Defining Collaborative Planning Forecasting And Replenishment Commerce Essay Example

collaborative system on paper and then demonstrated its effectiveness through a computer lab, showing that the Internet could be used for information exchange. The trial yielded positive results: Warner-Lambert's stock levels increased from 87% to 98%. Lead times also decreased from 21 to 11 years, resulting in a sales increase of $8.5 million during the trial period. It's important to note that the pilot was limited to one Warner-Lambert manufacturing facility and three Wal-Mart Distribution Centers. (source: free-logistics.com, 2010)

Case Study: West Marine

Today, West Marine is the largest boating-supply retail chain in the United States. They offer a product range of over 50,000 items available at more than 400 company-owned stores and through their retail catalog. The company generates an average annual sales revenue of $690 million. Founded in 1968 by Randy Repass, West Marine started as a mail-order business catering to boating enthusiasts. In 1975, they opened their first retail store in Palo Alto, California and later created a separate sales channel for commercial customers like boat dealers and boat builders, three years after their initial store opening.

In 1997, West Marine acquired E Marine, their East Coast competitor, which had a total of 63 stores. This purchase had negative repercussions for West Marine, resulting in an approximately 8% decrease in sales and over a 12% increase in out-of-stock levels during peak season compared to the previous year. Moreover, their net profit declined from $15 million in 1997 to slightly over $1 million in 1998 after six years of consistent growth (Highbeam Research, 2006). These adverse effects were primarily due to the realization that E's internal operations were worse than anticipated. The investment group overseeing E&A&B

allowed the company's infrastructure to deteriorate and its inventory to dwindle. This exacerbated the impact of the acquisition as it took six months to integrate basic systems due to poor infrastructure, leading to shortages of stock in stores. In response, West Marine made an impromptu decision to rebrand all E stores and convert them into their own products with their pricing system. John Edmondson, CEO of West Marine appointed after the acquisition with a mission to turn around the company stated,"West Marine bought E&A&B because it was different and unique."

According to Bruce Edwards, the senior VP of shop operations at West Marine, the shops were converted into West Marine shops and the customer base was excluded. Edwards also admitted that this transformation caused harm to both parties involved and resulted in a decrease in sales (Standford, Graduate School of Business, 2005).

How West Marine Rescued the Company

After acquiring the company, Edmondson identified four problem areas within the supply chain: distribution centers, transportation, refilling, and systems back using these operations. To address these issues, he implemented a CPFR program. The first step in West Marine's CPFR program was to introduce an aggregate ordering or "multi-echelon" refilling process. A "multi-echelon" system refers to a series of two or more production or supply facilities where any changes in policy parameters of one facility would have an impact on the other facilities directly or indirectly (Gopalakrishnan, 2004).

According to Standford, Graduate School of Business (2005), West Marine previously used JDA's Merchandise Management System (MMS) before implementing the multi-echelon system. The MMS was connected to the company's point-of-sale system in the stores, also provided by JDA, to track inventory levels and sales

at the store level. West Marine also utilized JDA's Warehouse Management System (WMS) for its distribution center (DC) operations. In addition, West Marine utilized JDA's advanced prediction tools, Advanced Store Replenishment (ASR) and Advanced Warehouse Replenishment (AWR). However, the issue was that these systems could not directly interact with each other, resulting in additional work and maintenance.

No package supplier offered a fully integrated solution at the time. Therefore, West Marine and Matt Henderson from Amigo Inc. designed a system that connected the point of sale systems to the DC systems. This system was the first of its kind in the retail industry. Through integrating information from retail shops and warehouses, including seasonal forecasts, promotions, and inventory levels, West Marine was able to provide suppliers with more accurate and timely orders. As a result, their multi-echelon refilling solution successfully bridged the gap between stores and warehouses, allowing for immediate replenishment based on store-level inventory discrepancies.

Similarly, all publicities and shop degree mixture alterations are planned in the shop system, and warehouse refilling instantly responds to them. The solution eliminates duplicate prediction undertakings and creates more accurate supplier-order prognosis ''. ( Reed Business Information, 2006 ) The West Marine multi-echelon system is shown in figure 2.

SUPPLIER INTEGRATION

The following job that West Marine encountered was to acquire its providers to purchase into the thought of CPFR. In order to turn to this job West Marine introduced a pilot plan with 12 handpicked companies that were major providers to West Marine, that all had old issues with their supply irons in some signifier.

West Marine implemented specific performance standards and goals for their partner companies. While no formal agreements

were written, each company was expected to adhere to these standards. Suppliers who joined West Marine's supply pilot program were not required to make any capital investments in technology, but they were expected to designate resources to act as counterparts to West Marine's supply chain planners. As part of the program, West Marine began sharing weekly forecasts with their suppliers and provided them with a report on their performance. Weekly meetings were also introduced, where cross-functional teams consisting of members from all involved organizations discussed potential improvements and maintained a holistic view of each supplier relationship. The results of the CPFR program were impressive, with in-stock rates approaching 96 percent in every store, even during peak season, and forecast accuracy reaching about 85 percent.

Although on-time cargos were improving, they only reached 30 percent against a stated goal of 90 percent in 2002. West Marine anticipates this number to increase to at least 50 percent by the end of 2003 (Standford, Graduate School of Business, 2005). Despite the successful pilot program that demonstrated the effectiveness of CPFR, West Marine faced difficulties convincing suppliers to participate in the CPFR program. To address this issue, West Marine offered suppliers a guarantee as an incentive.

This warrant stated that West Marine would purchase the entire projected stock, depending on the forecast. Consequently, if any errors occurred in the system, West Marine would be fully responsible for their consequences. This measure was crucial in gaining sellers' confidence in West Marines CPFR forecast. As a result, the company was able to optimize their transportation and receiving processes by leveraging their demand forecasts.

The utilization of its dock was effectively increased by

West Marine through the implementation of prognosis, resulting in improved efficiency for both inbound and outbound cargoes.The company was able to handle sudden increases in demand more seamlessly as a result. The decision was supported by various sources: - http://www.free-logistics.com/index2.php?option=com_docman;task=doc_view;gid=268;Itemid=26 - http://www.highbeam.com/doc/1G1-145836210.html - http://www.lomag-man.org/cpfr_industrie_achat_distribution/documentation_cpfr/WestMarineA_CPFRSuccStorySupChManReManNet_an.pdf - http://www.stanford.edu/group/scforum/Welcome/White%20Papers/Multi-Echelon%20Inventory%20Optimization%20-%20Evant%20white%20paper.pdf. Reference: Gopalakrishnan, P., 2004.Handbook of Materials Management, Prentice-Hall of India Pvt.Ltd.