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CPFR® Technology
Henry C. CoTechnology and Operations Management, California Polytechnic and State University
Cornerstones of CPFR®
Internal ProcessesJoint processes Technology
Småros J., and Kary Främling, “Peer-to-Peer Information Systems - An Enabler of Collaborative Planning, Forecasting and Replenishment,” available online from http://www.cs.hut.fi/~framling/Publications/LRN2001.pdf
Technology
Open System Internet Application
Development Methods Secure Communication
Working to a Single Forecast
Common MeasuresPlanningInformation Sharing
Joint processes
Internalprocesses
Scalability through collaborative processes that are flexible, fast to implement and easy to integrate.
Internal processes that produce and use collaborative information.
Technology for secure, reliable and cost-effective information sharing and communication.
Viswanathan, R., “Systematic Collaboration in the Supply Chain Planning, Forecasting, Viswanathan, R., “Systematic Collaboration in the Supply Chain Planning, Forecasting, and Replenishment,” available and Replenishment,” available online from http://www.ise.ufl.edu/Supplychain/done/Day1/Viswanathan/Viswanathan.pptonline from http://www.ise.ufl.edu/Supplychain/done/Day1/Viswanathan/Viswanathan.ppt
Internal Processes
Willing to share informationAble to share information
Collaborative Forecasting (Henry C. Co) 5
Willing to share information Trust – Fear that information (e.g., end-customer
demand, upcoming promotions, and sales forecasts) may leak, or be used against them.
Power – Knowledge is power. Access information (e.g., end-customer demand), gives one power in the supply chain – making this information available to others could lessen this power.
Able to share information Trading partners may have difficulties sharing
information because their internal processes do not correspond and, in some cases, cannot produce the necessary data. For example, several grocery retailers find it impossible to produce item level forecasts for all of their tens of thousands of products, which obviously forms a significant obstacle for CPFR type collaboration.
Joint Processes
ScalabilityInteroperability
Collaborative Forecasting (Henry C. Co) 7
Scalability Support for many trading partners,
involving large numbers of products
Interoperability Common standards
Collaborative Forecasting (Henry C. Co) 8
Scalability Small-scale pilots may not work be scalable.
Nabisco, for example, admits that it still does not have a scalable enough solution despite being one of the early companies to start CPFR piloting (Frantz, 2000).
Scalability, i.e. support for several users, rapid implementation and easy integration with different types of existing systems, need to be required of collaborative processes and supporting tools.
Common standards Lack of common standards for sharing the type of
information needed for CPFR is today slowing the development down (Angeles, 2000).
Technology
Control and SecurityScalabilityStandardization
Collaborative Forecasting (Henry C. Co) 10
Technological Infrastructure Requirements
1. Control and security – should be able to control what information is shared, with whom and be able to rely on the security of the information sharing.
2. Scalability – must support collaboration with many large or small trading partners, and many products; should offer easy integration with different types of existing systems.
3. Standardization – should use open standards in order to allow the network to expand rapidly.
Centralized vs. Decentralized Solutions
Centralized – Electronic MarketplaceDecentralized – Peer-to-peer information systems
http://www.cs.hut.fi/~framling/Publications/LRN2001.pdf
Electronic Marketplace, a.k.a. Exchanges
1. Order matching2. Requisition and routing approvals 3. Financial settlement of orders4. Content management5. Logistics fulfillment services6. CPFR activities.
Collaborative Forecasting (Henry C. Co) 13
Exchanges’ Services1. Order matching
Catalogue orders –Fix-priced catalogue items Dynamic pricing – the marketplace matches
orders real-time based on bids and quotes that come into the marketplace
Auctioning Request for proposals – detailed
specifications are put online and bids are consolidated and compared.
2. Requisition and routing approvals – requests are routed to the right manager for approval.
3. Financial settlement of orders
Collaborative Forecasting (Henry C. Co) 14
4. Content management – e.g., converting and maintaining catalogue information.
5. Logistics fulfillment services.
CPFR capabilities – forthcoming.
Morgan Stanley Dean Witter (2000), The B2B Internet Report. Collaborative Commerce.
Collaborative Forecasting (Henry C. Co) 15
CPG Industry Exchanges New in CPG (2000).
