and their organizations to undertake new roles and crossfunctional processes. The original CPFR guidelines noted that organizational structures in
most companies are continually evolving to address strategy changes and new opportunities.
Those companies that have already embraced process-driven structures should require the
least amount of change to accommodate CPFR. Companies with very strong functional
organizations, on the other hand, will need to address the alignment and integration of
decision making across functions and divisions. These changes will be more substantial. A
robust collaborative organization participates in a value chain that some practitioners have
called a “virtual vertical” enterprise.
B. CPFR Program Scenarios and “Best Practices”
The 2004 CPFR guidelines release introduced a set of scenarios intended to further guide
participants in the design of CPFR programs, based upon the experience of a broad spectrum
of existing programs.
Table 2: CPFR Program Scenarios
Scenario
Applicability
Industry Segment
Case Study
Retail Event
Collaboration
Highly-promoted
channels or categories
All (except EDLP)
Welch’s
Store-Level
Collaboration
Direct store delivery
or cross-docked
distribution
Mass merchant
Club store
DSD grocery
Wal-Mart CPFR
Program
DC Replenishment
Collaboration
Retail DC distribution
Drug chain
Hardware
Grocery
CVS CPFR
Program
Collaborative
Assortment Planning
Apparel and seasonal
goods
Department store
Specialty retail
Federated/Liz
Claiborne
Program
7 of 17
www.vics.org
Retail event collaboration specifically chooses not to manage total demand on the assumption
that non-promotional demand is quite predictable in many longer life time consumer goods
products. It is the changes in demand driven by retailer or supplier generated promotions
that create the most out of stocks, shortages and overages in the supply chain. Store-level
collaboration, focusing on shared visibility to point of sale historical data and store-level sales
forecasts, has been prevalent in large retailer CPFR programs. Most of these retailers also do
not have systems that generate order forecasts. DC replenishment collaboration programs,
prevalent among drug store, hardware, and some grocery retailers, have developed
particularly where those retailers have forecasting and replenishment systems that support
order forecasting, and so these programs have focused on generating accurate forecasts for
total order demand. Finally, leading retailers and suppliers in department store and specialty
retail have refined seasonal planning systems and communication of demand information for
short life cycle seasons.
We believe that it is useful to consider the CPFR model as a “strategic framework” rather than
a specific “best practice.”
As a strategic framework, the CPFR model broadly defines
collaborative practice. Most of us would agree that the notion of a “best practice” includes two
key attributes: 1) the practice identifies a “best way” or “standard of excellence,” and 2) the
practice has achieved a level of adoption and proven success that has moved it from an
aspirational idea to a clearly accepted solution, even though it may take many years for this
“best practice” to become ubiquitous. We suggest that the CPFR scenarios defined in the
Guidelines (Event, Store Retail, DC, and Assortment Planning) constitute “Best Practices”
within the strategic framework established by the CPFR model. The current list of CPFR
scenarios is also not exhaustive and the VICS CPFR Committee will consider additions to the
scenarios over time as we encourage and observe new “best ways” achieving significant levels
of adoption.
The VICS CPFR Committee recognizes that our community would benefit from more
specification and recommendation of “best practices” for each defined CPFR scenario. While
this is work for future updates to each scenario guideline, some comments seem appropriate
here. Within the scenario of Event Collaboration, best practice would imply execution to a
robust and predictive event sales forecast. Within the scenario of Store Level Collaboration,
best practice would imply execution to a robust and predictive point of sale forecast including
promotional demand expectations, new introductions and changes in assortments. Within DC
Replenishment Collaboration, best practice would imply execution to a robust and predictive
DC shipment forecast including promotional and new introductions shipments and the
shipments forecasted as a result of changes in assortments. Within Collaborative Assortment
Planning, best practice would imply commitment, order and fulfillment execution to a robust
shared seasonal assortment plan including promotional and life-cycle demand effects. CPFR
“best practices” represent a robust approach to value chain execution and end-customer
benefits within the realm of each CPFR scenario.
C. CPFR® Collaboration Role Alternatives
The CPFR reference model guidelines have delineated multiple role alternatives for trading
partners, encouraging participants in CPFR programs to assign lead responsibilities in demand
