InformationWeek

October 9, 2000

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Trading Partners Collaborate To Increase Sale

CPFR brings companies together to share data, cut product cycle times, and reduce inventory

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More on collaborative planning:

E- DATA FOR A PRICE (8/28/00)

More Than Just Exchanging Data (8/21/00)

The Internet's True Benefit (8/21/00)

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Because CPFR brings together buyers and sellers, there's been a tendency to tie it in with public online trading exchanges. But given the state of most public trading exchanges today, the two are more often than not worlds apart. "Trading exchanges are where companies go for one-time spot buying through reverse auctions," says Scott Smith, department man-ager of inventory at Ace Hardware. "CPFR isn't about that. It's about deeply linking buyers and sellers together in an ongoing supply chain."

Deploying the systems needed for such a close association has been a major obstacle for some of the companies looking to implement CPFR. "We don't have all of the pieces in place to do this in an automated fashion. We don't have a good, clean way, an automated way, to get forecasts to vendors," says Federated's Lichtenberg.

Even CPFR pioneers are hitting a roadblock. In 1996, Warner-Lambert Co., now a division of Pfizer Inc., based in New York, took part, with Wal-Mart, in its first CPFR pilot program, involving three flavors and four sizes of the Listerine brand of mouthwash.

Four years later, calculations between the two companies are still done in a "manual, paper-based process," says Cathy Kleiven, director of supply-chain initiatives for Warner-Lambert. The company is working on directly linking its planning tool--Manugistics' Demand Planning suite--into Wal-Mart's proprietary internal sales-forecasting system. "We're working on getting all of the systems in place. With the Pfizer merger, some of these initiatives have been put on the back burner. We're not as far along as we want to be."

Warner-Lambert's collaboration with Kmart is a bit more developed, because the technological load is a bit lighter for both parties. CPFR software vendor Syncra is providing and hosting the middleware necessary to translate the forecasting data. Hooking into the Syncra tool is easier than hooking into the Wal-Mart proprietary program. That allows Kmart to order and automatically replenish 29 items from Warner-Lambert's confectionery product line.

The push to collaborate isn't limited to the consumer-goods and retailing industries. "There's a lot of uptake [of collaboration] in the high-tech and automotive industries," says Chris Houck, director of solutions marketing and demand planning at collaboration software vendor i2. "It's not exactly CPFR, because it only covers planning, and not forecasting and replenishment. But companies like Dell and Volkswagen are sharing production plans with their suppliers."

CPFR's roots are in a series of programs implemented in the 1980s and 1990s designed to bring supply-chain partners closer together. The best known of these, vendor-managed inventory, made suppliers responsible for making sure their wares were in stock at their retail customers. The process lead to fewer out-of-stock items and smaller inventories. But VMI had its limits--the most important being that there was little, if any, sharing of information between retailers and suppliers.

"There were two playbooks, and they didn't match up. We couldn't tell what the manufacturer was doing," says Scott Smith, department manager of inventory for Ace Hardware. "With CPFR, we're all looking at the same screens, the same information."

Ace and its suppliers are using a new Web site built by E3, a retail forecasting vendor, to access that forecasting and sales information. Through the password-protected site, manufacturers can access Ace's AS/400 "to look at sales forecasts, and to hit the 'accept P.O.' [purchase order] key. Basically, we've let them become members of our inventory-management team," Smith says.

All 11 suppliers involved in e3marketplace.com have seen improvements in sales, turn rates, and inventory, Smith reports. Most are paying off the cost of their systems--either a $1,000 to $5,000 monthly subscription fee or an up-front charge of $20,000 to $100,000, with an 18% usage fee--in 90 to 120 days. Tape manufacturer Manco Inc. in Avon, Ohio, for example, broke even in 35 days. And the Ace distribution centers are now filling more than 99.5% of orders from its stores for signs and other items from the Hy-Ko Products Co. in Akron, Ohio, thanks to the new CPFR system. Ace's implementation was done for free, to attract its suppliers.

Like so many CPFR programs, these initial efforts seem full of potential. Time will tell whether supply-chain partners will be able to fulfill the promise of these early tests.