A&P BEGINS 'IMPORTANT INGREDIENT,' CPFR TEST

DAN ALAIMO

MONTVALE, N.J. -- Going where few supermarket chains have thus far ventured, A&P is launching a test of Collaborative Planning, Forecasting and Replenishment this month.

Nicholas L. Ioli Jr., senior vice president and chief information officer, A&P, made that announcement in a recent interview with SN.

"This is not a technology initiative. This is a business initiative that is enabled by technology, and that is how this company frames it," he said. "The business people will be managing this."

A&P's CPFR pilot will begin following a management review with four or five suppliers and will continue for an indefinite period.

"Hopefully, within six to nine months, we will have a real good feeling about how well we are doing and how fast we can ramp it up," Ioli said.

Although it is initially a test and a learning opportunity, Ioli left no question that CPFR will play a vital role in A&P's Project Great Renewal initiative.

"We view CPFR as an important ingredient in our business-to-business e-commerce strategy," he said.

"It really aligns itself with our Great Renewal -- the new core values that A&P is ascribing to -- and one of those certainly is about improving our relationships with all of our trading partners," he said.

Historically, those relationships have been adversarial rather than collaborative, "and I think everybody loses when that happens," he said.

CPFR enables trading partners to jointly coordinate forecasts and promotion plans, thereby cutting inventory levels while assuring product availability.

To date, suppliers have been pushing CPFR enthusiastically, while retailers have been sticking to the sidelines.

But lately, with the advent of new technologies and public trading exchange-based CPFR programs, CPFR's momentum has been picking up as retailers look at it with greater interest.

A&P's level of commitment is indicative of a trend observers expect to see growing with other retailers.

Initially, A&P will go the private-exchange route using the application software provider services of Syncra Systems, Waltham, Mass.

"There is technology in place today that we believe is opportunistic for us to take advantage of that we didn't have available to us two to three years ago," Ioli said.

"We think that is a key driver for us. We want to be able to take a leading position in this so we can move forward and hopefully establish more of a competitive advantage," he added.

He said using public exchanges for CPFR is a possibility in the future. CPFR is expected to bring dollar benefits from increased sales, greater in-stock positions, reduced inventories and efficiencies in the supply chain, Ioli said.

In a recent study from AMR Research, Boston, analyst Janet Suleski said that by using CPFR, retailers will see store shelf stock rates improve by 2% to 8%, inventory levels decrease by 10% to 40%, sales increase by 5% to 20% and logistics costs decrease by 3% to 4%.

"From a technology standpoint, the work we are doing around the back office lays a sound foundation for us and positions us to be able to take advantage of this where maybe some of the slower adopters are unwilling or unable to do that," said Harrison Lewis, vice president, business-to-business e-commerce at A&P.

The corporate cultures of supermarket retailers like A&P are also due for a big change, Ioli said.

"Relationships with vendors in the past haven't been as collaborative, and culturally there has been almost an aversion to sharing information.

"If we are going to do this, the trust factor has got to be there between both partners, and I think you can make that relationship work very well with the metrics," he said.

The ability to share some of those measurements of sales, inventory levels, in-stock rates and logistics costs will help create trust and mitigate some of the past reluctance to share information, he said.

A&P's executive committee, which Ioli sits on, is committed to the CPFR effort, he said.

"We are not going into this lightly. We need the support of the executive committee and the commitment across the entire enterprise if this is going to work," Ioli said.

For A&P, Ioli said CPFR is a natural extension of the recent progress the company has already made.

"It is going to be strategic to us. The pilot and how successful we are and how much we learn is going to drive the importance of CPFR within A&P and its acceptability across the entire enterprise. We are certainly going to make sure that the right people are involved and there is a lot of visibility around it. It's not something that is done in a back room someplace. It's very visible, it has a lot of light on it and a lot of management attention on it," he said.

Looking at the supermarket industry's slow adoption of CPFR so far, Harrison said, "there are early adopters and there are late adopters and then there are the people that never adopt. I don't see a change anytime soon. The technology is not the issue any longer. The issue is more focused on the people." Ioli added, "The players who are going to have a real competitive advantage are going to have to drive efficiencies."