management to either supplier or customer based upon the core competencies and capabilities
of each partner. This recommendation was a key part of the original 1998 guideline
document, and it is reprised in the 2004 release which introduced the four task “wheel” model.
8 of 17
www.vics.org
Table 1: Collaboration Role Alternatives
Alternatives
Sales
Forecast
Order
Forecast
Order
Generation
Option A
(Conventional Order Mgmt)
Retailer
Retailer
Retailer
Option B
(Supplier-Managed
Inventory)
Retailer
Manufacturer
Manufacturer
Option C
(Co-Managed Inventory)
Retailer
Retailer
Manufacturer
Option D
(Retail VMI)
Manufacturer
Manufacturer
Manufacturer
The message is this: successful cross-functional collaborations producing gains shared by
trading partners may have key activities in demand management and execution led by either
supplier or buyer. The essential element is that the trading partners have agreed to a goal to
match supply and demand and they designate a lead partner in task areas where that partner
has core capabilities. In all the role alternatives, ranging from retailer-led (collaborative
retailer order management) to supplier-led (collaborative vendor order management), each
partner is equal, but one partner is responsible for the reference forecast or order generation.
Moreover, the table of role alternatives provided in the guidelines is not intended to be
exhaustive, but to demonstrate a range of appropriate choices in trading partner CPFR
arrangements. For instance, a program may be truly supplier led, while the partners may still
agree that the retailer will generate orders. Some web-enabled collaborative solutions create
the possibility for managing “purely balanced” collaborations, in which both trading partners
submit forecasts and collaborate on resolving forecast exceptions for sales forecasts, order
forecasts, as well as resolving supply shortages. On the other hand, if an accurate demand
plan covering sourcing lead times can be established based upon shared point of sale
information or even a robust order forecast developed by either retailer or supplier, the
emphasis on exception management and supply shortages should be reduced in favor of a
focus on execution to the plan.
We recommend that you develop CPFR programs that leverage the capabilities and industry
influence of the trading partners in matching supply and demand. The choice of role
alternatives depends upon a number of factors, and the choice of a lead partner in each task
area is not always conclusive. Here are some factors to consider:
1.
Broad Selection. Does serving the market require the retailer or buyer to offer a
broad selection of items, (which may also require more suppliers), or are the
assortments appropriate to the market comprised of a limited number of items? If the
CPFR program is to successfully manage demand for a large number of items, success
will be dependent on demand planning resources and forecasting technology at the
retail level that can efficiently manage demand. The forecasting technology may also
generate order as well as sales forecasts. This scenario might imply a retailer-led role
alternative for generating reference forecasts and orders using a “multi-echelon” or
aggregate ordering forecast solution to provide enterprise scale performance
improvements. But since suppliers generally manage demand plans for significantly
fewer items than retailers, they may also have capabilities and competencies in
demand management based upon shared point of sale information
9 of 17
www.vics.org
that lead to their being selected to manage the reference forecast for production and
fulfillment.
2.
Planning Capability. Does the retailer or buyer have business process and planning
capabilities that allow them to plan demand over the materials requirements planning
horizons of the supply chain, or is the supplier or vendor determining the flow of
products that will be allocated to trading partners? In this situation, the trading
partner with the better planning capability might take the lead role, but all trading
partners in a CPFR program need to address their shared responsibilities in advance
planning.
3.
Promotions. Does the retailer or buyer generate promotional activities that affect
demand, or are these activities principally generated by the supplier or vendor? If the
retailer is the lead partner in this respect, to match supply and demand the retailer
would need to plan promotions in advance and with reference to the materials
planning requirements of its suppliers.
4.
Assortment Changes. Does the retailer or buyer generate assortment changes that
affect demand, or are these activities principally generated by the supplier or vendor?
If the retailer is the lead partner in this respect, to match supply and demand the
retailer would need to plan assortment changes in advance and with reference to the
materials planning requirements of its suppliers.
5.
Product Innovation.
Does the retailer or buyer contribute the most product
innovation initiatives to the market, or are these activities principally generated by the
supplier or vendor? While product innovation traditionally resides with the supplier or
