CHAPTER 5 RECOMMENDATION ON CPFR IMPLEMENTATION
5.1 CPFR M ODEL I MPLEMENTATION
Refer to the literature review, five steps of CPFR are: Step 1. Evaluate the current conditions, Step 2.
Define Scope and objectives, Step 3. Prepare for collaboration, Step 4. Execute of the Nine-step process model, and Step 5. Assess Results and Identify improvements.
5.1.1 Evaluate the current conditions
The most important technique of CPFR can be found in Step 1. That is how to gain commitment from both supply and demand perspective. To evaluating the current state of Hisense GmbH helps the executive managers better organize the priorities for carry on the tasks.
CPFR Benefit: Supply
What are the expectations from Hisense GmbH from launching the collaborative program with AC distributors?
1. Hisense Germany targets on Order Forecast Accuracy from China factory. CPFR enables a time-phased order forecast from regional distributors, so that Hisense manufacturing base has greater
lead time for production, planning for components/ raw materials, and international transportation arrangement.
2. Hisense Germany targets on inventory reduction in Europe. CPFR enables transparent information among the local partners, so that a visual central warehouse would reduce forecast uncertainty and process inefficiencies.
3. Hisense Germany launches AC business sector with the purpose to improve overall ROI as well as the customer satisfaction.
CPFR Benefit: Demand
What are the potential benefits for the buyer?
1. Cross-functional buy-in enhances relationship. Hisense and its distributors work hand-in-hand from inception through fruition gain for both a competitive advantages over the rest who are not in a strengthened relationship.
2. What’s more practical, the collaborative programs leverages the Sales by improved Category management (SKUs) and Product Offering. As confessed by professional distributors, overstocking or short of stock are always the struggling points for AC project sales. Among hundreds of articles in warehouse, there is always one model missing for the urgent projects, for which, the sales department ends up with giving up the sales order. With the collaborative forecast and planning program among all German distributors with Hisense GmbH, there are more chance to supplement rare items and urgent spare parts in time.
Check points
By cross matching the expectations from Demand and Supply perspectives, the executive manager must go through checking points for Hisense GmbH and external customers.
Table 5-1 checking list of Hisense & partners status
Hisense GmbH is ready for CPFR? Yes.NO Distributor A.B.C. is ready for CPFR? Yes.NO
*Strategic goals and company culture *Partnerships be characterized as open and trusting
*Experience with other industrial best practices *Partners have complementary strengthens and weaknesses
*IT platform and technology available *Partners have the appropriate resources required by CPFR
*Specific CPFR visions *Partners have the experiences with other suppliers
*Specific budget and resources information *partners being able to quantify the potential benefits 5.1.2 Define Scope and Objectives
After first round information collection, the executive managers must have acquired global views about Commitment from German distributors; and hereafter, Hisense GmbH has to explore, a. team members and
roles from organizations, b. product lineup and locations that will be included in the process, c. nine step CPFR process, and establish Key performance metrics to measure the initiative’s success.
Considering the key factors, the purposes of inter-organizational collaboration is to accomplish below practices. Hereby visual tools refer to the collaborative technology, CRM systems, ERP, IT platforms.
The researcher recommends developing a role map, to clarify Team Members- Roles- Responsibilities.
(Table 5-2) Each company identifies a management-level sponsor, and a team of full time individuals. There are 3 stages to follow. Firstly, Sales Collaboration represents the frontier information exchange, which is critical for project bidding and product advancement as well. A typical example could be an office building AC replacement project, for which, candidates from all brands are called in for tender, yet project designer require special AC treatment instead of standard solution. Therefore, collaborative team members from Hisense and its distributors should update several rounds for commercial and technical progress. Secondly, Replenishment Collaboration refers to the logistics management, from Chinese factory till the visual warehouse in Germany. Inventory analyst from both side works closely for synchronizes the flowing information of production and transportation; meanwhile, services manager from distributor collaborates with customer services from Hisense to fulfill the demands of components and spare parts. Lastly, the responsible people of this collaborative program must assure that the IT platform being suitable for actual process; in case of exceptions, remedy measures have been well prepared for backup.
•Product aging report from distributor
•Product advancement planning from supplier
•Market approval from distributor
•Product R&D program launch from supplier
•Product phase-out from distributor Collaborative
Product Management
•Potential project sales for reports from distributor
•Project registration and information sharing from supplier
•Projects sales order forecast updates from distributor
•Projects supply updates from supplier
•Projects registration closure from distributor Collaborative
Demand/supply Planning of AC
Channel
•Replenishment forecast from distributor
•Replenishment forecast approval from supplier
•Manufacturing & Transportation & Inventory update from Supplier
•Visual Inventory variaton update from distributor
•Pysical Inventory update from supplier Collaborative
Logistics operation based on visual
tools
Template table 5-2 Team Members, Roles and Responsibilities
Role Responsibilities Typical Position
Distributors
Typical Position Hisense Sales Collaboration -Establishing sales
forecasts, promotion plans
Replenishment -Determine the order forecast
Collaboration Technology -set up collaboration environment
The executive manager must work additional for finalize the scope and set up objectives as guidelines for upcoming meetings with partners. See table 5-3
Table 5-3 Template Scope-setting & Objective-setting
Scope-setting Objective-Setting
- Define the product category
- Determine CPFR coverage: Inventory management, R&D product advancement, services standards, spare parts/components managements
- Determine the partners’ responsibility items and measurements.
- Identify process in launch
- Identify the performance review mechanism
-Set up annual target on product sales volume -Targets on inventory rotate ratio
-S&OP expense cost down ratio -Distributor market share increase -Targets on annual forecast accuracy
- Improvement of distributor project order in-stock position
5.1.3 Prepare for the Collaboration
Step 3 is to prepare for the collaboration. The executive team studies the details of the CPFR business process and identifies the technology and additional resources required to support it. Sales and replenishment team develop ground rules for managing exceptions and changes. Collaboration technology team installs and configures the information systems (Common info. Reflect Platform). After all procedures done, collaboration is ready to begin.
In the case company, Hisense GmbH representatives must conduct sets of meet up with key functional departments from distributors to collected historical data. E.g. Purchase cycle with other supplier, standard and exceptional import procedures from external manufacturers, forecasting program with particular
product code, etc. Afterwards, Hisense GmbH needs to hold internal meetings with Chinese manufacture and local logistics partners, in order to work out managerial plan for future project. Hisense GmbH also needs to analyze the historical data from paralleled subsidiary, such as Hisense Italia srl. for accurate portray of exceptional conditions in forecasting and replenishment.