European CPFR Insights

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European CPFR Insights

• 23th April 2002, Barcelona

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Introduction
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Agenda

• ECR Europe CPFR Project
• Pilot Experience
• Status of CPFR in Europe
• Lessons learned
• Outlook

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What is Collaborative Planning, Forecasting and
Replenishment?

• Initiative to improve supply chain efficiency
  through
• Information exchange on planning, forecasting and
  replenishment data
• Development of a single forecast
• Collaborative exception management

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How CPFR contributes to Optimal Shelve
Availability
Value

• More accurate and reliable forecasts shared by
  the trading partners
• Joint forecast is the basis for replenishment
• Demand forecasting at Point-of-Sales

Consumer Loyalty
Optimal Shelf Availability
Other ECR Concepts
Shrinkage
CPFR
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Focus areas of the ECR Europe CPFR project

• Pilot insights
• Results of European pilot projects
• CPFR Knowledge transfer
• Spread CPFR in Europe
• European CPFR landscape
• Recommendations on scaling after pilot stage

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Take guidance to CPFR success

• CPFR Introduction
• CPFR Status in Europe
• European Focus Areas
• Implementation Guide
• Business Architecture
• CPFR in Action

2001 A Guide to CPFR Implementation
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Take guidance to CPFR success
2002 European CPFR Insights
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European CPFR Insights

• Current Status of CPFR in Europe
• Survey results
• Pilot Descriptions
• Detailed descriptions from seven European pilots
• CPFR beyond Pilot Stage
• What are the next steps?
• Future Outlook on CPFR

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ECR Europe CPFR pilots
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Agenda

• ECR Europe CPFR Project
• Pilot Experience
• Status of CPFR in Europe
• Lessons learned
• Outlook

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CPFR pilot speaker
Joan Ametller
Commercial/Logistics Director
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Piloting companies Retailer

• Spanish regional retailer headquartered in
  Catalonia
• Established in 1961
• Founded by Condal brothers
• Largest supermarket network in Catalonia
• Over 350 outlets in Spain
• 500 million turnover
• 2,900 employees
• Two brand names Condis and Distop

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CPFR pilot speaker
Enric Holzbacher
Vice-President Detergents Henkel Ibérica
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Piloting companies Manufacturer

• International chemical company headquartered in
  Germany
• 70 subsidiaries worldwide
• 45,000 employees and 13,100 million turnover
• 4 business sectors

• Laundry Home Care
• Cosmetics - Schwarzkopf
• Consumer Adhesives
• Henkel Technologies

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Thoughts on CPFR

• In Europe, nearly 35 of the total sales are
  promotional products...

...In Spain, this figure rises to 50 !
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Thoughts on CPFR

• Point of Sale
• Out-of-Stocks on the shelves
• Retailer Distribution Centre
• High administrative costs
• Obsoletes, high inventories
• Manufacturer
• Forecast deviations, production changeovers
• Supplier
• Low visibility, costs of transportation

• ...but...how are we managing this complexity?

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Thoughts on CPFR

• ...therefore...

How can CPFR help?
What are the opportunities that CPFR has to
offer to the companies in this context?
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Piloting companies
Retailer
Supplier
Manufacturer
Downstream
Instream
Upstream
SUÑER
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CPFR pilot environment

• The pilot is located in Spain
• Laundry home care products

• Collaboration on all SKUs
• Focusing on promotional items

Downstream

• Packaging used for customised promotions
• Large packages

Upstream
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Pilot overview
Future
Pilot
Diagnosis
Roll-Out
Category Mgmt.
Downstream
Instream
Upstream
In-Store Operations
OOS
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Scope of the pilot
SUÑER
Upstream
Instream
Downstream

• Shared Requirement Planning

• Collaborative Demand Planning

• Event Plan
• CRP with RDCs
• Shared forecast
• OOS analysis

Process

• Collaboration on all SKUs
• Focus on Promotions

• Packaging
• Critical promotions

Products
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CPFR

• Collaborative
• Planning
• Forecasting
• Replenishment

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Planning - Activities
CPFR

• Joint evaluation of promotional impact
• Collaborative definition of Event Management
  processes
• Definition of the horizon of communication

Downstream

• Demand planning
• Internal definition of the promotional workflow
• New procedures between internal departments

Instream

• Joint definition of the data to share
• Integrate planning with critical suppliers
• Joint evaluation of potential benefits

Upstream
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Forecasting - Activities
CPFR

• Joint forecasting by email
• Customer services involvement
• Focus on promotional SKUs

Downstream

• Production based on the shared forecast
• Forecast at a weekly level for the promotions