vendor, certain retailers or buyers have achieved core competencies in product
innovation. Product innovation clearly influences production and fulfillment levels not
only for new items, but for all items cannibalized or retired as a result of new
introductions. The message is this: product innovations are integral to a customercentric demand plan.
6.
Scale of Production. Is the retailer or buyer a large organization relative to the
market, capable of changing the scale of production and therefore the cost of products
based upon its buying decisions, or is the supplier or vendor determining the scale of
production and therefore the cost of products? There is clearly a more significant
benefit for large retailers to create successful collaborative planning partnerships and
solutions, and trends toward both retailer and supplier consolidation are increasing the
leverage of retailers on the scale of production and therefore the cost of products.
It is significant to note that the CPFR model’s strategic framework is not prescriptive, nor does
it imply that “one size fits all” situations. Lead firms and their trading partners need to
develop specific approaches which capitalize on their respective competencies and capabilities.
In successful collaboration programs an industry partner with significant scale and influence
can contribute even more significantly to improved consumer outcomes. The message is also
this: maximize gains and you will likely find gain sharing. Minimizing gains benefits no one,
especially not the end-customer.
The development of large scale CPFR programs has created a necessity to manage to tiered
relationships for collaborative success. While a CPFR lead partner may universally require
significant supply chain performance improvements and catalyze organizational change across
many of its trading partners, resource constraints and ROI considerations make it obvious that
there can only be a limited number of intense collaborations with key trading partners. A
middle group of trading partners will participate in a reduced collaborative cadence, and a
large group of collaborations will be supported primarily with shared data visibility and
performance reporting. The retailer leading the collaboration will designate its trading
10 of 17
www.vics.org
partners into tiers based upon a number of factors including 1) the sales or margin
encompassed by the trading partner relationship, 2) the collaboration experience or capability
of the trading partner, or 3) an objective to improve the performance of a particular supplier.
In setting standards and reporting mechanisms for collaborative supplier performance, the
lead retailer creates the capability to manage supply chain performance through vendor
exception management rather than attempting to manage performance exceptions item by
item.
D. Why Some CPFR® Pilots or Programs Stall or Fail
CPFR pilot programs that have stalled have usually not been integrated with collaborative
organizational changes nor have the initiating companies invested in core forecasting and
replenishment solutions that enable CPFR. These CPFR pilots have not become the way the
enterprise does business. While this could be a result of shifting or uncertain sponsorship, it is
also often the result of a lack of fit between the pilot design and the core competencies of the
trading partners and specific characteristics of the market and industry.
When the CPFR guidelines were developed in the late nineties, companies were encouraged to
undertake pilots. Pilots are a key to generating quick wins and providing proofs of concept for
the participating companies. For pilots to be scalable, they also need to be designed to
become consistent approaches in a CPFR program that addresses most of a firm’s leading
trading partners. The number of items and locations involved, the degree of automated
processing required, and the amount of necessary exception management can prevent pilots
from being scaled across large numbers of items and suppliers. Generally supplier teams are
managing significantly fewer items and locations than retailer teams. Human oversight and
interventions are costly. Systemic approaches may become more effective and accurate. For
instance, a retailer might provide suppliers visibility to store/sku activity and facilitate
replenishment recommendations from supplier teams, but lack the resources to approve and
review supplier recommendations.
Here are some common reasons CPFR pilots or programs fail:
1.
2.
3.
4.
5.
6.
7.
Supplier participants do not utilize cross-functional customer-facing teams to insure
that collaborative demand information is incorporated into the supplier’s production
scheduling and supply management operations.
Supplier account teams do not share sales and demand information provided by
retailers with their own sales and operations and production planning organizations.
Retail participants do not change their buying practices, do not utilize cross-functional
supplier-facing teams to ensure a reliable and executable demand plan. Retail buyers
