Introduction to Collaborative Planning Forecasting and Replenishment (CPFR)

November 3, 2000
Bob Cowdrick Manager of Business Consulting Logility Inc. Bcowdrick@logility.com

Agenda
Introductions Logility Overview What is CPFR Software Demonstration Demand Planning XPS (eXtensible Planning Solution) Case Study Summary Adjourn

Logility Mission Statement

To enable the optimization of our Customers Value Chain by providing solutions that collaboratively integrate their business processes with their Trading Partners

Logility Overview
Leader: Business-to-Business Collaborative e-Commerce Solutions via the Internet with over 400 customers

Innovator: Winner Information Week Outstanding e-Commerce Application using Internet Visionary: First Internet-based B2B Collaborative solution deployed in 1996 Public: Traded on NASDAQ under LGTY

Analysts Opinions of Logility

Logilitys strengths include breadth of product suite, ease of use of products (intuitive GUI), demand planning capabilities, rapid implementation focus, internet product -- not just vision. Gartner Group Logility is pioneering a direction the industry is sure to follow by providing collaborative planning solutions that balance production and supply constraints with demand opportunities. AMR Research

Blue Chip Customers

B2B Collaborative Commerce Solutions

Historic Demand
Forecast

B2B Collaborative Commerce Solutions

Historic Demand
Forecast

Collaboration: Lite Users Sales Reps World-Wide Intranet-Based

B2B Collaborative Commerce Solutions

Historic Demand
Forecast Promotional Data Advertising Calculate Lift

Collaboration: Lite Users Sales Reps World-Wide Intranet-Based

B2B Collaborative Commerce Solutions

Historic Demand
Forecast Promotional Data Advertising Calculate Lift Inventory Rules: Service Levels Safety Stock Inventory Turns Order Quantity

Time-Phased Inventory Plan

B2B Collaborative Commerce Solutions

Historic Demand
Forecast Promotional Data Advertising Calculate Lift

Supply Chain Network Time-Phased Inventory Plan On-Hand Inventory, Expected Receipts, Customer Orders

Transfer Orders, Manufacturing Orders, or Purchase Orders

Historic Demand From Legacy

B2B Collaborative Commerce Solutions

Promotional Data Advertising Calculate Lift Inventory Rules: Service Levels Inventory Turns

Forecast Time-Phased Inventory Plan

Trading Partners

Planned Orders
Orders

B2B Collaborative Commerce Solutions

Historic Demand
Forecast Promotional Data Advertising Calculate Lift Inventory Rules: Service Levels Inventory Turns Time-Phased Inventory Plan On-Hand Inventory, Expected Receipts, Customer Orders Transfer Orders, Manufacturing Orders, or Purchase Orders Constrain Supply Orders

B2B Collaborative Commerce Solutions

Historic Demand
Forecast Promotional Data Advertising Calculate Lift Inventory Rules: Service Levels Inventory Turns Time-Phased Inventory Plan On-Hand Inventory, Expected Receipts, Customer Orders Transfer Orders, Manufacturing Orders, or Purchase Orders Constrain Supply Orders

B2B Collaborative Commerce Solutions

Historic Demand
Forecast Inventory Rules: Service Levels Inventory Turns Time-Phased Inventory Plan On-Hand Inventory, Expected Receipts, Customer Orders Transfer Orders, Manufacturing Orders, or Purchase Orders Constrain Supply Orders

Demand Planning
The Goal To deliver the most accurate forecasts with the least effort.

Flexible Business Model Best Fit Modeling Graphical Review & Overrides Advanced Simulations

Pyramid Power & Flexibility

Logistics Face
DIV Retail Family Watch SKU KK101

Management Overrides

DC Atlanta
Customer Saks

Flexible Aggregation
Type SKU
Region SKU DC Customer
Salesman

Area

Sales Face

32 User Defined Attributes

Automatic Model Selection

SEASONAL

NONSEASONAL

UNPATTERNED IRREGULAR

PATTERNED IRREGULAR

MOVING AVERAGE

DERIVED

Self Correcting Process

E-Business Continuum
Pre Internet EDI over Internet Trade Exchange Cooperative Coercion Collaborative Community

