CPFR® Overview

BISG Board MeetingNovember 20, 2003

Joe Andraski, Senior Vice President OMI International

What This Session Covers.

• Collaborative Commerce Dynamics

• Collaborative Commerce Barriers

• CPFR® Process Model

• CPFR® Benefits

• Globalization of CPFR®

• VICS & VICS CPFR® Committees

• Standards Enable Collaborative Commerce

Collaborative Commerce Dynamics

Brings the supply chain closer to the consumer Focus on what mattersFocuses attention on exceptionsMandates reconciliation of exceptionsSupply constraints are realForecasts are constrained by supplier’s capacityPredicting demand in a vacuum is difficultFacilitates flexible relationshipsPartnership in order to succeed

Collaborative Commerce Initial Paradigm Shifts

Greater sharing of data and responsibility

Common goals and metrics

Forecasts aligned, & time phased across supply chain

Managed by shared exception criteria

Committed forecast ---> frozen orders

Pre-notification of issues in meeting consumer demand

Capitalize on trading partner strengths, resources & systems ---> 4 CPFR® scenarios

Barriers to Collaboration

Internal AlignmentSilo MentalitySilo CompensationNot Invented here mentality

Business Practices Out of Sync With RealityLegacy SystemsPersonal Comfort ZonesLack of LeadershipUninformed Opinions

CPFR® Definition

A shared process of creation between two or more parties with diverse skills and knowledge delivering a unified approach that provides the optimal framework for customer satisfaction.

Voluntary InterIndustry Commercial Standards (VICS)www.vics.org

www.cpfr.org

What about CPFR® in Collaborative Commerce?

First step for consumer-centric supply chain reality.

Initial alignment of retailers & their suppliers to consumer-based demand.

Built Industry Consensus on Real World Benefits

of Collaboration.

Visibility & focus on sources not symptoms of

supply chain inefficiencies.

Beginning of Collaborative Value Creation

FRONT END AGREEMENT

JOINT BUSINESS PLAN

CollaborativePlanning

CREATE SALES FORECAST

IDENTIFY EXCEPTIONS

RESOLVE EXCEPTIONS

CollaborativeForecasting

CREATE ORDER FORECAST

IDENTIFY EXCEPTIONS

RESOLVE EXCEPTIONS

GENERATE ORDER

Buyer

The CPFR® Process Model Seller

CPFR® Model

Planning

Forecasting

Replenishment

Consumer Demand Forecast

Replenishment Forecast

CPFR® Value Proposition

Increased Sales

Reduced Operations Cost

Reduced Inventory

Improved Relations

Improved In-Stock Shared insights to Demand

Seasonality/Regionality Promotional Causality

Lower Product Returns Reduced Expediting Costs Optimized Production Cycles

Less “Just-In Case” Stock Build to Order vs. Build to

Stock

Jointly solve problems vs. blaming other party

Value Delivery CPFR® Driver

Source: © E3 Corporation

CPFR® ROI Benefit Categories

Inventory 41%Storage Costs 22%Inventory Expense 17%Intransit inventory for Rail >1%Reduced 3’rd Party Storage 13%

Process Efficiencies 6%Inventory Control 1%Logistics 2%Order Management / CSR 2% Purchasing >1%

Sales Benefits 34% Increased Sales 25%Improved Margin 1%Customer Retention 8%

Transportation 19%Carrier Management >1%Load Planning >1%Truck Tendering/Carrier Selection 1%Truck Cycle Time 6%Rail Cycle Time 10%Demurrage >1%Excess Freight Charges 2%Total Benefit 100%Total Benefit 100%

Where do the Benefits Come From?Where do the Benefits Come From?