may have no commitment or accountability to the demand plan.
Suppliers lack a robust internal collaboration or sales and operations planning process.
Retailers lack a robust internal planning process that manages to appropriate lead
times to support an executable demand plan.
While the retailer’s and supplier’s demand planning organizations are collaborating on
demand management, the supplier’s sales and marketing organizations are motivated
by their incentives to achieve short term sales targets without consideration of total
costs. They continue to promote deal purchases at the end of each month or quarter
unrelated to retail demand.
Retailer’s may support collaboration programs based upon providing visibility to point
of sale data or store/sku sales forecasts, but expect suppliers to develop supply plans
without a point of sale forecast that robustly includes promotions, assortment changes
and new introductions. Some enterprising suppliers are using retailer point of sales
data to develop robust demand forecasts at the store level using their own forecasting
systems even where the retail partner generates purchase orders.
11 of 17
www.vics.org
3. Onboarding Trading Partners
A. Choosing a Strategy
All CPFR programs use consumer demand information to drive the supply chain. The most
successful CPFR programs extend the goals of collaboration well beyond limited forecasting or
supply chain solutions to key business drivers including competitive and operating strategies.
Collaboration programs are not “one size fits all.” When a collaboration strategy extends to key
business drivers such as sales, product lifecycle management and assortments, collaborative
performance and practice become seamlessly integrated within each firm’s operations.
The CPFR guidelines delineate a number of successful and widely adopted strategies (Store, DC,
Event and Assortment Collaboration) and provide a significant range of options regarding role
alternatives for trading partners. CPFR participants are also encouraged to develop their own
strategies that fit their specific situation and industry characteristics. As members of a
community of collaborative practice, the VICS CPFR Committee recognizes the thoughtleadership potential of all participating organizations. Each collaboration strategy leverages a
particular supply chain operating model to sustain a competitive advantage. Successful CPFR
programs incorporate enabling technology and leverage existing enterprise solutions.
A successful collaboration program becomes an integral part of the lead company’s competitive
and operating strategies.
The collaboration strategy defines inter-company cooperative
practices that are necessary for the lead company to achieve sustainable competitive and
operational advantage. The appropriate competitive strategy and supply chain operating model
will differ by industry and market, as well as by company. For instance, we find significant
differences in competitive strategy and supply chain operating models for such firms as WalMart compared to Limited, or Dell compared to IBM.
To create successful outcomes, operating strategies need to support competitive strategies, and
there are many alternatives. Our comments on strategic choices are informed by the work of
Dr. Larry Lapide from the MIT Center for Transportation & Logistics and the MIT Supply Chain
2020 Project (See “MIT’s SC2020 Project: The Essence of Excellence”, Larry Lapide, Supply
Chain Management Review, April 2006).
An operating strategy that delivers the lowest
operating costs supports a competitive strategy that relies on the lowest prices. Similarly, an
operating strategy that provides the maximum availability of products at the point of sale
supports a competitive strategy that relies on the highest margin products. An operating
strategy that ensures the highest quality of suppliers and the strongest manufacturing quality
controls supports a competitive strategy that relies on offerings with the highest quality. An
operating strategy that creates the shortest order to delivery cycle and the fastest request to
promise date supports a competitive strategy that provides the fastest customer response. An
operating strategy that enables the most efficient new product launches supports a competitive
strategy that depends upon being the most innovative. An operating strategy that is adept at
managing complexity supports a competitive strategy that depends on having the broadest
product line. An operating strategy that provides specific services for each customer segment
and maximizes availability at the point of sale supports a competitive strategy that depends on
the best customer service. Or an operating strategy that delivers the maximum availability of
service parts supports a competitive strategy that depends on having the best post-sales
support. An operating strategy that provides the minimum waste and maximum in recycling
supports a competitive strategy that is the most environmentally responsible.
While the research of the MIT Supply Chain 2020 group is still in progress, results to date have
contributed to the notion that specific “Best Practices” must be considered in the context of
