Defining Collaborative Planning Forecasting And Replenishment Commerce Essay

Defining Collaborative Planning Forecasting And Replenishment Commerce striveIn manufacturing and retail, poor inventory control can lead to overstocking as a result of bad forecasting, this over stocking is called buffer inventory or guard stock which can lead to waste and inefficiency. In 1996 about $700 of the $2.3 trillion retail planning compass inventory was in safety stock. That is, almost 30% was tied up due to waste and inefficiency.(Lambert, Stock, 2001)Collaborative Planning, Forecasting and Replenishment (CPFR), is a business process exploitation an internet based business model, as shown in figure 1.This model takes a holistic approach to information exchange and supply chain management between trading hittners, by using a standard set of business processes in order to improve supply chain efficiencies, and is seen as a re buttocksment to the old approach of electronic data interchange (EDI) (Fliedner, 2003). The objective of CPFR is to share data on a central web server that all of the trading partners can access to alter a much reliable forecast for long term future select in the supply chain, this eliminates the riddles associated with EDI such as supply partners manually incoming identical data in their records (Joachim, 1998), and the EDI process typically being done in batch transfers which can gain add to delays in information (Cooke, 1998) etc.History of CPFRCPFR began in 1995 with the keep company Wal-Mart and was originally called C-FAR for collaborative forecasting and replenishment. The acronym has evolved into CPFR standing for collaborative planning, forecasting and replenishment.Wal-Mart found that the pharmaceutical company Warner-Lamberts in-stock justs were not up to par with Wal-Marts vendor performance standards. Wal-Mart, along with Warner-Lambert, Surgency (formerly Benchmarking Partners), and two software companies, SAP and Manugistics, launched an effort to define a process that would link customer demand wit h replenishment inevitably through the entire supply chain.The pi stagger focused on stock of Listerine mouthwash kept in stock certificates. The group first tested the collaborative excogitation on paper, and then demonstrated in a computer lab that the Internet could be used for the information exchange. The results of the test were Warner-Lamberts in-stock averages rose from 87% to 98%. Lead times dropped from 21 to 11 days, and sales increased by $8.5 million over the test period-even though the pilot was limited to one Warner-Lambert manufacturing nominate and three Wal-Mart distribution hearts. (free-logistics.com, 2010)Case study watt MarineToday west Marine is the largest boating-supply retail chain in the United States, with a harvest range of more than 50,000 crossroads selling throughout more than 400 company owned retail stores, as well as their retail catalogue, generating annual average sales of $690 million. The company was founded in 1968 by Randy Repass as a mail-order firm selling to boating enthusiasts, and opened its first retail store in Palo Alto, California in 1975, three years later, the company created a separate sales channel to commercial customers such as boat yards and boat dealers. In 1997 West Marine a 73 store operation at the time acquired one of their East Coast competitors, EB Marine a 63 store operation. The consequences of the acquisition became quickly apparent Sales fell by almost 8 percent, and peak-season out-of-stock levels raised more than 12 percent compared to the prior year, and after half a dozen years of steady growth, net income dropped from $15 million in 1997 to just over $1 million in 1998. (Highbeam Research, 2006)The main contributing factor of this was that following the transaction, West Marine discovered that internal EB operations were in worse condition than pass judgment. The investment group that had been running EB had let the companys infrastructure deteriorate and inventories dwindle. T his further compounded the acquisition by adding to the problem that it took six months to implement the most basic of dodgings integration due to the poor infrastructure, leading to stock outs within the stores.West Marines first impulsive reaction was to rebrand all the EB stores convert them to West Marines products and pricing, West Marines CEO John Edmondson (who was brought in after the acquisition to execute a company turn around) said regarding the acquisition, West Marine bought EB because it was different and unique. Then, they turned all the stores into West Marine stores and locked out the customer base. Adding to this Bruce Edwards (West Marines senior VP of store operations) said, We created a lot of damage to both chains, as well as losing ground on comparable sales as a combined organization. (Standford, Graduate School of Business, 2005)How West Marine Turned the Company AroundIn order to turn the company around after the acquisition Edmondson identified four suppl y chain problem areas the distribution centres (DCs), transportation, replenishment, and the systems supporting these operations his upshot to these problems was to implement a CPFR platform.The first thing as part of West Marines CPFR programme was implement an integrality ordering or multi-echelon replenishment process. A multi-echelon system is defined as A series of two or more production or supply facilities where any change in policy parameters of one facility affects the other facilities, either directly or indirectly.