9/14/2016

European Grocery Supplier Shows How CPFR Really Works

Login|Subscribe|Advertise|ContactUs|AboutUs

Search
Sponsoredby:

TOPICS

Browse70Categories

VIDEOS

TheLargestNetwork

THINKTANK

Blog,Whitepapers,Research

Forecasting&DemandPlanning

EuropeanGrocerySupplierShowsHowCPFRReallyWorks

SUPPLIERS
TheLargestDirectory

SCBTRANSLATOR

SelectLanguage

By:RobertJ.Bowman|December01,2002

CollaborativePlanning,ForecastingandReplenishmentmayhavebeenborninthe
U.S.A,butittookaGermangrocerysupplierdoingbusinessinSpaintodemonstrate
truecollaborationamongtradingpartners.

AnyAmericancompanystuckintheearlystagesofaCollaborative
Planning,ForecastingandReplenishment(CPFR)pilotwoulddowelltolook
acrosstheoceanforguidance.InSpain,amajorproviderofcleaning
productshasrealizeddramaticresultswithoneofthecountry'slargest
grocerychains.

Melody Moore DIRECTOR OF

REGULATORY COMPLIANCE at
LeSaint Logistics
"At LeSaint safety is our highest priority, and our
team of knowledgeable experts work hand-inhand with our clients to maintain compliance."
Take a moment to learn how these efforts unfold
in every part of our business.

ThepartnersareHenkelKGaA,theDusseldorf,Germanybasedmakerof
householdcleaners,adhesives,toiletriesandotherhomecareproducts,and
GrupoEroski,theSpanishgrocerychainwhosethousandsofoutletsrangefrom
"hypermarkets"tominimarkets.TogethertheylaunchedasuccessfulCPFRpilot,atatime
whenfewsucheffortswereinevidenceinEuropeortheU.S.
HenkelmaynotbeahouseholdnameintheU.S.,butit'stoughtoignoreinEurope,which

Melody Moore
DIRECTOR OF
REGULATORY
COMPLIANCE at
LeSaint Logistics
"At LeSaint safety is our
highest priority, and our team of knowledgeable
experts work hand-in-hand with our clients to
maintain compliance." Take a moment to learn
how these efforts unfold in every part of our
business.

Jeff Pennington
PRESIDENT of
LeSaint Logistics
"At the core of our culture is
the drive to make things
better for our clients. We
know our clients entrust their
supply chain to us." Every day our management
leads our teams to advance our service
performance to higher levels of efciencies. Take
a moment to learn how these efforts unfold in
every part of our business.
poweredwithNTENT

Resources
CloudbasedSupplyChain
Execution&Orchestrationin
anOmnichannelWorld:
Thiswhitepaperpresentsthe5key
stepstobuildingacloudready...

ASMMastersComplex
FinancialReportingwith
Wdesk:

ASMisaleadingsupplierof
semiconductorequipmentforwafer
proc...

ThePathtoSupplyChain
Cloud:

Thiswhitepapergoesintodetail
aboutthegrowthofthesupplych...

accountsfor50percentofsales.Thediversifiedcompanyhassoldofforacquirednumerous
entitiesinits126yearsofexistence.In2001,itshedtwochemicalmakingunits,Cognisand
HenkelEcolab.Themovereflectedadesiretofocusonitscoreproductlineofdetergents,
cleansers,adhesivesandtoiletries.Henkel'scurrentU.S.holdingsincludeManco,themaker
ofDuckTape,anda27percentshareinTheCloroxCo.

Atatimewhenmanyconsumergoodsmanufacturersare
struggling,Henkelhasdonereasonablywell.Itshowedan
operatingprofitof168meurosinthesecondquarterof2002,
up11.5percentoverthesameperiodofthepreviousyear.In

Ittookaboutayearfor

thefirstsixmonthsof2002,salesoftheHenkelGrouprose

HenkeltogettheCPFR

3.3percent,to4.9bneuros.StillcontrolledbytheHenkel

program'selementsfullyin

family,thecompanyhasabout47,000employeesaroundthe

place.

