© Oliver Wight

Solution-Driven Integrated Learning Paths

• Educational Sessions– Lean– Global Supply Chain– Basics of Operation Management– Demand Management, Forecasting, and S & OP– Professional Advancement– Special Interest Topics

• Plant Tours• Networking Events/Peer Interaction• Materials for Sale at the APICS Bookstore

© Oliver Wight

Make the Most of Your Educational Experience

• Develop a Learning Plan• Assess your learning needs• Use teamwork• Prepare to learn• Create your own Action Plan

© Oliver Wight

Live Learning Center

Sync-to-Slidewww.softconference.com/apics

© Oliver Wight

Ron Ireland is on the Oliver Wight Americas and International Board of Directors, and is a leading educator and consultant in supply chain, sales and operations planning, demand management, and supply chain collaboration. Ireland began his career at Martin Marietta Aerospace where he was involved in 6 different Class A certifications for materials requirementsplanning. He then joined Wal-Mart Stores as a strategy manager, responsible for the design and implementation for a significant portion of Wal-Mart’s Supply Chain Strategy. Ireland was awarded Wal-Mart’s “Visionary of the Year” for the design and implementation of the company’s replenishment and forecasting processes. He also has authored a new book titled, “Supply Chain Collaboration—How to Implement CPFR and other Best Collaborative Practices,” and was one of the leaders in the development of the “Oliver Wight Class A Checklist for Business Excellence”.

© Oliver Wight

Collaborative Planning, Forecasting, and Replenishment

in the Global Supply Chain

Ron IrelandPrincipal Consultant, Oliver Wright Americas

© Oliver Wight

Challenges in the Global Supply Chain

• Poor communication• Different performance expectations• Longer lead times• Excess inventory• Poor service levels• Poor quality• Reduced flexibility• Others?

© Oliver Wight

Common Comments about our Trading Partners

• They are always surprising us• We can’t trust them• They aren’t very collaborative• They are very demanding• They are clueless in what they want• POs are never consistent• They won’t share any information

© Oliver Wight

Supply chainSCOPE

Our Supply Chain of Yesterday We Could Handle

ConsumptionCustomer

Our distribution

sales company

Ourproduction

Oursuppliers

Customerscustomer

© Oliver Wight

Extended supply chainSCOPE

Our Global Supply Chain of Today Has Added Complexities

ConsumptionCustomer

Our distribution

sales company

Ourproduction

Oursuppliers

Customers/Customer

© Oliver Wight

Ord

er Q

uant

ity

Consumer sales

TIME

5

10

15

20

Ord

er Q

uant

ity

Retailer’s orders to manufacturer

TIME

5

10

15

20

Ord

er Q

uant

ity

Wholesaler’s orders to manufacturer

TIME

5

10

15

20

Ord

er Q

uant

ityManufacturer’s order to supplier

TIME

5

10

15

20

S.Hau Lee, Stanford University

We need our trading Partners help more than

ever to help smooth out the bull whip effect

© Oliver Wight

Sam Walton knew he needed his Vendors help

“COMMUNICATE everything you possibly can to your partners. The more they know, the more they’ll understand. The more they understand, the more they’ll care. Once they care, there’s no stopping them”

Sam Walton, founder of Wal-Mart Stores, Inc.

Sam Walton, – Made in America – My Story

© Oliver Wight

Collaborative Planning Forecasting and Replenishment

A formal way to improve global Supply chain collaboration

© Oliver Wight

CPFR®

• Voluntary Inter-industry Commerce Standards (VICS) sponsors CPFR® Working Group

• VICS creates collaboration guideline standards– Business– Technology

• Original guidelines centered around forecasting– Sales demand– Planned orders

• New guidelines being currently developed– Retail S&OP– Expanded planning collaboration of S&OP to S&OP

between trading partners

© Oliver Wight

Change the relationship paradigm between trading partners and create significantly more accurate information that can

drive the value chain to greater sales and profits.