Instream

• Shared forecast by Internet
• Joint definition of the reliable horizon of
  visibility

Upstream
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Replenishment - Activities
CPFR

• CRP with two Distribution Centres
• Replenishment based on the joint forecast
• Increase information sharing

Downstream

• Lots ordering improvement
• Increase the visibility in transportation
  planning
• More adjustment of warehousing needs

Upstream
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CPFR success relies on the people

• Key account manager
• Customer Services

• Purchasing
• Logistics
• Sales

Downstream

• Demand planning

Instream

• Production

• Purchasing
• Logistics

• Sales
• Distribution

Upstream
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Planning - Results

• Event Management

• Increased the communication and confirmation
  horizon from 3 weeks to 7 weeks

• Reduction in the number ofmodifications in the
  promotional planning of 40

Downstream
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Planning - Results

• Longer communication and confirmation horizon for
  promotion planning

• Greater respect to service dates and management
  dates for the promotional products

Downstream

• Significant reduction in the time spent on
  promotion planning

• Administrative costs reduction

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Planning - Results

• Production reliability

• Increased Production planning reliability

Instream

• Increased the horizon of visibility for the
  suppliers

Upstream
2 days
7 days
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Forecasting - Results

• Shared Forecast Henkel Condis

• Significant improvement in the percentage of
  formats with a deviation between the Forecast and
  the actual salesless than 20

Downstream
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Forecasting - Results

• Increased internal forecast accuracy through the
  involvement of customer service in the forecast
  generation

• Forecast communication from Demand Planning to
  Production

Instream

• Changeovers and inventory reductions due to
  forecast exchange

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Forecasting - Results

• Optimised lots ordering through the improvement
  of the forecast accuracy

Upstream

• Streamlined production cycles at suppliers

• Higher visibility of the supply chain

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Replenishment - Results

• Increased the service level from Henkel to Condis

Downstream

• Condis inventory reduction of

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Replenishment - Results

• Reduction in days of packaging stocks due to the
  replenishment by shifts

• Cost savings of warehousing, handling and
  transportation

Upstream
58.5

• Reduction of the number of incidences due to
  replenishment

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CPFR - Results

• Out-of-Stock at POS analysis

• First analysis May/June 2001

• Second analysis February/March 2002

Downstream
Increase of sales due to OOS reduction
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Lessons learned

• Promotions and New Product Introductions are the
  big gain
• Higher visibility helps to improve forecast
  reliability
• CPFR requires internal and external collaboration
• Internal workflow redefinition precedes external
  one
• Higher forecast accuracy improves production
  efficiency
• Gaps in capabilities between the trading partners
  are easily overcome.

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Pitfalls

• Involving other retailers and suppliers to
  achieve critical mass requires specific CPFR
  tools

The evaluation of upstream results through CPFR
is more difficult than downstream results
CPFR means important cultural changes towards
Collaboration
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Key success factors

• Commitment of business and technological
  resources
• Identifying opportunities together
• Clear definition of roles and responsibilities
• Sharing goals and measurement
• Good definition of the information flows
• Management by exception criteria

Willingness to Collaborate
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Agenda

• ECR Europe CPFR Project
• Pilot Experience
• Status of CPFR in Europe
• Lessons learned
• Outlook

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51 European companies piloting CPFR

• Survey results based on

Starting 8

• 36 pilot initiatives from eight European
  countries

Completed 17
Ongoing 75
Source Accenture CPFR Survey
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Both demand and supply planning are being piloted

• All pilots collaborate on Sales and/or Order
  Forecast

CPFR Steps
Business Planning
1 and 2
70
Sales Forecast
3 to 5
78
Order Forecast
6 to 8
64
Replenishment
9
70
Source Accenture CPFR Survey
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Surveyed pilots achieved respectable results
Smoothed 80 range considered
Source Accenture CPFR Survey
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CPFR business case partially verified
Scaling of CPFR required
Optimise Production
Reduce Capital Invested
Scaling of CPFR required
Inventory
Up to 28
18 - 44 decreasein obsoletes 1)
Wastage
Decrease Costs
Benefits
Up to 58 reduction in unplanned overtime
Overtime
Not verifiedin Pilot stage
Up to 33 reductionin Rush Orders
Transportation Cost
Promising resultsachieved
Better Availability
Between 2 - 9
Significant benefits realised
Increase Revenue
Consumer Satisfaction
1) Forrester Research CPG Online CPFR Pays,
2001
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Agenda

• ECR Europe CPFR Project
• Pilot Experience
• Status of CPFR in Europe
• Lessons learned
• Outlook

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Key learnings

Strategy

Implemen-tation
Process
People
Technology
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Strategy issues (I)