world,doingbusinessin70countries.
Beneaththesurface,though,Henkel'soperationshaven'tbeensoconsistent.Inthelate
1990s,thecompanywassufferingfromseriousflawsinitsforecastingandexecution
methods.Inventorylevelswereunacceptablyhigh,yetstockoutswerechronic.Sowere
transportationinefficiencies.
Muchoftheproblemstemmedfromaninabilitytogaugetheamountofproductneededina
givenmarket.AccordingtoEstebanGarriga,tradeservicesmanagerofHenkelIbericain
Barcelona,thecompanywasexperiencingsalesforecastaccuracyofbetween40and45
percent.Clearlytherewasaneedforbettertieswithretailers.
ButHenkeldidn'trushblindlyintoacollaborationproject.First,saysGarriga,itneededtoget
itsownhouseinorder.Thatmeantimplementinganewdemandplanningsystemforinternal
forecasting.Atthetime,thecompanyhadnocoherentsystem,wasunabletointegratea
continuousreplenishmentprogramintotheforecast,andcouldn'tevencommunicatethebasic
eventsonwhichitrelied.ForecastswereproducedthroughExcelspreadsheets.Theresults
werenosurprise:highcostsandpoorservice.
Henkel'sgoalswereequallyclear.Itwantedtoeliminateaslewofinternalglitches,including
stockouts,deliveryerrorsandinvoicingcomplaints.Forecastshadtobesynchronizedwith
productionatoneend,andconsumerdemandattheother.Purchasinganddistribution,two

http://www.supplychainbrain.com/content/technology-solutions/forecasting-demand-planning/single-article-page/article/european-grocery-supplier-shows-how-c

1/5

9/14/2016

European Grocery Supplier Shows How CPFR Really Works

ofthecorporateworld'smostnotorious"silos,"hadtobeintegrated.Salesandmarketinghad
tobekeptintheloopaswell,foraccesstokeydemanddata.
Theanswer,atleastfromaninternalstandpoint,layinacquisitionoftheDemandPlanning
(DP)moduleoftheRockville,Md.basedManugisticsGroup,Inc.Thepurchasewas
accompaniedbyawholesalereengineeringofHenkel'sbusinessprocesses.
Manugistics'DPtoolprovides95percentofthecompany'stotalforecast.Itdrawson
informationfrommarketingandsales,amongothersources.Atthesametime,Henkeltook
painstodefinekeyperformanceindicators(KPIs),mostlyrelatedtoforecastaccuracyand
promotionsplanning.(PromotionswereamongtheareasgivingHenkelthemosttrouble,
Garrigasays.)
Henkel'sfulfillmentanalysisincorporatedsuchkeyelementsastheplanninghorizon,
modificationstotheplan,associatedpromotionalvolumes,andinternalfollowupbyvarious
playersintheorganization.Fromthatanalysis,thecompanyderivedaneventplanthat
identifiedwhowasresponsibleforeachstepoftheprocess.Internalforecasts,especially
thoserelatedtospecialprogramsorpromotions,becameajointeffortforthefirsttime.
RevisedForecasts
Theyalsobecameconsiderablymoreaccurate.Henkelwentfrombimonthlyforecast
revisionstoweeklyandevendailyadjustments.What'smore,theforecastswerebasedona
farlargeruniverseofdatathanbefore,suppliedbyalldepartmentsofthecompany.Andthe
resourcesneedtoprocessthedatadeclinedsharply.Before,saysHenkel,staffwouldspend
40percentofitstimeondataanalysisandmanagement,andtherestonprocessing.
FollowingimplementationoftheDPanddemandforecastingtools,thesameindividualswere
spending80percentoftheirtimeonanalysis.
ImplementationoftheDPsoftwarewasjustthefirststepinHenkel'squestforforecasting
accuracy."EvenwithManugistics,itwasnotenough,"saysGarriga."Intheend,itdoesn't
helpiftheinformationyouputintotheplanningsystemsiswrong."Andpromotionscanstill
goaskewifthemanufacturercan'treacttosuddenchangesindemand.
Forecastingprioritiesofmanufacturerandretailerdifferinkeyareas,saysGarriga.The
formerfocusesonshipments,orderleadtime,productioncapacity,productavailability,
promotionsandrawmaterialssupply.Thelatterlooksatvisibilitytoconsumerdemand,in
stockposition,varianceinshipments,promotionalactivity,growthplans,anddistributor
structure.
Somehowthosedisparateconcernsmustbemeldedintoacoherentforecastingmodel.For
Henkel,theanswerlayinCPFR,thesetofcollaborativeprocesseswhichhasattractedheavy
attentionintheU.S.andelsewhere,buthassofaryieldedlittleinthewayofcompleted
projects.Thatwaseventruerbackin1999,whenHenkel,itsDPsoftwareinplace,began
castingaboutforaCPFRpartner.
Itdidn'tlookforlong.Eroski,saysGarriga,wasHenkel's"customernumberone"inSpain.
Thetwoweredoingasignificantamountofbusinesstogether,buttheprocessesunderlying
thatpartnershipleftmuchtobedesired.HalfofHenkel'ssalesforecastshadanaverageerror
ofmorethan50percent.Stockoutswerecommon,especiallyonpromotionalitems.
ShipmentswouldfrequentlyarrivelateatEroski'scentralwarehouse,whichwasservicing500
stores.
OneofSpain'sleadinggroceryretailers,Eroskiwasanaturalcandidatefortheexperiment.
FocusedmainlyontheBasqueregion,thecompanyoperates47hypermarkets,800
supermarketsundertheConsumbrand,andsome2,000Charterminimarkets.Italsohas
threehypermarketsand17supermarketsinFrance.Inadditiontothecentralwarehouse,
Eroskimaintainsanumberofregionaldistributionplatforms,alongwithdirectstoredelivery
fordistantpointsorselectedproducts.
IncraftingaCPFRprogram,thepartnershadlittleinthewayofexamplesonwhichtodraw.
Atthetime,saysGarriga,therewerenomatureprojectsinEurope,otherthanacoupleof
isolatedeffortsinItaly.NotmuchhadbeencompletedintheU.S.either,althoughHenkel
drewheavilyongroundworklaidbytheVoluntaryInterindustryCommerceStandards
Association(VICS),andtheexperienceofCPFRpioneerssuchasformerNabiscoexecutive
JosephAndraski.
Workbeganinlate1999.HenkelandEroskiwereaidedbyAccenture(thenAndersen
Consulting),whichactedasconsultantandsystemsintegrator.Accenturehadalreadydefined
theCPFRstandardforprocessesandinformationexchangeonbehalfoftwodozencompanies
(includingHenkel)thatmakeupthegroupknownasECREurope.(ECR,forEfficient
ConsumerResponse,isacollaborativeplanningeffortwithinthegroceryindustry,which

