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by fred baumann and joe andraski

Collaborate, externally and internally
In CPFR and S&OP, two planning vehicles are better than one
June 2010

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manufacturers and mass-market retailers have established a joint collaboration so that manufacturers improve the accuracy of their demand forecasts and better manage their replenishment and inventory to fulfill demand from retailers. CPFR is external collaboration.collaborate. efficiency and margin. but were two pieces of an important process that when put together provided the intelligence and information for optimized planning at the executive level. lower expediting costs. Still. Practitioners have found that statistical models are only as good as the environments that they represent and the quality of the inputs that drive future calculations. Sam Walton. Additionally. as well as drive collaboration among all stakeholders to optimize profits. Collaboration makes good business sense. It enables organizations to synchronize effectively and efficiently. lower safety stock and proactively plan their supply chain to enhance overall customer service. manufacturers will be effective at integrating this data into a unified CPFR and S&OP process. externally and internally To take full advantage of retailers’ integrated and time-phased supply chain plans and translate them into new levels of customer connectivity. Manufacturers should portray accurately how the data will be used to drive value to their trading partners. CPFR and S&OP are both great planning vehicles on their own. Without that support and trust. 38 Industrial Engineer . the founder of Wal-Mart. translating collaboration for long-range plans has proven elusive. and optimize their supply and demand chains. Over the course of time. Manufacturers must find a methodology that ties independent best practices into a more holistic process that involves all partners in the supply chain. bringing both processes together into a cohesive plan can meet and exceed customer expectations. Manufacturers also should seek a methodology for connecting CPFR and S&OP that is built on insights from a number of retail partners. best-practice committees such as Voluntary Interindustry Commerce Solutions (VICS) provide an opportunity for manufacturers and their trading partners to participate and validate the synergy of connecting CPFR and S&OP processes. and those that can successfully harness collaboration with this critical retail channel will gain a strong competitive advantage in a crowded marketplace. Consider planning-time horizons The planning horizon for CPFR is usually short-term and typically is completed in weeks or months. manufacturers will not receive the data and visibility generated by time-phased demand planning. Scalability is critical as time-phased demand planning generates massive amounts of data. This increased visibility benefits suppliers with the potential to reduce variability. Best practices in demand management call for multiple views and perspectives with a statistical model being one of many inputs to the final plan. mass-market retailers can represent nearly half of a manufacturer’s revenue. retailers. Because CPFR and S&OP complement each other and can enable stronger supply chain links. Success or failure in this integration process hinges on creating a foundation of support with key trading partners. Retrofitting an emerging process into an old architecture or application built for a different purpose will cause more headaches than positive results. while S&OP is internal collaboration. streamline. forecasting and replenishment (CPFR) and sales and operations planning (S&OP). manufacturers must harness the synergy of collaborative planning. By creating this unified process. CPFR trading partners can provide validation and additional insight that can enhance the statistical forecast and add insights that cannot be captured in a statistical model. Simply put. In some cases. This includes committing to such benefits as shorter lead-times. It’s just like anything else though — it takes a little bit of time for the industry to understand what the value is and to take action to implement the necessary processes to see success and achieve economies of scale. • Evaluate your technology platform. linkage To link CPFR and S&OP successfully. Leading mass-market retailers are adopting time-phased forecasting and multilevel inventory planning capabilities to generate integrated supply chain plans across an extended period. improve perfect order metrics. add greater benefits for organizations. and an outdated system simply cannot support the integration of data at this level of granularity. Manufacturers must ensure that they have technology that is scalable and can support a linked CPFR and S&OP process. wholesaler distributors and suppliers can expect higher performance levels and a measurable competitive advantage. while the typical time horizon to support S&OP is 18 to 24 months and is presented in units and currency. was ahead of the curve by partnering with vendors and sharing information with them to optimize planning decisions for all trading partners in the retailer’s supply chain. • Take a proactive approach. companies began to realize that CPFR and S&OP weren’t so disjointed after all. pay close attention to the following recommendations: • Begin with a best-practice methodology. Traditionally. By adopting an advanced enterprisewide technology foundation. higher order fill rates.

