| May
25, 2004 |
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Your
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and learn what your peers are thinking!
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Dan Gilmore
Editor-in-Chief |
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At the Retail
Systems trade show in Chicago last week, The VICS committee
of the Uniform Code Council released a substantial update
of the Collaborative Planning, Forecasting and Replenishment
(CPFR) business process model.
I met with Jean
Schenck of Microsoft, Matt Johnson of Syncra Systems,
Joe Andraski, managing director of the VICS committee,
and Jim McGlaughlin of Gillette as the new process model
was unveiled. I've known Jean and Matt since CPFR first
got off the ground in 1998 (Jean was on the UCC staff
at the time), and both, along with others like Andrew
White (then of Logility, now at Gartner) have really
stuck with CPFR from the beginning, to the industry's
clear benefit.
Gone in the new
framework is the highly prescriptive, nine-step process
model. In its place is a "wheel" that represents four
key, high-level collaborative business processes (click
here for a graphic of this new model) and eight
more specific supply chain activities:
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Strategy and Planning:
collaborative agreements, joint business plans |
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Demand and Supply Management:
sales and order forecasting |
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Execution: order execution and fulfillment
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Analysis: exception management, performance
measurement |
There is obviously
quite a lot of overlap with the old model. The key is
that VICS is trying to make the model more accessible,
telling companies they can participate flexibly at any
or multiple points of collaboration, rather than progressing
in a highly prescriptive manner through all nine formal-looking
steps.
In other words,
a new, friendlier CPFR.
According to
Adraski, so far VICS has documented about 300 companies
involved in total in more than 1500 CPFR collaborations.
But VICS also rightly notes that many companies were
doing valuable collaboration that wasn't necessarily
considering CPFR because it didn't rigidly follow the
written process model. (Toronto-based retailer Canadian
Tire provides one such example of a company doing a
lot of collaborative work with suppliers without necessarily
calling it CPFR).
The new model
also has been aligned with the collaborative commerce
framework developed jointly by the Grocery Manufacturers
Association and the Food Marketing Institute.
It also now includes specific, expanded scenarios for
processes such as DC and store replenishment and event
collaboration. There
have been many notable CPFR successes, and early adopters
such as Wegman's, Wal-Mart and Gillette have realized
clear benefits. Yet, like many such initiatives, the
progress has to some extent been slower than expected.
One issue clearly was that in 1998, many companies
simply did not have internal systems and processes in
place to support CPFR effectively. As someone noted
last week, it's pretty hard to collaborate with a trading
partner around a forecast if you have five forecasts
floating around internally. Today, most companies are
in far better shape to participate in joint forecasting
than they were even 3-4 years ago.
The new model
is designed to remove some of the other perceived barriers
to adoption, such as the perception of complexity and
rigidity, resource requirements to implement, challenges
of scaling beyond a few key trading partners, etc. It
does that in part (only in part) by being a lot more
flexible about what to define as CPFR - start where
you want, use our detailed dialog models if you want
or do your own thing.
That's not
a criticism. Think instead it's a smart recognition
that there are a lot of business models, business goals,
and internal system capabilities among the thousands
of retailers and manufacturers that do business with
each other. As we noted here several months ago, Procter
& Gamble has said it plans to go "low tech" (email,
spreadsheets) with many trading partners in pursuit
of collaboration, while maintaining powerful IT tools
for high volume, highly strategic relationships (see
SCDigest
archive).
While there will
continue to be detailed process/dialog models, for those
that want to use them, the danger from a CPFR perspective
is that it becomes just a synonym for any type of collaboration
and joint dialog. But if it spurs more of that collaboration
under any umbrella, maybe that's just fine.
We'll be doing
more work on CPFR soon - wanted to give SCDigest readers
a first look at the new model.
Has CPFR met
its expectations and potential? Why or why not? What
are the real barriers? How can they be overcome? Let
us know your thoughts.
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While on the topic of benchmarking
(see article in News and Views), according to
the benchmarking results over three years from
PRTM's Performance Measurement Group, at what
rate do "best in class" and median discrete manufacturers
hit their order delivery commitment dates to customers?
Answer below
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Two
weeks ago, on our article on supply chain transformation
coming out of the i2 user conference, we asked
readers to respond to a couple of questions related
to this topic. The answers were interesting, and
supported our contention that supply chain initiatives,
especially around the purchase of technology,
have become very tactical over the past couple
of years in the overall economic and huge IT investment
slump.
We
asked readers first how they would describe their
company's approach to supply chain projects over
the past two years. Of 103 respondents, 81, or
79%, classified them as primarily tactical and
limited in scope, versus 21% who termed their
efforts as strategic and broad in scope during
that time.
But
when we asked them what their expectations were
for the next two years, the results were split
almost down the middle. Just over 51% said thy
expected more strategic/broad initiatives, versus
49% who anticipated primarily tactical plans.
That
may be over-optimistic, as strategic plans and
visions often don't get off the drawing board,
and companies are always (and rightfully) attracted
to the short term benefits of tactical improvements.
However, I still hold my contention that we'll
see an upswing in transformational programs by
many companies.
If
you would like to comment on this topic or any
other from this issue, please click
here.
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View
Full Article >>
The
American Productivity and Quality Center (APQC), a Houston-based
non-profit organization, announced last week a new "open"
benchmarking service. The idea seems to be that companies
will pool their expertise and agree on a standard set
of definition for literally hundreds of performance
metrics across product development, purchasing, supply
chain management, logistics, etc., using industry representatives
to harmonize these metric definitions across vertical
industries.