Mission of CPFR®

© Oliver Wight

Collaborative planning, forecasting and replenishment (CPFR®) is 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® Defined

© Oliver Wight

CPFR® Principles• Joint business planning• Common goals and metrics• Agreement to collaborate• Use technology standards

for data sharing– Data, text, and security

• Measurement and reporting of joint benefits and performance results

© Oliver Wight

Why CPFR® Is Important?Financial Benefits

Cut costs

Increase profits

Grow revenue

Improved Communication

BetterExecution

Leverage Strengthsof Each Partner

FewerSurprises

Coordination forBetter Optimizations

Core Competency Focus

© Oliver Wight

• Step 1 – Front-End agreement– Agree to confidentiality and dispute

resolutions– Develop scorecard to track supply

chain metrics– Establish incentives

• Step 2 – Joint Business Plan– Project team develops plans for

promotions, inventory policy changes, new product introductions, store openings and closings

• Steps 3 – 5 – Sales forecast collaboration– Trading partners share demand

forecasts and identify exceptions. Resolutions are collaborated on causal factors to a single forecast number.

• Steps 6-8 – Order forecast collaboration– Trading partners share replenishment

plans, identifying and resolving exceptions.

• Step 9 – Order generation/delivery execution

– Results data is shared and forecast accuracy problems is reviewed. Performance metrics are accessed.

R esolve / C ollabora te O n Exception Items

Identify Exceptions for Sales Forecast

Crea te Joint B us iness P lan

Distributor B usiness D evelopment Activities

Manufac turer B usiness D eve lopment Activities

Manufac turer Materials & Production

Planning

C reate Sales Forecas t

C reate Order Forecast

Identify Exceptions for Order Forecast

Resolve / Collaborate On Exception Items

Order Generation Produce Product

D elive ry Execution Order Filling / Shipment ExecutionDistributor Rece iving

Retail Store

C onsumer

LongTerm

Feedback

POS Data

Short Term

Order / PO

Distributor Exception Triggers

2

3

4

5

6

Product

U pdated Data for Exception Item s

Exception Items

Order filling feedback

M anufacturer Exception Triggers

Frozen Forecast

K ey :Distributor Activities

Either / Jo int Activities

Manufacture r Activities

Business M odel - Scenario A

Exception Items

7

8

Distributor Exception Triggers

M anufacturer Exception Triggers

Distributor Decision Support D ata

M anufacturerD ecision Support Data

PlanningForecasting

Replenishm

ent

D eve lop Front-End Agreement1

9

Order Forecast

Constraints

Constraints

Exception Criteria

Exception Criteria

Distributor Decision Support Data

M anufacturerDecision Support Data

The OriginalCPFR® 9 Step Guidelines

© Oliver Wight

Consumer

Manufacturer

Retailer

Customerscorecard

Accountplanning

Marketplanning

Marketdata

analysis

Demandplanning

Production &supply planning

Logistics/distribution

Executionmonitoring

Performance assessment

Collaborationarrangement

Jointbusiness

plan

Salesforecasting

Orderplanning/

forecastingOrder

generation

Order fulfillment

Exceptionmanagement

Vendormonitoring

Categorymanagement

Supplierscorecard

Storeexecution

Logistics/distribution

POSforecasting

Buying/re-buying

Replenishmentplanning

© Oliver Wight

CPFR® Challenges • Trust• Complexity• Cultural issues

– Internal– External

• Organizational –Getting rid of the silos– Internal– External

• Execution - Doing what was promised• Win/win partnerships

© Oliver Wight

To resolve some of the CPFR® Challenges of the past: Use a Simple CPFR® Approach

• Business process flow• How trading partners

plan and execute

Educate

Share

Execute

Agree• Information and knowledge• Data

• When and how to collaborate• Improvements and benefits

that will be gained

• Measure and monitor results

• Continuously improve

© Oliver Wight

Types of information shared and collaborated on using CPFR® : Globally

• Demand forecasts

• Replenishment orders

• New product launches

• Shipments and withdrawals

• Inventory positions

• Performance scorecards

• Promotions

• Collaborative VMI

• Supply commitments and constraints

• Collaborative transportation flow

• Business plans– Strategic S&OP

© Oliver Wight

When you agree to CollaborateKeep it Simple and Write it Down

• Document the front end arrangement• Define objectives and scope• Define roles and responsibilities• Agree to what information will be shared• Agree to how collaboration will work• Agree to the performance metrics• Keep the lawyers out of it!

