Metro Group Sees Benefits of CPFR Program

German retailer documents inventory improvements resulting from collaborative planning initiative based on GNX solution

German retailer documents inventory improvements resulting from collaborative planning initiative based on GNX solution

Chicago — July 15, 2005 — German-based retail giant Metro Group has seen significant inventory improvement since implementing a collaborative promotional planning with suppliers based on a solution from GlobalNetXchange (GNX), the solution provider announced this week.

Metro's collaborative planning, forecasting and replenishment (CPFR) program, based on GNX's Supply Chain Collaboration platform, facilitates joint promotions management between Metro Cash & Carry in Germany and seven strategic suppliers in the detergent and paper goods categories.

Joint workflow processes for promotion planning and promotional sales forecasting are key components of the program. Throughout the duration of the program, which was launched in 2002, key metrics including stock service level, promotion lift and end-of-promotion coverage were measured and tracked for the approximate 500 stock-keeping units (SKUs) in Cash & Carry stores.

Rise in Promotional Lift

An analysis of historic sales, inventory and forecast data of the German Metro Cash & Carry stores of the years 2002 to 2004 was used to benchmark the collaboration results. For purpose of analysis, not only were all key metrics of products within Metro's collaboration program monitored, but they were also compared with the performance of the remaining products of the paper goods and detergents categories.

The analysis showed that within the test group (all CPFR suppliers, Q4 2004 vs. Q2 2002), the results included 26.8 percent improvement in promotion lift, as well as 0.74 percent improvement in promotional stock service level (from an already very high level to 99.53 percent, representing a further reduction of out of stocks by more than 61 percent). In addition, the analysis pointed to 14.9 percent reduction in end of promotion stocks (18.9 days vs. 22.2 days).

Promotion coverage and stock service level were at comparable levels for products within and outside the program in 2002, but by the end of 2004 Metro measured significant improvements in the program product metrics over non-program products of the same category, including 4.85 percent superior promotional stock service level (99.53 percent CPFR vs. 94.68 percent non-CPFR), and almost 50 percent less end-of-promotion coverage (18.9 days CPFR vs 37.3 days Non-CPFR).

Conceptual Changes in CPFR Program

While the promotion lift of the products in the CPFR program was improved by 26.8 percent, no significant change could be measured in the control group of the non-program products, which actually saw a slight decrease of 1.7 percent.

Metro's CPFR program underwent several conceptual as well as technological changes, according to Axel Hopp, Metro Group corporate information manager. "Connecting Metro's pilot environment with Metro Cash & Carry's operational replenishment systems in order to prove the concept with hard facts was a technological and organizational challenge in itself," Hopp said. "The fact that Metro and its trading partners and our technology partner GNX had to undergo considerable effort to gauge these impressive results underlines our continuous belief in the superiority of the concept of supply chain collaboration."

"Today's overwhelming results, which are based on real data from the Metro Cash & Carry stores gathered and diligently analyzed over the entire pilot length, represent the proof of the CPFR concept," said Ken Fleming, vice president of supply chain for GNX. "GNX has seen similar benefits from our members in various categories across many types of businesses including department stores, grocery and mass merchandisers. CPFR is a critical component in assisting our members manage inventory effectively and time critical promotions accurately."

Additional Articles of Interest

— For an in-depth look at how agribusiness Syngenta is reducing inventory while maintaining customer service levels by building a demand planning process based on a collaborative forecasting solution, see the article " Forecasting Processes from the Ground Up ."

— Demand planners at glove manufacturer Wells Lamont have put their finger on a way to bring new value to the company by leveraging technology that allows them to plan by exception. Read their story in the article " Planning by Exception," in the December 2004/January 2005 issue of Supply & Demand Chain Executive.

— Enabling the end-to-end purchase to pay process may seem daunting, but the benefits are hard to ignore. Read the best practices article "The Analyst Corner: Payment" by Christopher Sawchuk and Joseph B. Lancaster III of The Hackett Group, in the February/March 2004 issue of Supply & Demand Chain Executive.