http://www.supplychainbrain.com/content/technology-solutions/forecasting-demand-planning/single-article-page/article/european-grocery-supplier-shows-how-c

2/5

9/14/2016

European Grocery Supplier Shows How CPFR Really Works

predatesCPFR.)ThateffortleddirectlytoHenkel'sindividualpilot.
Onthesoftwareside,HenkelonceagainchoseManugistics,whoseNetWORKSCollaborate
moduleprovidedtheplatformforinformationsharing.ThecustomerwasthefirstinEuropeto
implementManugistics'collaborationproduct,accordingtoMartineGosse,thevendor'sParis
basedmarketingdirectorforEurope.Thepilotinvolvedtheentirecategoryofdetergent
productssoldbyHenkelthroughEroski'smarkets.
OpeningthePipeline
Itsowninternalforecastingprocessesfinallyinplace,Henkelwasabletoassumesole
responsibilityforprovidingtheproductionforecast,figuringpropersupplylevelsand
generatingorders.YetitstillneededafreeflowingpipelinefordatabetweenitselfandEroski.
Thepartnersbeganexchanginginformationonceadayonoutgoingstock,stockfiguresand
ordersonceaweekonorderforecastsevery15daysonsalesforecasts(eventuallythrough
theNetWORKSCollaboratetool),andeveryfourmonthsonthepromotionaleventscalendar.
Withthehelpoftheinternet,HenkelandEroskidevelopedcommonbusinessandpromotional
plans,comparedsalesforecasts,orderforecastsandexceptions,andobtainedinformationon
changesinpromotionsandproductavailabilityrelativetodemand,amongotherthings.
Theyalsopaidcloseattentiontomeasurements.Thepilotwasbuiltaroundaselectnumberof
KPIs,includingcustomerservicelevelsatEroski'scentralwarehouse,numberofstockouts,
numberofpromotions,stockrotation,forecastreliability,truckfillrates,palletfillrates,and
numberofurgentorders.
Nomajorprocesschangeiswithoutobstacles.JaumeFerrer,Accenture'spartnerresponsible
forsupplychainincontinentalEurope,saysthemajoronewashumaninnature.Atthepilot
stage,hesays,CPFRislargelyamatterofchangemanagement.Entrenchedpractices,such
asmanufacturersofferingdiscountstostimulatesaleslongbeforegoodsareactuallybought
byconsumers,mustbestopped.
Gosseagreesthata"mentalitychange"wasnecessaryinorderforthepartnerstocollaborate
fully.CPFRisstillarelativelynewconceptinEurope,shesays.Soisthenotionofsupply
chainmanagement,wherebycompaniesteardownbarriersbetweentraditionalfunctionsand
encouragethefreeflowofdata.
WiththeCPFRpilotinplace,thequalityofHenkel'ssalesforecastsimprovedsteadily.Inthe
periodbetweenOctober1999andMarch2000,theshareofforecastsshowinganaverage
errorofmorethan50percentdeclinedfromnearlyhalfofthetotaltoaround5percent.
Meanwhile,forecastswithanerrorrateoflessthan20percentareasonablelevel,giventhe
vagariesofconsumertastegrewfrom20percentto75percent.
OtherKPIsduringthatperiodshowedsimilarlystrongresults:a98percentcustomerservice
level,fivedaysofsupply,2percentstockouts,betterthan85percentforecastreliability,98
percenttruckfillrates,and99percentpalletfills.Perhapsmostimportantly,saysGarriga,
wastheintegrationofdataonnewproductintroductionswiththatconcerninglocalactivities,
intoasingle,reliableforecast.Previously,suchinformationwasnotaregularpartoflogistics
plans.
Thepartnerssetuparelativelysmallteamtogetthepilotrolling.Henkelcontributedfive
people,includingaconsultantfromManugistics,whileEroskisuppliedfour.Theywerebacked
byinternalinformationtechnologystaffers,aswellasateamofAccentureconsultants.The
latterwereinstrumentalinplottinghowthepilotcouldbeexpandedtoincludeadditional
products,Garrigasays.
Ofspecialnoteonthepersonnelsidewasthecompanies'insistenceontheinvolvementof
salesandcustomerservicestaff.Salespeoplehaveapoorrecordofparticipationinsuch
partnerships,saysGarriga.Andcustomerservicerepsaren'tschooledintheintricaciesof
salesforecastingorcommercialplanning.Butthemarketknowledgeofthoseindividualsistoo
valuabletowaste.SoHenkel'skeyaccountmanagerforEroski,notademandplanning
expert,waschosentospearheadcollaborationthatwouldleadtocreationofasalesforecast.
Andthecustomerserviceteamwasgivenresponsibilityforincorporatingpromotionsintothe
forecast.
Demand,ProductionLinked
Thedemandplanner,meanwhile,focusedonsynchronizingthatendofthechainwith
productionplanning.Toavoidsupplyglitches,planswouldbesquaredwithcapacity
constraintsbeforefiguresweretransmittedtoEroski.Intheeventofadiscrepancy,the
systemwouldgenerateawarningmessage.Forthepilot,Henkelestablishedaforecasting
horizonoffiveweeks,givingproductionenoughtimetogetitsoperationsinline.Theperiod
wouldlaterbeexpandedtotwomonths.