• Lets review an example of a CPFR® Front End Arrangement

© Oliver Wight

CPFR® in the Global Supply Chaincollaboration opportunities between all links

Planning

Forecasting

Ordering

Producing

Inspecting

Shipping

Packaging

ProductionPlanning

Designing

Sourcing

MaterialsOrdering

Forecasting

Pricing

Receiving

Allocating

Warehousing

Processing

Shipping

Store Receiving

Presenting

Replenishing

Supplier

Retailer

collaborative forecasting?

JIT prepacks?shared scheduling?

capacity commitments?

EDI?

dynamic allocation?

pre-receiving?

cross-dock?

reserve stock?

size scaling?

pre-buy goods?

© Oliver Wight

VICS CPFR® Working Group expands to S&OP

New Subcommittee formed in Spring 2009 to define S&OP Collaborative Guidelines for Retail Supply Chain

© Oliver Wight

VICS Retail Supply ChainS&OP Subcommittee

• Retailers– Wal-Mart - sponsor - Lowes - sponsor – Best Buy - West Marine

• Suppliers/Vendors– Kimberly Clark - Samsung– P&G - Garmin– Kraft - Whirlpool– J&J - Reckitt Benckiser– HP

• Technology Providers– JDA - Agentrics– SAP

• Consulting– Oliver Wight – facilitator– Alixpartners

© Oliver Wight

Why is VICS defining a standard guideline for Retail S&OP?

• Retailers first wanted to require all major suppliers to have Best Practice S&OP processes

• Retailers realized that they should also adopt S&OP processes

• VICS is developing a Best Practice Guideline for S&OP in Retail that Links to the Best Practice S&OP processes used by their suppliers and links to the CPFR® Guidelines

• VICS is the sponsor to help Retailers and Suppliers think through this S&OP and CPFR® effort to develop what would be Best Practices for the expanded S&OP Collaboration effort

© Oliver Wight

Increased Forecast Accuracy by: 18–25%

Increased Sales Revenue by: 10–15%

Increased On-Time Delivery by: 10–50%

Inventory Reduction by: 18–46%

Safety Stock Reduction by: 11–45%

Increased Productivity by: 30–45%

S&OP Benefits Reported by 40 Companies

©2007 Oliver Wight International Confidential

Could both partners benefit if they do S&OP?

© Oliver Wight

Could both partners benefit if they do CPFR®?

• Sales increased 15% to 20% from inventory optimization and instock improvements

• Margin rate improved 3% to 5% from reduced markdowns and better operational efficiency

• Inventory reduced 12% to 15% from increased planning horizons and forecast accuracy

• SG&A expense reduced 3% to 5% from lower transportation expediting, inventory carry and overhead

• Kurt Salmon Study of CPFR®

© Oliver Wight

VICS S&OP Best Practice Model

© Oliver Wight

SupplyVP OperationsPresents the Supply forecast and Rough-Cut Capability Validation Identifies Imbalances in Demand and Supply and Presents AlternativesChairs Supply Review

DemandVP Marketing & Sales

Presents the DemandPlan and SummaryIdentifies Customer andMarket IssuesChairs Demand Review

MBR ChairCEO / President

Chairs the MBR MeetingEnsures that Decisions are made and ActionsAssigned to AddressKey IssuesS&OP Process Owner

Product MgmtPresents the Product Mgmt Status and SummaryId’s New Product Issues That Impact Demand/SupplyChairs PMReview

VP of R&D or Marketing

Finance

Presents the Financial Plan and SummaryIdentifies Financial IssuesChairs Finance Review

Chief Financial Officer

The Manufacturing S&OP Process Owners -Roles and Responsibilities

STRATEGYBUSINESS PLANPERFORMANCE

DEMANDREVIEW

SUPPLYREVIEW

PRODUCT MANAGEMENT

REVIEW

MANAGEMENTBUSINESSREVIEW

© Oliver Wight

Supply

Presents the Supply forecast and Rough-Cut Capability Validation Identifies Imbalances in Demand and Supply and Presents AlternativesChairs Supply Review

Demand

Presents the DemandPlan and SummaryIdentifies Customer andMarket IssuesChairs DM Review

