That decline is larger than the multichannel retailer’s overall 5.8% sales decline.
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“Suppliers would see indications of changes in demand, but the information was only part of the order replenishment plans we shared and contained no details on actual sales data,” Rae says. As suppliers received Canadian Tire’s order replenishment data through EDI, they had to download it into their own software applications and translate it into their preferred data format. And for merchandise and logistics managers to get practical use of the data, they had to rely on IT experts to help run analytical reports.
But even after analyzing the data, there was still much missing from the full scope of CPFR. There were no pre-set business rules, for example, that would set supply chain performance thresholds that could trigger alerts to trading partners of exceptions. And because there was no system of sharing sales forecasts and plans for promotions, suppliers were left with scant details for getting a better understanding of the retailer’s order replenishment plans and prepare for exceptions that might be revealed by a look into sales forecasts.
Getting a retailer to share forecast data on sales and promotions, however, crosses a traditional line of defense in the retail industry. But to really use CPFR to its ultimate potential, sharing sales and promotional forecasts is a crucial part of the mix, experts say.
Pick the best
So how do retailers get over that hump? By starting out slowly with the most trusted suppliers whose collaboration could have the most significant impact on improving the flow of goods onto store shelves, experts say.
“Look at your top 20% of suppliers, pick one or two that you have good relationships with, then start to put some rules in place about sharing information,” says Garf.
But going much beyond that step needs a supportive technology infrastructure, Rae says. It’s one thing to establish business rules and agreements-such as defining which managers at each trading partner need to stay in contact, how often and through what communication channel-but getting broad and timely participation requires a technology infrastructure that provides universal access to a central core of information. In other words, the web is crucial to making this work, experts say.
“CPFR is a business process, but when you have a technology application that enables that process, it definitely enhances the collaboration by making the relationship more formal,” Rae says.
That technology infrastructure emerged at Canadian Tire through its web-based Manugistics NetWorks suite. Manugistics was a natural fit because the retailer was already using its software to analyze its sales as a preliminary step to producing the order replenishment forecasts sent through EDI and e-mail to suppliers. Canadian Tire configured the NetWorks suite with a Collaborate module for sharing data and a Monitor module that automatically alerts managers at retailer and supplier to changes in expectations. Retail companies using its software to collaborate with suppliers average a 10-25% reduction in inventory, Manugistics says.
The NetWorks application, which gets an integrated data feed from Canadian Tire’s Manugistics sales forecast software, sits on Canadian Tire’s own web servers, providing web browser access by any authorized manager at the retailer and at its designated suppliers.
The first step under the new system involved setting business rules. Though these can differ with each supplier, they always require a retailer to first review how each trading partner needs to conduct business.
If a supplier has four departments that need to review the retailer’s sales and order forecasts, for example, Canadian Tire will meet with each department manager and learn which data they need to see, including data that may need to be adjusted for particular managers during different selling seasons.
Collaboration technology doesn’t replace human interaction, it supports it, Rae says. “We have regular reviews with suppliers and internally, both in person and remotely, and analyze the way our partners use the information we provide them.”
Getting the business rules down pat sets the table for Canadian Tire’s next phase of CPFR, creating a sales forecast, identifying exceptions to expected sales and establishing ways to collaborate on exceptions.
Canadian Tire’s move into this phase of CPFR was partly helped by its experience working with sales forecasts to plan the order forecasts it had been sharing with suppliers through EDI and e-mail transactions.
Suppliers under the old system got used to getting updates on changes in demand. But without extra details on the sales and promotional forecasts that went into devising the order forecasts, suppliers were less capable of preparing for exceptions to planned orders.
Rae says that learning to use the NetWorks system was not difficult for Canadian Tire managers, who were already accustomed to using sales forecast data. But Canadian Tire did conduct in-person and telephone sessions with trading partners, she adds.
One of the advantages of sales forecast collaboration, experts say, is that it opens up analysis to suppliers as well as retailers. And often two heads are better than one. “Part of the collaboration process is being able to decide whose forecasts are more accurate,” says Karim Bursa, vice president of marketing for Logility Inc., a provider of collaboration software.
A critical part of this phase is for the retailer and supplier to agree on tolerance levels in dealing with exceptions to such things as sales forecasts and delivery times. When alerted of exceptions, managers contact other managers within their own organization as well as at their trading partner to make changes to production, delivery and merchandising plans.
With its business rules and sales forecast phases in place, Canadian Tire took its collaboration program full circle by bringing it back to its order forecast stage. Rather than having to gather information on sales forecasts, replenishment plans and order generation from different sources and assorted spreadsheets, managers can access and analyze all data from a single web page.
Now when Canadian Tire shares order forecasts with suppliers, the retailer and its suppliers have already worked through exceptions that could impact order forecasts. “The information in our 26-week order forecast is golden, because we have few last-minute changes,” Rae says. “Now when production planning takes place, suppliers are a lot more comfortable about it.”