Introduction to Collaborative Planning Forecasting and

Introduction to Collaborative Planning Forecasting and

Replenishment (CPFR)

November 3, 2000

Bob CowdrickManager 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 Customer’s Value Chain by

providing solutions that collaboratively integrate their business processes with their

Trading Partners

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

Logility Overview

“Logility’s 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

Analysts’ Opinions of Logility

Blue Chip Customers

HistoricDemand

Forecast

B2B Collaborative Commerce Solutions

HistoricDemand

Forecast

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

B2B Collaborative Commerce Solutions

HistoricDemand

Forecast

Promotional DataAdvertisingCalculate Lift

B2B Collaborative Commerce Solutions

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

HistoricDemand

Forecast

Time-PhasedInventory Plan

Inventory Rules:• Service Levels• Safety Stock• Inventory Turns• Order Quantity

Promotional DataAdvertisingCalculate Lift

B2B Collaborative Commerce Solutions

HistoricDemand

Forecast

Time-PhasedInventory Plan

On-Hand Inventory, ExpectedReceipts, Customer Orders

Supply ChainNetwork

Transfer Orders, Manufacturing Orders, or Purchase Orders

Promotional DataAdvertisingCalculate Lift

B2B Collaborative Commerce Solutions

Forecast

Time-PhasedInventory Plan

Planned Orders

Inventory Rules:• Service Levels• Inventory Turns

HistoricDemandFrom Legacy

Orders

Trading Partners

Promotional DataAdvertisingCalculate Lift

B2B Collaborative Commerce Solutions

HistoricDemand

Forecast

Time-PhasedInventory Plan

Constrain Supply Orders

Transfer Orders, Manufacturing Orders, or Purchase Orders

Promotional DataAdvertisingCalculate Lift

Inventory Rules:• Service Levels• Inventory Turns

On-Hand Inventory, ExpectedReceipts, Customer Orders

B2B Collaborative Commerce Solutions

HistoricDemand

Forecast

Time-PhasedInventory Plan

Transfer Orders, Manufacturing Orders, or Purchase Orders

Constrain Supply Orders

Promotional DataAdvertisingCalculate Lift

Inventory Rules:• Service Levels• Inventory Turns

On-Hand Inventory, ExpectedReceipts, Customer Orders

B2B Collaborative Commerce Solutions

HistoricDemand

Forecast

Time-PhasedInventory Plan

Transfer Orders, Manufacturing Orders, or Purchase Orders

Constrain Supply Orders

On-Hand Inventory, ExpectedReceipts, Customer Orders

Inventory Rules:• Service Levels• Inventory Turns

B2B Collaborative Commerce Solutions

Demand Planning

• Flexible Business Model

• Best Fit Modeling

• Graphical Review & Overrides

• Advanced Simulations

To deliver the most accurate forecasts with

the least effort.

The GoalThe Goal

Management OverridesManagement Overrides

Pyramid Power & Flexibility

Logistics Face Logistics Face

DIV

Family

SKU

DC

CustomerSaks

Atlanta

KK101

Watch

Retail

Type

Flexible Aggregation

Sales FaceSales Face

32 User Defined Attributes

SKU

SalesmanSalesman

Area

Region

SKU

DC

CustomerCustomer

SEASONAL NONSEASONAL

PATTERNEDIRREGULAR

UNPATTERNEDIRREGULAR

MOVINGAVERAGE

DERIVED

Automatic Model Selection

Self Correcting Process

Forecast ComponentsForecast Components

BEST POSSIBLEFORECAST

BEST POSSIBLEBEST POSSIBLEFORECASTFORECAST

Tracking SignalsTracking Signals

Demand FiltersDemand Filters

SEASONALITY

Dynamic SmoothingDynamic Smoothing

Reasonability

Checks

Reasonability

Checks

LEVEL

TREND

- - - - - - - - - - - - - - -

- - -

- - - - - - - - - - - - - - -

- - -FORECAST

ACTUAL DEMAND OUTLIER

FORECAST

ACTUAL DEMAND

E-Business ContinuumCollaborativeCommunity

CooperativeCoercion

TradeExchange

EDI overInternet

PreInternet

1

a

bc

a

bc3

1

2 a3

11

a

b

2 c

Buyer Seller

RelationshipModel

One to OneCompany v Company

Many to Many Many to Many One to ManyCompany v Company

HybridColloboration

Buyer Seller Buyer Seller Buyer Seller Buyer Seller

2

a

bc3

12

Ind. Material, Public

Competition

One to One,MChain v ChainDirect Material

PrivateCollaboration

CPFR.ORG

E-Business ContinuumCollaborativeCommunity

CooperativeCoercion

TradeExchange

EDI overInternet

PreInternet

1

a

bc

a

bc3

1

2 a3

11

a

b

2 c

Buyer Seller

Transaction Cost, Unit Cost

Service, Revenue, Relationship ValuePrimaryBenefit

RelationshipModel

One to OneCompany v Company

Many to Many Many to Many One to ManyCompany v Company

HybridColloboration

One to One,MChain v ChainDirect Material

PrivateCollaboration

CPFR.ORG

Buyer Seller Buyer Seller Buyer Seller Buyer Seller

2

a

bc3

12

Ind. Material, Public

Competition

CPFR: What Is It?

• A major initiative by large-scale backers

• It’s 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

• 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

ManufacturersManufacturers RetailersRetailers• Circuit City• Federated Department

Stores• JCPenney• Kmart• Staples• Wal-Mart

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

OthersOthers

Collaborative Trading Communities vs. Exchanges• One to One • Many to Many

• Price is not • Price is keyprimary driver decision factor

• Products are branded • Products are not or differentiated differentiated

• Fulfillment is • Fulfillment is competitive weapon homogenous

• Discontinuous • Continuous innovation,innovation, integrating automating old business new business processes processes

• Exception based • Self-service based

• B2B Exclusive • B2C and B2B

The CPFR Process

1. Front-End Agreement

2. Joint Business Plan

3. Create Sales Forecast4. Identify exceptions5. Resolve exceptions

6. Create Order Forecast7. Identify exceptions8. Resolve exceptions

9. Generate Order

Once

Qtr

.

Wk,

Mo

Wk,

Mo

Collaborative Planning

Collaborative Forecasting

Collaborative Replenishment

Seller

Buyer

Sales Forecast

Order Forecast

Voyager XPSTM – VICS-Compliant 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

• 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)

Case Study

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”

• Extended order cycle time

• Traditional supply-side focus

• Disconnected from field knowledge

FactoryFactoryWarehouseWarehouseDistributionDistributionTradeTradeYou & MeYou & Me

• Focus on entire Value Chain

• 4 week reduction in lead time

• Fresher product on shelf

• Heineken Sales focused on trade cultivation

Heineken “after”

FactoryFactoryWarehouseWarehouseDistributionDistributionTradeTradeYou & MeYou & Me

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.