MBR Chair

Chairs the MBR MeetingEnsures that Decisions are made and ActionsAssigned to AddressKey IssuesS&OP Process Owner

Product Mgmt

Presents Category ManagementIdentifies New Product Launches and AssortmentChairs PMReview

Finance

Presents the Financial Plan and SummaryIdentifies Financial IssuesChairs Finance Review

Retail S&OP process owners - roles and responsibilities – a work in progress

VP Replen / POS Forecasting

VP Supply Chain

CFOCEO / President

VP Merchandising

STRATEGYBUSINESS PLANPERFORMANCE

DEMANDREVIEW

SUPPLYREVIEW

PRODUCT MANAGEMENT

REVIEW

MANAGEMENTBUSINESSREVIEW

© Oliver Wight

The Linking of S&OP and CPFR® Challenge

© Oliver Wight

You need to have the skills if you’re going to execute well with others.

To link S&OP and Retail S&OP using CPFR® you need to be able to

“Pitch and make the Catch” both ways

© Oliver Wight

Demand Review

ExecutiveMgmt Business

Review

1.

SupplyReview

2.3.

4.

New Product/ActivitiesReviewCPFR ® Model Property of VICS

S&OP Links To CPFR® - TBD

© Oliver Wight

How they could work together• The S&OP process supports better demand forecasting, just

as CPFR® supports better forecasting of demand – Could lead to the actual use of the forecast in execution

• S&OP provides greater visibility to product marketing– Retail S&OP provides greater insight into retailer product

transitions– MFG provides better insights to New Product Introductions– Private Label collaboration potential seen

• S&OP provides visibility of supply capabilities– Manufacturing constraints and optimization decision making– Longer range forecasting of capacities in Retailer DC’s, Logistics– Store Expansions and longer range impacts on supply

• CPFR® provides the mechanism for coordination between Supplier S&OP and Retail S&OP– Expansion on information sharing and collaboration points

© Oliver Wight

S&OP and CPFR® – better together

• The synergy– Time frame

• S&OP and Retail S&OP 1 – 24 months• CPFR® 1-12 months – currently

– Main focus is 1 – 13 weeks

• Key Benefits– More accurate demand forecast– Stronger internal alignment– CPFR® process well positioned to provide more accurate