It is imperative that C-level executives make the process a priority to drive organizational change and build a foundation of trust. • Establish a cross-functional team. there should be documentation placeholders for vulnerabilities. location and product dimensions.” It is critical that accurate inputs are leveraged when creating demand plans. To allow for continuous process improvement. Senior management must have a clear understanding of how this process is executed and how it helps the organization attain strategic and tactical objectives. However. sales. • Seek executive sponsorship. Determine how your company compares to leaders in your industry in execution and maturity level.improved on-time delivery and lower supply chain costs as a result of sharing this data. It is a given that a statistical demand planning engine should be in place to support the collaborative demand planning process. however. opportunities and action items related to the associated planning views. Use industry experts and benchmarking materials to identify gaps and opportunities related to your current approach. that the statistical engine be balanced by human intelligence that calls out assumptions incorporated into the working plans. Exceptionreporting capabilities will go a long way to assist management and improve the efficiency of the process. Incorporate a common framework and access approach to monitor performance of the collaborative S&OP (CS&OP) process. Significant change in management will need to take place on behalf of the manufacturers and their high-volume trading partners. Inputs include historical movement and inventory positions. so it is important that solutions leverage this single source for input to plan creation so the timeliest data is modeled. It is imperative that the participant views of the planning process can be summarized and changed at different levels of aggregation and then revised up or down the product location/hierarchy via automation. migrating to a successful CS&oP Begin your journey in the boardroom. In addition. Sales teams often plan at the account/item level. It is critical. forecasts. product and marketing often work at the product group level. while executives supporting the S&OP process generally work at the highest levels of product and geographical hierarchies. This will help guide future strategies that mitigate risk and take advantage of key opportunities as they occur. Value analysis models are available to assist with quantifying the value to gain required resources. Different functions within a supplier organization plan at varying levels within the time. previous demand plans and the assumptions used in the development process. demand plan accuracy and other key operating plan metrics will point to opportunities. Cross-functional teams historically have played a critical role in developing a single. team members must buy into the measurements that are put in place and have timely access to metrics that they are chartered to deliver. Make certain that the planning solution is flexible enough to work in different hierarchical views and reconcile planning views that are created at diverse levels. essentially defeating the purpose of the mass retailer providing this visibility. Assess demand planning and S&OP processes against best-practice leaders. weaknesses and threats that should be addressed in the monthly CS&OP meetings. in the past these teams have not been effective in ensuring that consumer demand data is translated into time-phased order plans and integrated into the supply chain. shared forecast and replenishment plan with an assigned mass-market retail customer. The solution should have a place to incorporate these written assumptions into the demand planning view so plans and assumptions can be reviewed continually for validity. A natural first step is a briefing session on how the process is executed and the best-practice approach to be deployed. margin. Manufacturers need to ensure that cross-functional teams have proven processes for migrating data pulled from timephased demand planning and transformed into a holistic CPFR and S&OP process. Many of the data elements are dynamic. Because many of the constituents in the process will be dispersed geographically. keys for a collaborative S&oP infrastructure plan Ensure that there is a single data repository to support “one version of the truth. Companies also can potentially accelerate behavior and process change by seeking out industry-leading consultants with proven track records for facilitating strategic processes and behavioral changes. Senior leaders will require a business case that can support the transition to this new working model. June 2010 39 . Web-based architectures are best suited to fill this requirement. A single repository also ensures that the metrics used to monitor the performance of the process are built from a common framework and data source. A common analytical environment should be connected to the single data repository to ensure that all constituents in the CS&OP process are measuring and monitoring performance from a common point of view. Inventory. Ensure the planning environment balances statistical views with human intelligence.

the number of product families incorporated and the planning horizon used for the initiative. and then determine what trading partners to participate with to provide a greater ROI in technology as well as in making changes within the organization. Define the CS&OP team leads for the deployment and execution of the planning exercises. He also served as a senior vice president of OMI. there is risk that companies operating too lean will be unable to fulfill orders and will lose sales by not having a proactive plan in place for future demand shifts. positively impact profitability. Begin the process sooner rather than later. As better technology and data become available. Unifying CPFR and S&OP models into a single process will enable manufacturers to realize unprecedented levels of customer connectivity. including vice president of supply and customer marketing. which is really what CPFR and S&OP is about. including the trading partners involved. manufacturers have to improve their supply chain practices. leverage time-phased demand-planning data generated by their massmarket retail partners and drive supply chain value to serve the end consumer better. the output of the process will be more accurate and completed quicker. Evaluate your current technology infrastructure. Highlight opportunities and potential return on investment (ROI) to senior management to acquire the resources for the project plan to achieve your desired end state. Existing business processes most likely will be well-entrenched and difficult to change. a retail software provider. These team leads need to have the authority to implement the new planning methodology. serving as the chair for the logistics committee. but it is about the ability to project what those problems are and take proactive steps before they become a critical issue. both upstream and downstream. To stay ahead of the competition. A formal reporting methodology will ensure that the participants constantly strive for improved results and will enable the planning and executive teams to weigh the views of functional participants properly. As the economy continues to improve.. d Fred Baumann is vice president. Create a framework that fosters continuous improvement. as well as sharing information with trading partners. There’s a tremendous opportunity to be garnered by strategically planning sales and supply through this integrated process. Joe Andraski is the president and chief executive officer of VICS and has been an adjunct professor at Penn State’s Smeal College for nine years. manufacturers must shift to demand-driven production and supply planning. Make sure your existing technology toolset supports the best-practice planning steps in your earlier assessment. replenishment and collaboration solutions to the retail. however. conducting self-evaluations across functions so that each function has an opportunity to build on strengths and improve upon weaknesses. wholesale and manufacturing demand chain verticals at JDA. That intellectual exchange of information then can be turned into an operational plan. 40 Industrial Engineer . He had been active with the Grocery Manufacturers Association. industry strategies at JDA Software. Researching and documenting the baseline performance of the organization prior to the kickoff of CS&OP and then monitoring the ongoing results will add momentum and continued buy-in to the process.collaborate. externally and internally Map processes to models and industry best practices that have been developed. He leads product and industry strategy for forecasting. The CS&OP team leads need to have the leadership and empowerment to change the status quo. To stay competitive. Many companies have accrued great benefits by working through the process steps even before all data and technology components are fully loaded. This approach helps companies begin to build the integration and communication points between functions and customers that will be critical to the ongoing success of the initiative. CS&OP offers organizations the capability to seize opportunities created by a changing customer landscape and take advantage of technology and process innovations. Prior to joining VICS. CS&OP is not about fixing problems on an ongoing basis. Information exchange boosts business CS&OP builds a framework for integrating the insights of customers downstream for a truly demand-driven approach to consensus planning. Supply chain practice improvement begins with the knowledge and intelligence that comes from building capabilities from within the organization. Build a requirements document that begins with the formalized business process developed through the assessment stage of your migration path. Andraski held several positions with Nabisco Inc. It will be important to document the scope of the initiative. Progressive manufacturers who unify the S&OP and CPFR models into a single process approach and shift to demand-driven production and supply planning will gain a competitive advantage. Manufacturers can achieve business and operational improvements by not operating in silos. Many retailers and manufacturers still are struggling with excess inventory as a result of the economic downturn.

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