Advantage Collaboration CPFR Sase Study

Manufacturers, distributors and retailers are under intense pressure from customers and investors to improve their business performance. They weed solutions that will help them increase sales, reduce inventory and overhead, improve customer service, and avoid running out of stock. Among the new Web-based business practices, Collaborative Planning, Forecasting, and Replenishment (CPFR) has the potential to achieve all these goals. The benefits of CPFR include better customer service, faster inventory turnover, and increased sales.  In India, Godrej Consumer Products Ltd (GCPL) is implementing CPFR, under the nomenclature CPFaR, as a part of its IT initiative, which also includes a Business-to-Employee (B2E) portal and Customer Relationship Management (CRM).

GCPL is a major player in the Indian FMCG market with a presence in the personal, hair, household and fabric care categories. The company has three manufacturing facilities at Malanpur (MP), Guwahati (Assam) and Silvassa (Dadra & Nagar Haveli). With a distribution network covering the Indian market through 32 company stockists, 3,030 distributors and super/substockists that together service over 4.8 lakh retail outlets, distribution is one of GCPL's core competencies. GCPL uses the S&OP (Sales & Operations Planning) process to align demand and supply at the start of each calendar month. