Business Intelligence in CPFR
Implementing CPFR in organizations involves not only co-operation at process level across trading partners but also involves close co-operation in IT systems and information exchange standards. This throws up numerous opportunities in the Business Intelligence and Performance Management area that trading partners can leverage to plan better and monitor and analyze their performance from the multiple perspectives of Retailer and Manufactures Tasks.
As shown in the previous section implementing CPFR implies that trading partners will collaborate on strategic information that optimizes the supply chain making the inventory lean as well as helping manage and services sales demand more optimally. The CPFR model represents 4 key parts – Strategy & Planning, Demand and Supply Management, Execution and Analysis. All these parts in turn are comprised of Manufacturer and Retailer tasks and Collaborative tasks. Each of these tasks presents significant Business Intelligence and Performance Management opportunities that organization can tap to measure their Supply Chain efficiencies as well as measure of strategic plans and how well these plans are being executed and monitored.
Vendor Management – Vendor Management is the one of key focus areas for retailers. Vendor Management usually deals with analyzing Vendors/Suppliers on the following performance indicators –
- Average spend on each vendor
- Vendor SLA Performance based on timeliness and delivery accuracy
- Assortment of Products bought from different vendors.
- Vendor Consolidation opportunities.
- Average loss/wastage from each vendor
Retail organizations can gain substantial advantages both from cost as well as operational efficiency from Vendor Management KPI’s.
In a collaborative environment like CPFR it is important to understand that some of the Vendor Management performance indicators can be shared with the Manufacturers to enable them to analyze the feedback and build the corrective steps in their operations cycle.
Category Management – Category Management is crucial to measure the success of retail categories and focusing on the correct product mix in stores to ensure optimal sales and as well manage inventory. Category Management focuses on the following indicators –
- Sales per Square Feet
- Top Selling Categories
- Bottom Selling Categories
- High Growth Categories
- Actual Sales vs Projected Sales
- Actual Profitability vs Projected Profitability
- Promotion/Markdown Effectiveness
Account Planning – Account Planning deals with the Manufacturers perspective of different Retail organizations/Accounts that it services by selling manufactured products. Account Planning focuses on the following indicators –
- Understanding of Retailers assortment plans, selection of products
- Understanding of Retailers negotiating a deal with manufacturers and measuring success of contracts
- Understanding of Retailer’s Open to Buy standards
- Analysis of Sales Trends across Retail Accounts and regions
Market Planning – Market Planning deals with the Manufacturer having a good understanding of Markets that it services. For instance if a Manufacturer manufactures Fast Moving Consumer Goods it is key to understand the seasonality of certain products and the demand fluctuations across seasons. From a geographical perspective markets may vary in terms of timing of promotions, products launches etc. Market Planning focuses on the following indicators –
- Products mix that sells in a Market
- Market Analysis and Competitive Research
- Marketing Goals and Strategy
- Product Pricing
- Sales Management
POS Forecasting – POS forecasting is crucial to measure the accuracy of future demand that will help Retailers in managing Demand as well as controlling Inventory levels. POS forecasting can be achieved by either buying POS data from syndicated data sources (Like AC Nielsen) or through in house POS systems. POS Forecasting focuses on the following indicators –
- Sales per SKU
- Sales Trends by SKU over seasons
- Understand Sales which is used to predict future demand using predictive algorithms
- POS data in tandem with Pricing over a period of time also helps in understanding the Price Elasticity (demand fluctuations brought about by Price Changes for a Product).
Replenishment Planning – Replenishment Planning is crucial to ensure that stocks of Products are replenished in order to meet the Demand as well as ensure that the Inventory carrying costs are minimal. Replenishment Planning focuses on the following indicators –
- Safety Stock for different products
- Order cycle time/lead time for different products
- Understand the Open to Buy policy and integrate it with Replenishment Planning process.
Market Data Analysis – Market Data Analysis is crucial for Manufacturers to understand the current Sales trends based on Sales data provided by external data providers. Market Data Analysis focuses on the following indicators –
- Analyze Market Data to understand demand trends
- Analyze Market/Internal Data to analyze supply trends and the potential demand supply gap
Demand Planning – Demand Planning is crucial to Manufacturers in responding to orders coming from Retailers to replenish their stock which implies a good understanding of Demand forecasting. Demand Planning focuses on the following indicators –
- Ability to forecast Sales at SKU level
- Forecasting for special events (like promotions, holidays etc.
- Ability to Forecast Sales over variable time periods – Short, Medium and Long
Buying/Re-buying – Buying/Re-buying is crucial as it determines the point at which Retailers either order for new products or re-order existing products when the inventory levels are close to Safety stock levels. Retailers need to focus on the following indicators from a Buying perspective –
- Sales Demand for Assortment of Products
- Safety Stock levels and Lead Time for procurement of Products
- Purchase Order creation and processing times
- Define SLA’s for Lead time to ensure Supplier (Manufacturer) meets timelines
Logistics/Distribution – Logistics and Distribution from a Retailer’s perspective deals with ensuring that products are delivered timely from Warehouses and Distribution Centers to individual stores. Logistics and Distribution from a Retailer’s perspective focuses on the following indicators –
Logistics Cost – this is important as Retailers usually outsource logistics to 3rd party providers
- Internal Costs – internal costs incurred in managing Logistics and distribution
- Logistics/Distribution SLA’s – need to be defined to measure the execution efficiency of 3rd party providers
- Analyze impact on failed SLA’s on Inventory Carrying Costs
Production and Supply Planning – Production and Supply Planning is crucial for Manufacturers to ensure they are able to address the supply needs of Retailers generated through Purchase Orders. Production and Supply Planning focuses on the following indicators –
- Production Plan – deals with planning the production cycle on short term and long term basis. Production Plans are rolling to ensure that fluctuations in demand can be factored into the Production Plan. Production Planning in demand driven supply networks ensures that manufactures have a better understanding of demand and current inventory levels at Retailers.
- Supply Plan – Supply Planning deals with the Sales and Operations of Manufactured products.
Logistics and Distribution– Logistics and Distribution from a Manufacturer’s perspective deals with ensuring that products are delivered timely from Factories to Warehouses and Distribution Centers of Retailers. Logistics and Distribution from a Manufacturer’s perspective focuses on the following indicators –
- Logistics Cost – this is important to Manufacturers as they outsource their logistics and distribution function to 3rd party providers
- Internal Costs – costs incurred by the Manufacturer in handling the Logistics and distribution management
- Understand Logistics/Distribution SLA’s to meet Retailer requirements and measure 3rd Party execution efficiency
- Analyze impact on Failed SLA’s on Inventory Costs at Manufacturer end.