Real World ROI ExamplesFirms Customer Service Inventory Forecast

AMR RetailersSummary

Sales +6 to 20% Store Inv down 10 to 40%

AMR SuppliersSummary

Shipment +2 to 10% Del. Cycle cut 10 to 40%

Metro/Herlitz In Stock + 50%Sales +4%

Down 15%

Canadian Tire/25 Suppliers

Sales +30%Fill Rate +1%

Down 10% Improved

Sainsbury/Nestle

In Stock + 30%Supplier Fill +24%

Exp/Short Sav. £ 2.8 Million

TruValue/ 7 Suppliers

Sales +10 to 20% Logistics Saving 10 to 30%

Improved

Ace/Manco Sales +12% Improved 10%

Tesco/ P&G In Stock 100% DC Stock -75% Improved 10%

Conad/Barilla Item Sales +167% 85% Accuracy

The Globalization of VICS/GCI CPFR®

UK - 11ArgosASDAHasbroJ. SainsburyKingfisherLever-Faberge UK SomersfieldSuperdrugTescoUnilever UKWoolworth’s

France-2CarrefourChanel

Benelux - 3Delhaize le LionRoyal AholdVandemoorte

SpainEroski

Denmark - 2HeinekenDansk

Canada - 2Canadian TireRONA

Germany - 4BayerHenkelHerlitzMetro

SwitzerlandNestle

MexicoGroupo Elektra

Hong KongJusco

Japan - 3KaoPanasonicYKK

Israel - 2SupersolTruva

ArgentinaUnilever

USA – 66 FirmsA&P Ace Hardware Albertson’s Ashley Furniture Bell SportsBest Buy Binney & Smith Black & Decker Broyhill Colgate-PalmoliveCompaq CVS Delta Faucet Do It Best Eastman ChemicalsEckert Eli Lilly Federated Flowers Bakeries Fuji Film USAGE Appliances Harley-Davidson Hasbro H.E. Butt Hewlett-PackardHome Depot Inland Paperboard International Paper J.C. Penney John DeereJohnson&Johnson Kimberly-Clark Kraft Lane LeviLiquid Nails Liz Claiborne Manco Mars Master LockMeijer Merial Mitsubishi USA Nelson New BalancePacific Coast Feather Pharmavite PlumbPak Procter & Gamble Ralston PurinaRite Aid Saks Sara Lee Schering-Plough Sears & RoebuckSports Authority Staples Super Valu Target TaylormadeTru Value Hardware Walmart Walgreen’s Warner-Lambert Wicke’s Furniture

Europe - 28 Americas - 70Asia - 7

Italy - 2ConadBarilla

TaiwanCMC

What is VICS?Voluntary Interindustry Commerce Standards

AssociationThe mission of the VICS Association is to take a

global leadership role in the ongoing improvement of the flow of product and information about the product throughout the entire supply chain in the retail industry.

VICS Members include the leading Global Retail and Consumer Goods Manufacturers with a combined liquidity that exceeds $1.2 Trillion

Participation in VICS Committees enables firms and their trading partners to leverage the benefits of Collaborative Commerce

VICS CPFR® Committee

Advisory BoardWorking Committees;

Metrics, Business Process, Technology, N-Tier,CTM, and Education and Publicity

VICS CPFR® Committee Work So Far.

1996

1997

1998

19992000

2001

1st “CFAR” pilotVICS subcommittee develops CPFR®

VICS CPFR® Guidelines published

First CPFR® rolloutRoadmap to CPFR® published, with pilot results

Leading CompaniesPilot CPFR®

Global CPFR® guidelines publishedB2B marketplaces offer CPFR® services

2002

2003

2004

What about your firm?

CTM Ver 1.0

The Industry:UCCnet, UCC, EAN, FMI, GMA, Transora, WWRE,

ECCC, GCI, Wal-Mart, Kraft, Colgate, Wegmans, P&G,

Ahold, Sterling Commerce, IBM, Microsoft, UDEX, etc…

2. GLOBALregistry

3. Data Synchronization

4. Collaborative Core Business Transactions - Order, Shipment, Payment.

5. Collaborative logistics management

6. Collaborative sales & promotion planning

7. Collaborative product development

1. Common data standards

e-Collaboration

Time / Degree of trust & complexity

Ben

efit

s

You

Source: A.T.Kearney for GMA - FMI

Standards Enable Collaborative CommerceVICS Enables Standards Adoption

Any Questions

Find The Answers at the next VICS CPFR® Committee Meeting.