particular competitive and operating strategies. The MIT research findings also suggest that
12 of 17
www.vics.org
certain “underlying principles” distinguish excellent supply chain performance across all
competitive and operating strategies. So far, six principles seem evident:
1.
2.
3.
4.
5.
6.
Expanded Sphere of Influence. A lead firm increases its sphere of influence over its
operations and those of its partners. All parties tend to act in the interest of the lead
firm.
Increased Transparency. Generally, increasing the visibility of sales, inventory and
forecast information between a customer and supplier allows participants to improve
supply chain performance.
Relaxed Constraints.
Improved understanding of trading partners through
collaboration commonly results in agreements to relax constraints when individual firms
recognize that these changes lead to optimized operations.
Supply Matched with Demand. Collaborating organizations, both suppliers and
customers, come to realize that marketing and sales decisions made jointly with supply
chain operations provide better outcomes than decisions made by each organization and
silo in isolation.
Reduced Cycle Time Lowers Supply Chain Inventory. Supply chain integration
practices using the Internet or other electronic channels reduce the cycle time of the
ordering and fulfilling process allowing inventories held in the supply chain to be
lowered.
Supply Contracts. Improved understanding of trading partner business models leads
to novel gain-sharing arrangements. Examples include pay on scan initiatives or
supplier compensation that is a mix of wholesale product purchases and a share of a
retailer’s sales revenue.
According to the research at MIT, all of these “underlying principles” seem to be hallmarks of
excellent supply chains. It is remarkable that all of these “underlying principles” involve
supply chain integration and collaborative practices recommended in the CPFR Guidelines.
B. Senior Management Support and a Formal Announcement
Once a specific strategy is chosen, including a choice of a scenario (Event, Store Retail, DC, or
Assortment Planning) and determining the best set of role alternatives for your CPFR program,
we recommend engaging senior management support and making a formal announcement as
soon as practical. In many cases, progress in a pilot is critical to securing this support. For
your CPFR program to be successful and maintain senior management support, it needs to be
aligned with your corporate goals, skills and capabilities.
Clearly, for a CPFR program to be announced as a major corporate initiative, it must have
important goals in performance improvement that the lead trading partner intends to be the
outcome. What goals are likely for a retailer, for instance? You might choose from: 1) instock
or depth of inventory for key items and promotions, 2) on time shipping, 3) sales, or 4)
customer satisfaction. If CPFR is a supply chain initiative, the goal statements might be
restricted to instocks and shipping. A broader corporate initiative would very likely focus on
increasing customer satisfaction and raising sales with higher instock and on time shipping as
strategies contributing to customer satisfaction. The message is this: it might be alright for a
pilot to produce almost any measurable benefit, but a program needs to produce benefits that
are core to the corporate mission. If the goals of the CPFR program are increasing sales and
customer satisfaction, your marketing and merchandising organizations will support it. In
fact, our experience shows, these constituencies are likely to ask for the program rollout to be
broadened and accelerated as much as possible.
13 of 17
www.vics.org
C. Requiring Multi-disciplinary Participation in Collaboration
Multi-disciplinary participation is a key component of the organizational transformation
integral to most performance improvement initiatives within businesses today. We live in a
world changed by the Internet and other information services, but our business organizations
remain structured as if the information revolution never happened. The mandate for change is
as clear for suppliers as it is for retailers, and a trading partner is often the catalyst for
organizational change in its partner firms. For suppliers, the multi-disciplinary approach is
significantly codified in the “Best Practice” of Sales and Operations Planning. And while less
codified, we can point to the need for similarly structured coordination between retailers’
merchandising and supply chain planning functions. We are seeing significant organizational
changes within leading retailers, including new reporting relationships, the co-location of
teams, the development of process owners and accountabilities as much as functional owners
and accountabilities.
Successful CPFR programs require formalized processes that effectively and efficiently manage
cross-functional intra-company and inter-company activities. Automated communication and
adequate information technology for business forecasting and reporting must be accompanied