http://www.supplychainbrain.com/content/technology-solutions/forecasting-demand-planning/single-article-page/article/european-grocery-supplier-shows-how-c

3/5

9/14/2016

European Grocery Supplier Shows How CPFR Really Works

WithinsixmonthsoflaunchingtheCPFRpilot,Henkelpresenteditspreliminaryresultsatan
ECRconferenceinEurope.Butittookanothersixmonths,saysGarriga,togetallofthe
program'selementsintoplace.
Alongtheway,thepartnersdiscoveredhowharditwastoimplementallninestepsofthe
CPFRprocessmodelasdevelopedbyVICS.Theycanbebrokendownintothreecategories
planning,forecastingandreplenishmentwiththefinalonefocusingoncollaborativeorder
generation.
Henkeldidendupaddressingmostoftheninesteps,butonlyintheformofahighlevel
businesscase,aidedbyAccenture,onthefeasibilityofimplementingCPFRthroughout
Europe.And,inthecaseoftheEroskiproject,itbypassedatleastonesteptheuseof
technologytoolsforvalidatingexceptionsaltogether.Instead,thecompanyisrelyingonthe
telephoneandemailforthatpurpose.

Akeylesson,saysGarriga,wasthateachcustomerrequiresa
uniquefocus,emphasizingsomestagesattheexpenseof
others.TheEroskipilotcenteredoncollaborativeforecasting,
CPFRisstillarelativelynew

anareainwhichHenkelhadconsidereditselfespeciallyweak.

conceptinEurope.Sois

AsubsequentCPFReffort,withtheCataloniangroceryretailer

supplychainmanagement,

Condis,tackledupfrontagreementsleadingtopromotional

whichencouragesthefree

calendars.AccordingtoGarriga,thesoftwaretoolscreatedto

flowofdata.

supportCPFRmightfocusononeareaortheother,butnever
both.