Buyer

Seller

Buyer

Seller Buyer

Seller

Buyer

Seller

Buyer Seller

a Relationship Model

1 2 3

a b c

1 2 3 a

a 1 b

b c

2 3

b c

One to One Many to Many Many to Many Company v Company Ind. Material, Public Competition

One to Many One to One,M Company v Company Chain v Chain Hybrid Direct Material Colloboration Private Collaboration CPFR.ORG

E-Business Continuum
Pre Internet EDI over Internet Trade Exchange Cooperative Coercion Collaborative Community

Buyer

Seller

Buyer

Seller Buyer

Seller

Buyer

Seller

Buyer Seller

a Relationship Model

1 2 3

a b c

1 2 3 a

a 1 b

b c

2 3

b c

One to One Many to Many Many to Many Company v Company Ind. Material, Public Competition

One to Many One to One,M Company v Company Chain v Chain Hybrid Direct Material Colloboration Private Collaboration CPFR.ORG

Primary Benefit

Service, Revenue, Relationship Value Transaction Cost, Unit Cost

CPFR: What Is It?

A major initiative by large-scale backers Its not a technical protocol A business process model in 9 steps Applies to all trading partner relationships

A Definition
A formal business process for value chain partners to coordinate plans in order to improve efficiencies and increase sales and service.

VICS-CPFR Participants
Manufacturers
Corning Consumer Products Eastman Kodak Fieldcrest Cannon Hewlett Packard Kimberly-Clark Levi Strauss Philips Consumer Communications Mead School & Office Products Nabisco Pillsbury Procter & Gamble Sara Lee Warner-Lambert

Retailers
Circuit City Federated Department Stores JCPenney Kmart Staples Wal-Mart

Others
Benchmarking Partners DAMA Project Ernst & Young Intelink Uniform Code Council

Collaborative Trading Communities vs. Exchanges

One to One

Many to Many

Price is not primary driver

Products are branded or differentiated

Price is key decision factor

Products are not differentiated

Fulfillment is competitive weapon

Fulfillment is homogenous

Discontinuous Continuous innovation, innovation, integrating automating old business new business processes processes Exception based B2B Exclusive

Self-service based B2C and B2B

The CPFR Process

Once
1. Front-End Agreement
Collaborative Planning

Qtr.

2. Joint Business Plan

Seller Order Forecast

Collaborative Forecasting

Wk, Mo

3. Create Sales Forecast 4. Identify exceptions 5. Resolve exceptions

Buyer Sales Forecast

Wk, Mo

6. Create Order Forecast 7. Identify exceptions 8. Resolve exceptions

Collaborative Replenishment

9. Generate Order

Voyager XPSTM VICSCompliant CPFR

Collaborative Forecasting and Replenishment Configurable Workflow Capabilities Process Definition for managing Trading Partner Relationships Universal Exception Builder User configurable exception engine Scalable Deployment Hub and Spoke and Peer to Peer

Heineken USA
Case Study Per Gartner Group and AMR: acknowledged as the first collaborative forecasting and replenishment system over the Internet (live since Dec. 96) $750M/year beer importer 425 distributors (95% of volume) now live with HOPS over the Internet Order to Cash Cycle Reduced by 4 weeks (from 9 to 5)

Heineken, USA
Challenge: New business process, connecting 450 distributors, Heineken USA, and Heineken breweries May 1996: Contract signed July 1996: Implemented Logility Value Chain Solutions at corporate November 1996: Pilot distributors live with Demand and Supply Chain Voyager December 1998: 100% participation

Heineken before

You & Me

Trade

Distribution

Warehouse

Factory

Extended order cycle time

Traditional supply-side focus

Disconnected from field knowledge

Heineken after

You & Me

Trade

Distribution

Warehouse

Factory

Focus on entire Value Chain

4 week reduction in lead time Fresher product on shelf Heineken Sales focused on trade cultivation

Why CPFR?
Reduce variance between your Supply and your customers Demand through jointly derived plans. Increase Revenue. Competitive Advantage: Win with your partner mentality - My chain is better than your chain. More accurate collaborative plans equates to more accurate/automatic execution transactions.