by organized planning activities across the engagement. Most CPFR programs have clear
calendars of weekly, monthly, quarterly and annual activities that govern the collaborative
planning and execution cycle.
Large scale CPFR programs usually come from the impetus of a lead firm, often a retailer. A
lead firm defines the CPFR strategy, which usually involves the adoption of an enabling
technical solution. In many cases the technical solution may already have been an installed
capability at the retailer or its suppliers, such as a forecasting and replenishment solution.
The solution simply was not being used collaboratively. Often new technical solutions have
been those providing visibility, such as portals, the Internet, or automated emails. Today,
most retailers and many suppliers have sophisticated demand forecasting solutions. In CPFR
programs this information becomes shared with trading partners. Personal computers and the
Internet provide all of us robust capabilities to share large amounts of useful machine
readable data that can be manipulated to support decision analysis and integrated with the
receiving partner’s corporate systems.
D. Training and Engagement Programs for all Levels of the Trading
Partner Organizations
For a CPFR program to be successful, the lead trading partner needs to engage its trading
partner organization at multiple levels as well as across multiple disciplines. The CPFR
guidelines distinguish between executive level responsibilities such as aligning trading partner
goals and strategies across each enterprise’s functions and tactical and operational level
responsibility such as ensuring that participants know each other’s processes well enough to
leverage complementary competencies. The most successful CPFR programs utilize more
levels of training and engagement.
1.
A “CXO” level meeting each year comprising select top executives to define and
redefine the vision and commitment to performance.
14 of 17
www.vics.org
2.
Invitation-only annual or twice annual focus meetings to bring together crossfunctional management teams to define and redefine the CPFR program, assess
progress, approve recommendations and share successes and best methods in the
community of trading partners. Especially early in a CPFR program, these “Supply
3.
Chain Summits” enable a lead firm to expand its CPFR program to more trading
partners more rapidly.
4.
“Quarterly” or periodic planning meetings for each collaboration group between the
cross-functional managers and process owners to define and redefine the specific
tactics and deliverables of the engagement.
Routine weekly or monthly collaborative meetings (or conference calls) to review initiatives,
results and manage key exceptions.
Designed for efficiency and effectiveness, these
meetings can be relatively brief or extended, depending on the importance of the specific
trading partner relationship to the lead firm. Suggested agenda items might include 1) a
review of current performance metrics for both sides, 2) managing current team initiatives
with clearly assigned accountabilities and milestone deliverables, 3) identifying and resolving
supply constraints based upon the collaborative forecast, and 4) a review of changes to the
forecast based upon promotional planning, assortment planning or any other change to the
demand strategy.
VICS CPFR companies should certify their associates through the VICS CPFR certification
program. Companies with active collaboration programs should support their key associates
in attending the VICS CPFR Knowledge Network and Committee Meetings to help them
generate effective collaborative strategies with the support of our community of practice.
E. Making CPFR® the Way You Do Business
The central tenet of CPFR is satisfying end-customer outcomes. Suppliers and retailers need
to speak the same language regarding measured results, while, at the same time, we
recognize that each trading partner relationship may have legitimate nuances for generally
accepted performance measures. Everything we do is to make the sale to the consumer and
for the consumer to be satisfied.
This focus represents an obvious reorientation for
manufacturers and resellers, but retailers as well need to clarify their goal to deliver value to
the consumer. Once an organization has integrated a collaborative program with its key
business drivers and enterprise goals, the sustainability of this new way of doing business is
assured.
The VICS CPFR Committee recognizes the need for trading partners to have an inter-industry
model for trading partner joint performance scorecards. The basics are simple but powerful.
In CPFR programs suppliers track collaborative performance measures such as consumer sales
and realized gross margins at retail. CPFR suppliers understand that organic growth within a
customer account can only come from increases in consumer sales. Satisfying their retail
trading partners depends upon the realized margins on sales of their products or services.
Forecast accuracy is a critical addition to a collaborative performance scorecard, but it is often