It'seasytogetlostinthemassofrequirementsthatmakeuptheCPFRmodel.Garriga
recommendsthatcompaniesavoidtreatingtheeffortasasingle"superproject."Ratherthey
shouldapproachitasaseriesof20to30smaller,moremanageabletasks.Suchanapproach
canalsobehelpfulinimplementingCPFRwithsmallercustomers.
HenkelalsolearnedabouttheimportanceofmaintainingaCPFRprocessindefinitely.Long
afterapilothasbeenimplemented,companiesmustkeepinplaceataskforcetooverseeits
continuedsuccess,Garrigasays.
Henkel'ssuccesswithEroskileddirectlytothesubsequentpilotwithCondis,whichoperates
300storesinSpain'sCataloniaregionunderthebrandnamesofCondisSupermarketsand
Distop.Thistimearound,Henkelsoughttoincludenotjustthemanufacturerandretailer,but
anupstreamsupplier.Thegoal,saysGarriga,wasendtoendintegrationofthesupplychain
throughthedeploymentofCPFR.
LaunchedinSeptember2000,theCondispilotwascompletedearlierthisyear.Therelatively
lowtecheffortinvolvedtheuseofspreadsheetsfordata,withcollaborationtakingplace
throughemailandtelephone.ThefocusthistimewasonpromotionalSKUs.
JointlydefinedKPIsintheCondispilotincludedforecastingaccuracy,promotionplanning,
promotionplanchanges,servicelevels,inventorylevels,numberofrushorders,andtheuse
offullpalletsandfulltrucks.Initialresultsshoweda15percentimprovementinforecast
accuracybetweenJanuaryandJulyof2001,alongwithbetterjointplanningofpromotions.
Customerservicelevelsclimbedto99percentwithoutanincreaseininventorylevels.Overall
supplychaincostsfell6percent,largelyduetoadeclineinrushorders.
Fromthestart,saysGarriga,Henkel'sbiggestchallengewasgettingitsarmsaroundthe
complexCPFRmodel,andwhatwasneededtoapplyit."Wehadtoknowallofthedriversof
theforecast,"hesays."Thenwehadtodecidewhattofocuson."
Longerterm,CPFRcontinuestobeimpededbyageneralreluctancebysupplychainpartners
tocollaborateinameaningfulway.Manytoutthevirtuesofcollaboration,butfewseem
willingtoundertaketherevampingofbusinessprocesses,andsharingofsensitive
information,thatmakeitpossible.
FurtherblockingprogressisacontinuedlackofcommunicationsstandardsforglobalCPFR,a
deficiencythatmembersofVICS,theECRmovementandtheGlobalCommerceInitiative,
amongothers,areworkingtorectify.Still,thathasn'tstoppedsome50Europeancompanies
frommovingbeyondthepilotstagetofulluseofCPFR,saysFerrer.AndGossepointstothe
workofGlobalNetXchange,L.L.C.(GNX),anelectronicmarketplacewhichincludessomeof
thelargestretailersinEuropeandtheU.S.GNXfeaturesasupplychaincollaborationsuite
builtaroundtheCPFRmodel.
AsforHenkel,itisbentonextendingitssuccessintheEroskiandCondispilotstoother

http://www.supplychainbrain.com/content/technology-solutions/forecasting-demand-planning/single-article-page/article/european-grocery-supplier-shows-how-c

4/5

9/14/2016

European Grocery Supplier Shows How CPFR Really Works

customersduringthecomingyear.Followingitsownadvice,thecompanywilltakemodest
stepstowardthatgoal."Insteadofbigprojects,"saysGarriga,"we'llbelookingformore
smalleronesthatwecaneasilyimplement."

RELATEDCONTENT

GotSupplierCapacity
Risk?

OMPPlusforChemicals

MayolySpindler:No
Shortages

ChangingDemandson
Foodservice

SmartPlanning&
Business

RoadmaptoBetterSupply
ChainPlanning

CaterpillarUsestheGT
NexusCloud

AdvancedQuality
Planning

AdsPoweredwith

>moreForecasting&DemandPlanningarticles

MorefromSupplyChainBrain

TheMagazine

Resources

SCBCorporate

News

Subscribe

Newsletters

AdvertiseonSCB.com

FeaturedContent

ManageYourSubscriptions

EventsCalendar

AboutUs

IndustryVerticals

PastIssues

Library

ContactUs

Videos

SupplyChainInnovators

SupplyChainSolutionsForm

PrivacyPolicy

Blogs

SupplyChain&LogisticsJobBoard

SiteMap

Whitepapers

Research&Analysis

Webinars

SupplierDirectory

CaseStudyShowcase

Allcontentcopyright20152016KellerInternationalPublishingCorpAllrightsreserved.Noreproduction,transmissionordisplayispermittedwithoutthewrittenpermissionsofKellerInternationalPublishin

http://www.supplychainbrain.com/content/technology-solutions/forecasting-demand-planning/single-article-page/article/european-grocery-supplier-shows-how-c

5/5