demand forecast for S&OP – Addresses constraints and opportunities to create a

consensus forecast– Smoothing the Retail Supply Chain Bull Whip

© Oliver Wight

MANAGEMENT BUSINESS REVIEW

SUPPLIERMANAGEMENT

SUPPLY POINTMANAGEMENT DEMAND

MANAGEMENT

MARKETMANAGEMENT

SALESMANAGEMENT

DEMANDREVIEW

SUPPLY CHAINMANAGEMENT

SUPPLYREVIEW

PRODUCT MANAGEMENT

REVIEW

RESOURCEMANAGEMENT

PORTFOLIOMANAGEMENT

PROJECT MANAGEMENT

PROCUREMENTMANAGEMENT

PROCUREMENTMANAGEMENT

STRATEGYBUSINESS PLANPERFORMANCE

MANAGEMENT BUSINESS REVIEW

SUPPLIERMANAGEMENT

SUPPLY POINTMANAGEMENT DEMAND

MANAGEMENT

MARKETMANAGEMENT

SALESMANAGEMENT

DEMANDREVIEW

SUPPLY CHAINMANAGEMENT

SUPPLYREVIEW

PRODUCT MANAGEMENT

REVIEW

RESOURCEMANAGEMENT

PORTFOLIOMANAGEMENT

PROJECT MANAGEMENT

PROCUREMENTMANAGEMENT

PROCUREMENTMANAGEMENT

PROCUREMENTMANAGEMENT

PROCUREMENTMANAGEMENT

STRATEGYBUSINESS PLANPERFORMANCE

MANAGEMENT BUSINESS REVIEW

SUPPLIERMANAGEMENT

SUPPLY POINTMANAGEMENT DEMAND

MANAGEMENT

MARKETMANAGEMENT

SALESMANAGEMENT

DEMANDREVIEW

SUPPLY CHAINMANAGEMENT

SUPPLYREVIEW

PRODUCT MANAGEMENT

REVIEW

RESOURCEMANAGEMENT

PORTFOLIOMANAGEMENT

PROJECT MANAGEMENT

PROCUREMENTMANAGEMENT

PROCUREMENTMANAGEMENT

STRATEGYBUSINESS PLANPERFORMANCE

MANAGEMENT BUSINESS REVIEW

SUPPLIERMANAGEMENT

SUPPLY POINTMANAGEMENT DEMAND

MANAGEMENT

MARKETMANAGEMENT

SALESMANAGEMENT

DEMANDREVIEW

SUPPLY CHAINMANAGEMENT

SUPPLYREVIEW

PRODUCT MANAGEMENT

REVIEW

RESOURCEMANAGEMENT

PORTFOLIOMANAGEMENT

PROJECT MANAGEMENT

PROCUREMENTMANAGEMENT

PROCUREMENTMANAGEMENT

PROCUREMENTMANAGEMENT

PROCUREMENTMANAGEMENT

STRATEGYBUSINESS PLANPERFORMANCE

MANAGEMENT BUSINESS REVIEW

SUPPLIERMANAGEMENT

SUPPLY POINTMANAGEMENT DEMAND

MANAGEMENT

MARKETMANAGEMENT

SALESMANAGEMENT

DEMANDREVIEW

SUPPLY CHAINMANAGEMENT

SUPPLYREVIEW

PRODUCT MANAGEMENT

REVIEW

RESOURCEMANAGEMENT

PORTFOLIOMANAGEMENT

PROJECT MANAGEMENT

PROCUREMENTMANAGEMENT

PROCUREMENTMANAGEMENT

STRATEGYBUSINESS PLANPERFORMANCE

MANAGEMENT BUSINESS REVIEW

SUPPLIERMANAGEMENT

SUPPLY POINTMANAGEMENT DEMAND

MANAGEMENT

MARKETMANAGEMENT

SALESMANAGEMENT

DEMANDREVIEW

SUPPLY CHAINMANAGEMENT

SUPPLYREVIEW

PRODUCT MANAGEMENT

REVIEW

RESOURCEMANAGEMENT

PORTFOLIOMANAGEMENT

PROJECT MANAGEMENT

PROCUREMENTMANAGEMENT

PROCUREMENTMANAGEMENT

PROCUREMENTMANAGEMENT

PROCUREMENTMANAGEMENT

STRATEGYBUSINESS PLANPERFORMANCE

consumptionOur customers

Ourdistribution

sales company

OurproductionOur suppliers

OPTIMIZED / SYNCHRONIZED PLANS

Supplier Manufacturing Customer

Collaboration Linkage using CPFR®

Global Extended Supply Chain S&OP with CPFR®

© Oliver Wight

So what’s next?

• The new Retail S&OP Committee is now active• Strong support by leading companies

– Retail• Has a Gorilla behind it

– Manufacturing• Has many Gorilla’s behind it

– Technology– Consulting

• Goal to have Retail S&OP and the CPFR Guidelines defined and implemented by 2010

© Oliver Wight

Using CPFR® in your Global Supply Chain

Key Take Aways

© Oliver Wight

CPFR® is Flexible

• CPFR® is an Industry “Guideline”• You can define each collaborative

relationship differently• Keep the process simple• Ensure you have leadership

sponsorship• Write down and agree to how the

collaboration can work• Make this a Win/Win Partnership

© Oliver Wight

Get Started• Determine your own readiness for CPFR®

– Do you have Your Own House In Order?• Determine if your trading partners are willing

to collaborate in a CPFR® process– You can’t teach a Pig to Sing

• Develop a CPFR® program– On boarding workshops– Front end Arrangement– Structure review and collaborative processes

• “Learn from Doing”

© Oliver Wight

Prepare now for the future

• An industry transformation will change with Retail S&OP– The Gorilla Retailers are going to “Strongly

Encourage” S&OP to S&OP using CPFR®

– Don’t become the Victim of the “Bar Raising”– Other industries often watch what Wal-Mart is

doing• CPFR can help you “Smooth the Bullwhip”• You can collaborate if you try

© Oliver Wight

Thank You!

Ron Ireland720-289-0016

rireland@oliverwight.com