used by suppliers as an excuse for poor performance rather than an opportunity to improve.
To add value, forecasts don’t need to be accurate (spot on), they just need to be more
predictive than a supplier’s historical shipments, or whatever non-collaborative data was
previously used to generate a supplier’s production plans.
15 of 17
www.vics.org
It is not our intention to provide a joint performance scorecard here. The VICS CPFR
Committee will address a scorecard in a forthcoming VICS CPFR guideline. Our purpose here
is to guide CPFR participants in thinking about how collaborative key performance indicators
support consumer outcomes.
4. Conclusion
Collaboration, Planning, Forecasting and Replenishment (CPFR®) initiatives have moved well beyond
pilots to programs governing the majority of sales of large enterprises. The CPFR Model presents
collaboration practices as end-customer centric and binds internal collaboration processes to external
collaboration processes. The model is also inclusive as well as expansive, and one size does not fit all.
Most of us would agree that the notion of a “best practice” includes two key attributes: 1) the practice
identifies a “best way” or “standard of excellence,” and 2) the practice has achieved a level of
adoption and proven success that has moved it from an aspirational idea to a clearly accepted
solution, even though it may take many years for this “best practice” to become ubiquitous. Each of
the defined CPFR scenarios (Event Collaboration, Store Level Collaboration, DC Collaboration, and
Collaborative Assortment Planning) entail different approaches and specific collaborative “best
practices.” The current list of CPFR scenarios is also not exhaustive and the VICS CPFR Committee will
consider additions to the scenarios over time as we encourage and observe new “best ways” achieving
significant levels of adoption. At the same time many firms are generating value and competitive
advantage by applying CPFR while leveraging our community of practice in strategies that creatively
and individually adapt collaborative learnings to their specific competitive and operating models. The
VICS CPFR Committee supports these successful implementations through their case studies and
conference presentations.
We believe it is useful to view the entire CPFR Model as a “strategic framework” rather than a specific
best practice. At the same time, we identify a set of “underlying principles” that are clear hallmarks of
excellent collaborative practice regardless of which specific CPFR scenario or role alternatives are
employed:
1.
2.
3.
4.
5.
Your CPFR program employs a well-defined demand-driven strategy that leverages partnership
skills.
Your CPFR program is supported by senior management and extends the collaboration to key
business drivers such as sales, lifecycles and assortments.
Your CPFR program utilizes multi-functional teams, formalized processes and internal
collaborations that provide better decision-making closer to the work.
Your CPFR program provides training and engagement programs for all levels of the trading
partner organizations.
Your CPFR program has become “the way you do business,” embedded in each trading
partner’s DNA and key performance measurements.
Each company employing CPFR as part of its continuous improvement effort will need to apply
executive thought leadership to the design, implementation and guidance of its collaboration program.
The VICS CPFR Model, the specific guidelines for the various scenarios, and now this updated
“onboarding” guideline are key tools for all VICS member companies that wish to employ collaborative
processes to maximize enterprise results. Along with these resources VICS’ offers an extensive library
of case studies and analyses, an active CPFR Committee that holds working sessions and conferences
for “Knowledge Networking” among companies with CPFR programs, and a professional certification
program for prospective CPFR participants.
16 of 17
www.vics.org
Implementing Large Scale CPFR® Programs
1.
Your CPFR® program employs a well-defined, demand-driven strategy
that leverages partnership skills.
2.
Your CPFR® program is supported by senior management and extends the
collaboration to key business drivers such as sales, lifecycles and
assortments.
3.
Your CPFR® program utilizes multi-functional teams, formalized processes
and internal collaborations that provide better decision-making closer to
the work.
4.
Your CPFR® program provides training and engagement programs for all
levels of the trading partner organizations.
5.
Your CPFR® program has become “the way you do business,” embedded
in each trading partner’s DNA and key performance measurements.
17 of 17
www.vics.org

Implementing Successful Large Scale CPFR Programs

Transcription

Similar documents

Peer-to-Peer Information Systems - An Enabler of Collaborative

Trading floor

Small Business Development Fund

R.O. Writer

Marketplace - Traders.com

Brochure - QuoteStorm

Read full article - MultiCharts Trading Platform

“SMC AUTO

ST INF_Game_of_Onboarding_Tabloid SS1514

Free CBOE Paper Trading Account

Roadmap to CPFR: The Case Studies