Founded by supplier Transora (www.transora.com) CPGmarket.com (www.CPGmarket.com)
Founded by retailers WorldWide Retail Exchange
(www.worldwideretailexchange.org) GeneralNetXchange (www.gnx.com)
Collaborative Forecasting (Henry C. Co) 16
Advantages Efficient matching of demand and supply – Easier to
involve many (even anonymous) players in the trading process. Expands customers base; lowers barriers for sellers to
participate in bidding. Expands supplier base; allows buyers to get better
price. Only investment is the communication link to the
exchanges – Low entry barrier (allows small players to participate in CPFR).
ONE link (to the exchange), rather than several links to several trading partners.
Standardization – Exchanges impose communication standards (open or proprietary).
Value-added services – translation services when trading partners use different message formats.
Collaborative Forecasting (Henry C. Co) 17
Disadvantages Reduced control – once information is
uploaded to the exchanges, must rely on the exchange to deliver it to the right recipient (and only the right recipient);
Power – Exchanges are likely develop features and capabilities to cater to the needs of large customers;
Exchanges offer standardized solutions, companies have different needs in collaboration.
Transaction and service fees.
Collaborative Forecasting (Henry C. Co) 18
Disadvantages Information has to be explicitly
communicated to the administrator of the marketplace, thus making it more difficult to keep catalog information (product info, prices) up to date.
Peer-to-Peer System
Instead of passing through centralized databases and servers, data is exchanged directly between systems.
No need for a 3rd party for setting-up and governing the network.
Inter-face
RETAILER MANUFACTURER
ForecastTable
Shared Data
Inter-face
PromotionsTable
ItemTable
AP
PL
ICA
TIO
N
ForecastTable
PromotionsTable
ItemTable
AP
PL
ICA
TIO
N
ITEMNUMBER
1234567890001
1234567890002
1234567890003…
RTLR’SFORECAST
1200
14000
330
MFR..FORECAST
1150
9000
350
DELTA
50
5000
20
TOLERANCE
100
2000
50
OK?
Internet
Shared Process and Data Model
Viswanathan, R., “Systematic Collaboration in the Supply Chain Planning, Forecasting, Viswanathan, R., “Systematic Collaboration in the Supply Chain Planning, Forecasting, and Replenishment,” available and Replenishment,” available online from http://www.ise.ufl.edu/Supplychain/done/Day1/Viswanathan/Viswanathan.pptonline from http://www.ise.ufl.edu/Supplychain/done/Day1/Viswanathan/Viswanathan.ppt
RetailerWorkstation
WorkstationManufacturer
CPFR Serverwww.supplier.cpfr.com
CPFR Serverwww.retailer.cpfr.com
SMTPS/MIME, SIL
Backend Server AppsData Data
Backend Server Apps
Peer to Peer Scenario Architecture
Viswanathan, R., “Systematic Collaboration in the Supply Chain Planning, Forecasting, Viswanathan, R., “Systematic Collaboration in the Supply Chain Planning, Forecasting, and Replenishment,” available and Replenishment,” available online from http://www.ise.ufl.edu/Supplychain/done/Day1/Viswanathan/Viswanathan.pptonline from http://www.ise.ufl.edu/Supplychain/done/Day1/Viswanathan/Viswanathan.ppt
Collaborative Forecasting (Henry C. Co) 22
Example of Retailer-Supplier Setup Supplier configures three connections to access
forecast data from three retailers Each retailer configures the connection to the
supplier, permitting the supplier access to their forecasting information.
http://www.cs.hut.fi/~framling/Publications/LRN2001.pdf
Collaborative Forecasting (Henry C. Co) 23
Connections set up by mutual agreement; configure what database to use, setup the database tables, and eventually add new database users with appropriate access rights.
Three pieces of information Identifier of the partner Internet address of the partner computer to
connect to/receive connections from Public RSA encryption key that uniquely identifies
and authenticates the partner.
http://www.cs.hut.fi/~framling/Publications/LRN2001.pdf
Information Sharing Connections
See PowerPoint on Cryptography
Collaborative Forecasting (Henry C. Co) 24
Advantages and Disadvantages Advantages
Control and power No need for a 3rd party for setting-up and
governing the network. All parties have equal status regardless of their
size and can independently choose how to collaborate with other network parties.
