Solid early results from pilots of collaborative planning, forecasting and replenishment, including increased sales, reduced out-of-stocks and lower inventory levels, have retailers and manufacturers seeking ways to move the process even further ahead.
In addition to new and expanded CPFR pilots, trading partners are looking at employing the Internet as a common information platform, as well as adding point-of-sale item movement data to the forecasting and monitoring processes.
According to industry sources, CPFR allows manufacturers and retailers to form a partnership -- to develop one forecast across the entire supply chain, and extend collaboration from planning through completion using common Internet technology.
Procter & Gamble, Cincinnati, is planning to take advantage of CPFR's potential this year with two new pilots, one with Wal-Mart Supercenters, Bentonville, Ark., according to Ralph Drayer, vice president of Efficient Consumer Response for P&G. Schnuck Markets, St. Louis, is looking to regroup early this year to start up CPFR projects that were postponed last year after one of the retailer's trading partners lost its account team.
Drayer believes CPFR could reduce inventory levels in a category by as much as 50% across the entire supply chain, while improving in-stock levels.
A CPFR pilot in the nut category, conducted last year by Wegmans Food Markets, Rochester, N.Y., and Nabisco, Parsippany, N.J., produced increased sales for both trading partners, as well as reduced inventory levels and fewer out-of-stock situations.
Wegmans' CPFR project manager Mike DeCory said that during the third quarter of the 26-week pilot, which started June 1, 1998, unit sales in the category rose 12.2%, with dollar sales up 17.4%. Nabisco's Planter's brand saw unit sales increases of 36%, with dollar sales up 47.1%. The increases are even more striking because Wegmans was able to reduce its inventory by 17.7%.
The CPFR pilot also provided good news for Nabisco. "The results [with CPFR] have been phenomenal," said Joe Andraski, former vice president of customer marketing for Nabisco, and currently senior vice president of retailing development for Americold Logistics, Atlanta, and OMI, Chicago. During the pilot with Wegmans, nut category sales for Nabisco rose 40%, Andraski told SN.
While Wegmans is also very happy with the pilot's results, the retailer's enthusiasm is tempered by the fact that a lot of manual work went into the process, and some things were done by "brute force," according to DeCory.
"Basically, we're trying to better understand what this monster [CPFR] can do for us," he said. DeCory added that the results are not scalable because there was a sizable amount of manual technique used for forecasting the category, noting that in order to add more categories, better demand-planning technology, such as POS data, would be necessary.
Even with these reservations, however, he added that "[CPFR] is very exciting, there is a lot going on."
Andraski and Drayer echoed DeCory's sentiments about CPFR, noting that the process has not always been received with open arms due to the large amount of information-sharing among trading partners that it requires.
"The reason no one wanted to share information in the past was because there was no benefit," Andraski said. "When you start seeing real-life examples [of CPFR's ability], it's all win, win, win," he added.
"CPFR provides the visibility of consumer demand all the way up the supply chain," Drayer said. He added that CPFR allows trading partners to more accurately orchestrate the flow of goods.
The next phase of CPFR's development will involve trading partners' embrace of new technologies. Wegmans, for example, is looking to use the Internet as a communications medium during its next pilot.
Industry sources told SN that using the Internet would allow for a common server that would host the trading partners' merchandising plan. Both partners could view the data on the server and, if necessary, make up-to-date changes -- maximizing its efficiency. Andraski believes the future of CPFR is heading toward the Internet.
Trading partners are also seeking to modify their sources of replenishment data. Instead of relying solely on warehouse withdrawal data, POS data is now being sought to optimize CPFR's potential.
A juice category pilot with Wegmans and Ocean Spray, Lakeville, Mass., planned for the coming year, will use Internet communication between the manufacturer and the retailer, according to DeCory. A common server that both parties can access will contain the merchandising plan and up-to-date information on the category. If the plan needs to be changed, one trading partner can put it on the server and the other can see the change and respond.
Wegmans recently met with Ocean Spray and worked on a collaborative merchandising plan, which included discussing marketing ideas as well as goals for the category, DeCory said.
"We want to use the same CPFR process [for Ocean Spray] with a little more volume and a few more items," he said. The new pilot will include about 40 stockkeeping units in the juice category. The Nabisco pilot included about 22 SKUs.
"Every item [in the category] will have a by-item, by-week forecast," DeCory told SN.
The retailer said it is also "entertaining the idea of using POS data" for the first time in a CPFR pilot, said DeCory. Until now, Wegmans' CPFR plans have been based on warehouse-withdrawal data.
P&G's Drayer said he believes the future of CPFR will be affected by POS data. "POS data will be critical to drive daily replenishment as well as provide a more accurate future demand," he said.
According to Andraski, POS data will eventually be folded into the current means to determine a forecast, but will not be the sole deciding factor. He added that the Nabisco-Wegmans pilot did not use POS data.
Procter & Gamble is looking to take advantage of CPFR's potential in 1999. "We're looking at two categories for our CPFR pilots, heavy liquid detergent and health and beauty care," Drayer said. The pilots are in the early planning stages.
One of the planned P&G pilots is with Wal-Mart, considered by many a CPFR pioneer, with pilot programs dating back to 1995. Drayer would not comment on which category it will pilot with Wal-Mart.