• Selecting the right trading partners to
  collaborate with
• Some companies are willing to collaborate
  strategically, some less and some are not!
• Defining the right approach for piloting and
  scaling CPFR
• Limited piloting vs. early roll-out
• Limited processes vs. end to end

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Strategy issues (II)

• Setting realistic and manageable objectives is
  key
• Scope of SKUs
• Stores
• DCs
• Service improvement supply chain cost reduction
  targets
• Benefit sharing model and metrics are important

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Strategy challenge
Innovators
Followers
Attain competitive advantage but risk investing
too early
Loss of competitive advantage but minimize
mistakes

• Preparation of solid CPFR implementation strategy
  with business case is advisable
• Realistic internal readiness assessment and
  trading partner segmentation verified

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Process issues

• Today limited number of pilots are using POS data
• Most initiatives relay on DC-level data
• CPFR imposes demands on internal processes and
  not only at the interface with the trading
  partner (eg. Demand Supply Planning)
• External collaboration process requires breaking
  barriers (eg. Sharing POS, exceptions management
  for promotions and new products...)

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Process challenges
CPFR as is
Manufacturer
Retailer
DC
Collaboration
DC
DC
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Process challenges
CPFR to be
Collaboration
Retailer
Manufacturer
POS
POS
POS
POS
POS
POS
Order Mgmt.
Inventory Mgmt.
Transport Mgmt
Order Mgmt.
Inventory Mgmt.
Transport Mgmt
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People challenges

Strategy

Implemen-tation
Process
People
Technology

• CPFR requires cultural changes towards a
  collaborative organisation (Senior Management /
  Board-Level Commitment first!)

Metrics for collaboration in reward systems
From functional to process orientation
(internal/external)
Open communication and willingness to share
data
Invest in change (train in new roles and skills)
Exchange of sensitive data requires trust
Relying on tradingpartners information
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Technology challenges

• IT Strategy needs to be consistent with your CPFR
  roll-out strategy

Planning
Collaboration
Connectivity
ERP Transaction Management
Spreadsheet
One-to-one
One-to-one / Flat file
DC Repl.
Advanced Planning Tools
eMarkets
eAI via eMarkets
POS Repl.
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Technology issues

• Increasing data volume when scaling CPFR

• Variables
• Number of SKUs
• Number of Trading Partners
• Collaboration Frequency
• Collaboration level (e.g. POS)
• Number of technologies (e.g. backend systems)

Data Volume and Handling Complexity
Increase of Value of Variable
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Balance CPFR implementation
Process
Scope / Strategy
Technology
Organisation
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Agenda

• ECR Europe CPFR Project
• Pilot Experience
• Status of CPFR in Europe
• Lessons learned
• Outlook

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Do you conduct online CPFR today?Will you in
2003
2003
2001
Base 43 CPG Companies Source Adapted from
Forrester Research CPG Online CPFR Pays, 2001
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However, the real prize requires critical mass!

• Inventory Optimisation
• Dynamic parameter sizing based on POS and DC
  data(eg. dynamic lot sizing, safety stocks, lead
  times,...)
• Optimised inventory allocation to customers and
  stores based on POS and DC info (eg.
  "intelligent allocation")

• Manufacturing Capacity Optimisation
• Benefits in production require demand
  visibilityfor gt40-50 of capacity of facility

• Transportation Capacity Optimisation
• Optimised shiploads
• Collaborative backhauling
• Multi-modal planning

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CPFR is evolving and is here to stay!

• We honestly believe that

CPFR is going to be a Standard-Operating Practice
in the FMCG Industry!
Collaborative Principles and processes will
replace current behaviour practices!
CPFR will become a key driver for process and
organisational change!
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CPFR on a global scale

• Combine resources from GCI, ECR Europe, VICS and
  the exchanges to define a global recommendation.

Recommend a global CPFR process data standards
and define technical process requirements that
enable CPFR between companies and in an exchange
environment.
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European GCI involvement

• Co-Chairs / Team leads
• Project Co-Chair (R.Marzian/Metro)
• Process Sub-Group (E.Garriga/Henkel)
• Synchronisation Sub-Group (G. Wolfram/Metro)

• 25 Team members from Europe

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Focus areas GCI CPFR group
Global CPFR processes standards
Internal Organisation
From Forecast to Replenish- ment
Event Management
Automated Exception Resolution
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Seminar European CPFR Insights

• Insights from three European pilots

Tomorrow 9.00 10.30 Auditorium 2
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Thank you

• See you tomorrow at the CPFR
• Seminar!

Tomorrow 9.00 10.30 Auditorium 2