Scalability Network setup as needed; no limit on number of
parties, products or product groups. Up-to-date information No participation fees
Disadvantage: Slow standardization
CPFR Interoperability
In Peer-to-Peer Collaboration, trading partners use CPFR applications
ServerServer ClientClient
NetscapeLiveWireInformix 7.2
NetscapeLiveWireInformix 7.2
EnterpriseServer 3.0EnterpriseServer 3.0
WebBrowser
WebBrowser
Sun Sun UltraUltra
HTTPHTTP
A Client-Server Architecture
Viswanathan, R., “Systematic Collaboration in the Supply Chain Planning, Forecasting, Viswanathan, R., “Systematic Collaboration in the Supply Chain Planning, Forecasting, and Replenishment,” available and Replenishment,” available online from http://www.ise.ufl.edu/Supplychain/done/Day1/Viswanathan/Viswanathan.pptonline from http://www.ise.ufl.edu/Supplychain/done/Day1/Viswanathan/Viswanathan.ppt
Prototype Process/Functionality Authenticates users Stores exceptions data Allows selective retrieval of data Displays time-variant data such as supplier
forecast, retailer forecast, POS for 52 weeks Displays detail time-invariant data such as
On-hand, Fill-rate, store information etc for a specific forecast
Displays information in both tabular and graphical form
Displays calendar of events for both sides, for each item
Shows how a level 1 (corporate) forecast can be drilled down to DC and store levels
Shows how a forecast update can take place interactively
Shows how messages associated with an exception can be created, stored and sent.
Next Steps for CPFR and the industry Refinement and publication of process models Define/establish prerequisite EDI feeds if non-existent Define/establish other feeds (manual initially) -
forecast drivers (promotions, price changes, replenishment strategies etc)
Define/establish business rules for exception generation
Develop exception processes based on forecast comparisons
Define/establish procedures for use of CPFR system Develop measurements/business cases Refine technology infrastructure Introduce security - S/HTTP and/or S/MIME Investigate use of open data model
Challenges Organizational readiness Process confirmation Integration of supply chain
collaboration tools with backend applications data models architecture (hub-hub, hub-spoke, hub-
web) Change management
Capabilities Assessment Process Readiness
Forecasting and Replenishment Scorecard Solution Change Management Inter & Intra organization communication
channel readiness
Technology Readiness Data availability Internet Enablement Electronic Commerce
SAP APO Collaborative Planning (CP) and CPFR
APO is the acronym for Advanced Planner and Optimizer
Collaborative Forecasting (Henry C. Co) 33
ERP ERP breaks functional silos within the 4 walls
of an enterprise Integrates Streamlines … Intraorganization Processes“One number for business planning across all
departments”
Next step Streamlines Collaborates … Interorganization Processes“One number for supply planning across the entire
supply chain.”
Collaborative Forecasting (Henry C. Co) 34
ERP promises concurrent, real time planning, information sharing and value added services for intraorganization processes.
Next step – collaborative commerce to break division barriers separating the distinct links in the supply chain: procurement companies, production companies, … low inventory levels, high inventory turns, improved cash flow … drastic reduction of the dreaded bullwhip effect.
Collaborative Forecasting (Henry C. Co) 35
Before Internet Businesses exchange information by
Meetings Phone Mail (slow) Fax EDI (costly and rigid)
The Internet enable businesses to establish low cost, secure, scalable, and dynamic collaborative commerce.
Collaborative Forecasting (Henry C. Co) 36
SAP APO Collaborative Planning Exchange planning information Browse and update data via a browser Multiple partner access, but restricting
access to authorized data and activities
Consensus planning process Exception-based management One number for supply planning
across the entire supply chain.
Collaborative Forecasting (Henry C. Co) 37
Internet-Based Functionalities
1. Consensus-based forecasting2. CPFR compliant collaborative
forecasting3. Vendor managed inventory4. Supplier collaboration.
SAP APO CP Functionality 1
Consensus-Based Forecasting
Collaborative Forecasting (Henry C. Co) 39
Pyramid Forecasting SAP APO Demand Planning allows you to create
plans for different business goals (strategic business plan, tactical sales plan, operational supply chain plan, etc.) and integrates them into one consensus plan that drives your business.
Joint Business Planning Across Supply Chain using SAP APO CP’s tools Planning Books (Internet-compatible demand
planning/supply network planning books in SAP) Enhanced Macros
Collaborative Forecasting (Henry C. Co) 40
Pyramid Forecasting Parties Involved
Central planning department which creates a consolidated forecast for ALL products
Key account manager who creates a forecast for a specific retailer or wholesaler
Sales department which forecasts its own demand Each party bases its forecast on specific
information.