Early
participants include IBM, Procter & Gamble, Shell
Oil, the U.S. Navy and the World Bank. Any company can
access the metric definitions. As noted on the APQC
web site: " Organizations
of all industries and sizes may access and use the standards,
which are depicted in the APQC Process Classification
Framework (PCF), available at no charge. The PCF serves
as a high-level, generic enterprise model that allows
organizations to see their activities from a cross-industry
process viewpoint. APQC encourages all organizations
to use the PCF as a way to adapt standard processes
that can then be easily benchmarked against organizations
within and beyond their industries. "
The
new "open" movement comes on top of a benchmarking service
already provided by APQC to companies that are members
of the organization.
This
is not the first attempt at metrics rationalization,
of course. The Supply Chain Council's SCOR model includes
metric definitions across a broad span of process steps
from "Source" to "Deliver". But, they are buried within
the SCOR process model, and available (in theory) only
if you belong to that organization. The APQC's Process
Classification Framework and the SCOR model appear to
be, if you will, direct competitors in the process definition
space.
The
Performance Measurement Group, offshoot of consulting
company PRTM, took the SCOR model and created an interesting
benchmarking service, although they scaled back the
effort because members found the burden of completing
multiple detailed surveys to feed the benchmarking database
too burdensome.
So,
this looks interesting, although clearly the effort
is in part an attempt to get more dues paying members
into APQC (so companies can participate in the actual
benchmark database, not just get the definitions). But
I still think we are a long way from a widely accepted
definition of key business and supply chain metrics.
Do
we need an "open benchmarking" metrics definition set?
Is the lack of clearly defined metrics across companies
a real barrier to benchmarking - and performance improvement?
Let us know your thoughts.
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View
full article>>
Article
in this month's "Inside Supply Management" by Anshul
Gupta of Arizona State University on the advantages
and disadvantages of "single sourcing."
First,
Gupta defines single sourcing as choosing to use only
one supplier when multiple suppliers exist, whereas
"sole sourcing" occurs when only one supplier for a
product/commodity is available.
The
benefits cited in the article for single sourcing I
think are generally well understood: reduced costs/time
account payable, reduced supply chain complexity, reduced
effort to integrated enterprise software systems, ability
to more easily pursue continuous improvement, six sigma
and other initiatives. However, while well understood
in theory, it is much more difficult to quantify those
benefits, as we have discussed here before.
The
challenges Gupta cites I think are also fairly well
understood: getting into a "locked-in" supply situation,
loss of purchasing leverage, greater risk in case of
a supply disruption at the single source vendor.
The
article's greatest value is in its identification of
strategies to mitigate the downside of single source
strategies. These include:
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Flexible
contracts: Craft contracts with the supplier that
minimize switching costs and minimize the impact
of lost leverage. This includes having a no penalty
exit clause, defining continuous improvement KPIs,
ensuring price increases are tied to some objective
index, and making firm commitments for relatively
short-term time frames. |
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Trust and collaboration:
Single source relationships provide the best results
when both sides formally pursue collaboration in
terms of product design, reducing total supply chain
costs, etc. |
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Maintain a strong
back-up supplier option: Have a "pre-qualified"
second supplier option. |
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Outsource capability,
not knowledge: Outsource production if necessary
to lower costs, but be very leery of losing control
of key design and R&D intellectual property
- and internal capabilities. |
When
do you think "single sourcing" makes sense - and when
are multiple suppliers better? Do companies have the
tools to measure the benefits of reducing the number
of suppliers and single sourcing? Let us know your thoughts.
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View
full article>>
In
a sign of just how much intensity, dollars, reputations,
you name it, are tied up in RFID/EPC right now, Wal-Mart
felt compelled last week to issue a press release saying
everything was going fine with its initial pilots of
the technology. Although it's extremely unusual for
a non-technology vendor company to issue this kind of
release, in fairness to Wal-Mart, they are undoubtedly
being besieged with press and other inquiries, and this
announcement may have been in part just self-defense.
The
release quotes Wal-Mart CIO Linda Dillman as saying,
"To date, no glitches - only positive glimpses
of what's to come. During this test phase, we're experimenting
with various tag types and tag placements to see how
they impact readability on various products in a non-laboratory
environment."
Interestingly,
the release notes the retailer is going for 100 percent
readability of pallet tags in receiving and cases on
its conveyor systems - not reading of cases on pallets,
where read rates are still of course very low.
Next
month, Wal-Mart is bringing the top 100 suppliers back
in for a EPC progress review, and followed by a meeting
with its next 200 to give them preliminary marching
orders.
The
release takes pains to allay consumer privacy fears,
and notes more products (only 21 SKUs from eight suppliers
are being tagged right now) will be coming on-line soon:
" It is expected that many
of these will be electronic products or other large
items such as bicycles or lawnmowers. In all instances,
the cases will have tags only on the outermost packaging,
Wal-Mart will notify consumers of the tag's existence
and customers will retain the choice of keeping or disposing
of the tag post-purchase."
There's
not much more that can be said about Wal-Mart's RFID
initiative, but if you have any thoughts or opinions,
please give us your feedback.
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| Q. |
While
on the topic of benchmarking (see article in News
and Views), according to the benchmarking results
over three years from PRTM's Performance Measurement
Group, at what rate do "best in class" and median
discrete manufacturers hit their order delivery
commitment dates to customers?
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Best in class - 96.2% of the
time; median - 81%. |
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| © Copyright 2004, SupplyChainDigest. All rights reserved. |
