Retail exchange: Collaboration increases demand forecast accuracy, reduces inventory, improves in-stock levels

Alexandria, VA  April 30, 2002  A recent implementation of collaborative planning, forecasting and replenishment (CPFR) at the WorldWide Retail Exchange demonstrated that CPFR can increase demand forecast accuracy, reduce inventory and improve in-stock levels, according to a report this week from the exchange.

The WWRE  an industry-backed B2B exchange for retailers, manufacturers and suppliers  said that the recent launch of its CPFR tool, dubbed WWRE Collaborative Planner, involved 480 stock keeping units (SKUs) in general merchandise, food, drug, electronics and apparel in 12 trading partnerships, and encompassed 45 distribution centers over three continents.

Participants in the launch reported a mean increase in forecast accuracy of 25 percent, the exchange reported. By collaborating on sales, order and promotional forecasts, participants using Collaborative Planner were able to develop mutually agreed upon forecasts based on the best data available to both parties. These improved joint forecasts could serve as the basis for other supply chain efficiencies, such as service level improvements, inventory reductions and increased sales, the WWRE asserts.

In addition, the participants reported a mean inventory reduction of 32 percent thanks to improved forecast accuracy and business process improvements. Visibility and confidence in the collaborative forecast enabled the trading partners to more closely match replenishment plans to consumer demand, reducing costly safety stock, according to the exchange.

Other results included a mean lead-time reduction of 25 percent as trading partners worked together to jointly establish business goals and re-engineering processes and realign supply chains to meet those goals. Participants also saw a mean improvement in in-stock levels by 10 percent. By avoiding empty shelves, especially during promotions, stores reported increased sales levels as well as long-term gains such as increased customer satisfaction and loyalty. Shared plans, improved demand visibility and more reliable forecasts can improve product availability at the shelf, the WWRE said.

The exchange said the launch results indicate that retailers and suppliers were able to re-align their supply-chain processes to achieve operational and financial goals using the Collaborative Planner, which enables exchange members and their trading partners to work in real-time to jointly manage sales, order and promotional forecasts and processes.

"The WWRE Collaborative Planner was one of the key reasons we joined the exchange," said Bob Wigmore, vice president of supply chain logistics at Wyeth Consumer Healthcare. "It will enable us to work at large scale with a broad spectrum of our retail trading partners."

"Implementing WWRE Collaborative Planner has been a huge learning experience, resulting in improved trading partner relationships and streamlined processes," said Jeffrey Rein, executive vice president of marketing for Walgreen Co. "We were able to improve communication and visibility with our trading partners. And by sharing our forecasting data and joint business processes, we have realized savings that can be distributed across the supply chain."

Dawn Andre, director of supply chain collaboration for the WWRE, suggested that the launch results bolster the business case for CPFR. "Retail and manufacturing executives cannot ignore CPFR as a significant method of improving supply chain efficiencies and adding to their organization's bottom line," she said.