GOAL – to consolidate the various forecasts into a common time series to be used for planning.
Collaborative Forecasting (Henry C. Co) 41
Pyramid Forecasting Process1. Department-specific forecasts
Sales For a combination of product and customer Goals are tactical – maximize sales Focus on promotions, orders, POS data,
competitive info, customer info. Logistics
For a combination of product/item and location
Goals are operational – minimize costs, fulfill orders
Focus on shipments, material and capacity constraints.
Collaborative Forecasting (Henry C. Co) 42
Marketing For a combination of product family/market
zone Goals are strategic – increase demand,
reduce stock Focus on promotions and events, causal
relationships, and syndicated POS data.
Collaborative Forecasting (Henry C. Co) 43
2. Team meeting held to reach consensus3. Manual adjustments made4. Accuracy of forecast checked against sales
data.
SAP APO CP allows access to SAP APO Planning books through an Internet browser.
Trading partners can view each other’s forecasts, make changes and agree on a consensus-based forecast.
SAP APO Functionality 2
Collaborative Planning, Forecasting and Replenishment (CPFR®)
Collaborative Forecasting (Henry C. Co) 45
The CPFR® Reference Model
8 collaboration tasks form an iterative cycle of 4 activities:
A. Strategy & PlanningB. Demand & Supply
ManagementC. ExecutionD. Analysis.
Each activity consists of two collaboration tasks.
Collaborative Forecasting (Henry C. Co) 46
CPFR in SAP APO Collaborative Planning
Collaborative Forecasting (Henry C. Co) 47
SAP APO Collaborative Demand Planning
SAP APO CP Functionality 3
VMI over the Internet
Collaborative Forecasting (Henry C. Co) 50
Vendor-Managed Inventory Supplier takes the task of
requirements planning for its own products within the retail company. Supplier monitors the buyer’s inventory
levels, physically or via electronic messaging.
Supplier decides on when and how much to replenish inventory.
Supplier sends an advance shipping notice to inform the buyer of materials in transit.
Collaborative Forecasting (Henry C. Co) 51
SAP APO CP Enables VMI over Internet VMI requires supplier to be able to track the
amount of its products stocked at the retailer side, and access to the retailer’s sales forecasts.
SAP APO CP enables VMI over the Internet Internet planning book allows users to access the
Supply Network Planning data Business Connector allows users to transmit VMI data
from SAP APO Collaborative Planning to partners’ systems that can receive and process XML messages.
VMI over the Internet Affordable – small retailers can participate in supply
chain planning. Allows retailer to maintain control over the data it is
sending to the supplier and change it if necessary.
Collaborative Forecasting (Henry C. Co) 52
SAP APO Business Connector The Business Connector translates EDI messages to XML
messages that can be transmitted over the Internet. Retailer can transmit, via the Business Connector, VMI data
from SAP APO Collaborative Planning to suppliers’ systems. Partners’ systems must have the capability to receive and
process XML messages Making VMI possible via Internet provides small retailers
with an economical alternative to participating in supply chain
planning. It also allows the retailer to maintain control over the data it is sending to the supplier and change it if necessary.
To achieve their goals, participants will be able to access the Supply Network Planning data through Internet planning books.
SAP APO CP Functionality 4
Supplier Collaboration
Collaborative Forecasting (Henry C. Co) 54
EDI in automotive industry Suppliers connected to auto
manufacturers by EDI; Exchange dependent requirements (MRP) Requires large investments.
The Web Low cost Allows smaller companies to participate The only requirement is that partners’
systems must have the capability to receive and process XML messages.
Collaborative Forecasting (Henry C. Co) 55
SAP APO Collaborative Planning The dependent requirements in Supply Network
Planning are displayed in supplier specific planning books. A supplier can have access to those aspects of the
planning situation that affect him/her. Users can have access to production plans as well as
dependent requirements. Internet enabled planning books allow users to have an
interactive role; for example, if the delivery of the dependent requirements cannot be made in time, an alternative date can be suggested.
Using the Business Connector, SAP APO Collaborative Planning can directly communicate with partners’ system using XML messages over the Internet. Allows system-to-system communication enabling users
to be involved only in exception situations. Thus, SAP APO Collaborative Planning enables
synchronized planning across business partners.