(Gopalakrishnan, 2004). According to (Standford, Graduate School of Business, 2005) prior to the implementing of the multi echelon system West Marine were using JDAs Merchandise Management System (MMS). The MMS was interfaced with the companys point-of-sale system in the stores (also provided by JDA) to keep track of basic inventory levels and product sales at the store level. West Marine also used JDAs Warehouse Management System (WMS) as the software engin e for its distribution centre (DC) operations. As well as these systems West Marine also made use of JDAs advanced forecasting tools, both modern Store Replenishment (ASR) and Advanced Warehouse Replenishment (AWR). The problem with these systems was that while they were good on their own, none of the systems had the ability to directly interact with each other leading to extensive reproduction work and maintenance. At the time no software provider offered a fully merged solution, it was left to West Marine as well as Matt Henderson a systems engineer and integrator from the San-Francisco based software company Amigo Inc. to design a system that integrated linkages between the point of sale systems to the DC systems. The system they designed was the first true multi echelon system in the retail sector. (bisg.org, 2005)The way in which West Marine implemented their multi echelon replenishment solution was to integrate data from the retail stores and warehouses with relation to sea sonal forecasts, promotions and stock levels, enabling suppliers to deliver more accurate, on time orders to satisfied customer demands.West Marines multi-echelon replenishment solution resolves the store-warehouse disconnect. Warehouse replenishment presently responds to all store-level overstocks and understocks. Similarly, all promotions and store level assortment changes are planned in the store system, and warehouse replenishment immediately responds to them. The solution eliminates duplicate forecasting tasks and creates more accurate supplier-order forecasts. (Reed Business Information, 2006) The West Marine multi echelon system is shown in figure 2.CUsersAmyElizabethDesktopSCM0654WESTERN2.gifSUPPLIER INTERGRATIONThe next problem that West Marine encountered was to get its suppliers to buy into the idea of CPFR. In order to address this problem West Marine introduced a pilot program with 12 handpicked companies that were major suppliers to West Marine, that all had previous issues with their supply chains in some form. To these companies West Marine laid out specific performance levels and expected stopping points, although no formal written agreements were created each company was expected to comply to the performance standards.For the suppliers that joined West Marines supply pilot there was no jacket investment outlay in technology, they were plainly required to designate recourses to act as counterparts to West Marines supply chain merchandise planners.With this set in place West Marine began sharing its forecasts on a weekly basis with its vendors, as a weekly update report on vendor performance. in that respect was also the introduction of weekly meetings with cross functional teams made up of members from all the organisations involved, in order to discuss potential improvements as well as to maintain a holistic integrated perspective on each vendor relationship.The results of the CPFR programme were in stock rates at the stores came close t o the goal of 96 percent in every store, even during peak season. Forecast accuracy climbed to approximately 85 percent. On-time shipments, on the other hand, were improving but only reached 30 percent against a stated goal of 90 percent in 2002. However, West Marine expected them to climb to at least 50 percent by the end of 2003. (Standford, Graduate School of Business, 2005).Even after the pilot programme with the evidence to back up that CPFR works, West Marine shut away had problems getting supplies to buy into the CPFR programme, West Marines solution to this was to offer its suppliers an incentive in the form of a guarantee. This guarantee was that based on the forecasts, West Marine promised to bargain for one hundred percent of the forecasted stock. This meant that if there were any errors in the system, then West Marine would bear the brunt as a result. It was this action that was responsible for convert and instilling vendor trust in West Marines CPFR forecasts.The knoc k on effects of having the suppliers buy into West Marines CPFR programme were that the company were able to use their demand forecasts to stream line their shipping and receiving activities. The forecasts enabled West Marine to maximise efficiency in its inbound and out bound shipments and to use its dock space more effectively, in turn allowing West Marine to smooth demand spikes.ConclusionIn conclusion as the evidence shows in both the Wal-Mart pilot programme and the West Marine case study CPFR is a powerful logistics stock forecasting toolhttp//www.free-logistics.com/index2.php?option=com_docmantask=doc_viewgid=268Itemid=26http//www.highbeam.com/doc/1G1-145836210.htmlhttp//www.lomag-man.org/cpfr_industrie_achat_distribution/documentation_cpfr/WestMarineA_CPFRSuccStorySupChManReManNet_an.pdfhttp//www.stanford.edu/group/scforum/Welcome/ discolor%20Papers/Multi-Echelon%20Inventory%20Optimization%20-%20Evant%20white%20paper.pdfGopalakrishnan, P., 2004. Handbook of Materials Managem ent, Prentice-Hall of India Pvt.Ltdhttp//webcache.googleusercontent.com/search?q=cache1UbbYNftcc8Jwww.bisg.org/docs/West_Marine_Case_GS-34_FINAL_092704.doc+matt+henderson+amigo+inc+cpfrcd=2hl=enct=clnkgl=uksource=www.google.co.uk