Put the right stuff on the shelves: Page 2

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Embracing CPFR is a major part of that plan. Starting in the spring of 1999, Abercrombie began looking for a replenishment system that would drive the reordering of basic products such as men's underwear and blue jeans, women's intimate apparel and handbags, and home products like sheets. The goal of the system was to improve the proportion of merchandise in stock to 95%. "All our retail franchises had a good reputation for service, and we wanted to make sure we fulfilled that reputation. We didn't have enough of the products we wanted in certain locations," Abercrombie explains.

At the same time, each retail chain operated with a couple of key buyers or procurement staffers manually producing the models for maintaining stock. Essentially, they'd get the average rate of sales for a particular item, multiply it by the weeks of supply, and employ that as a forecast, typically only going through the process of running the numbers once a quarter, given the complexity. That approach, Abercrombie says, didn't allow the retailer's replenishment system to be as responsive to sales trends as it needed to be. As a result, it wasn't uncommon to have stores sell out of a particularly popular item or have too much inventory on hand for other products that were not in demand in that particular region, he says.

Abercrombie's search led him to Logility's Voyager software suite, which includes such modules for CPFR as Demand Planning, Inventory Planning, and Demand Chain Voyager. The initial rollout, to 40 of Saks' Parisian department stores in March, will be augmented in the April to June 2000 timeframe to stores in the South, with the Midwest operating companies coming onboard in July and August 2000. At first, the Logility system will be focused internally: The replenishment teams of the various Saks department stores will dynamically generate inventory management models with Voyager and load the models into an in-house replenishment system to automatically initiate orders and alert buyers to exceptions when items are under- or overstocked. "This will allow us to respond dynamically in weeks vs. quarters," Abercrombie says.

The benefits of CPFR

For the demand side:

Greater sales: The close collaboration required for CPFR drives improved business planning between buyers and sellers. That can directly translate into increased category sales.

Enhanced relationships: CPFR strengthens an existing relationship and substantially accelerates the growth of a new one. Buyer and seller work hand-in-hand on business plans and promotional forecasts.

Category management: Before starting CPFR, both parties inspect shelf positioning and exposure for targeted SKUs (stock keeping units) to ensure adequate days of supply and proper exposure to consumers. This will result in improved shelf positioning.

Improved product offerings: Before CPFR implementation, buyers and sellers agree on which merchandise items to track, synchronize their SKUs, and identify additional members of a product line that are likely to sell well.

For the supply side:

Improved order forecast accuracy: CPFR enables a nearly real-time order forecast that provides additional information, greater lead time for production planning, and improved forecast accuracy vs. traditional tools.

Inventory reductions: CPFR helps reduce forecast uncertainty and process inefficiencies. With the technique, products can be produced to actual order requirements instead of storing inventory based on forecast.

Increased customer satisfaction: With fewer out-of-stock items resulting from better planning information, higher store service levels will prevail.

Source: Source: CPFR Roadmap, published by the Voluntary Interindustry Commerce Standards Association (VICS)

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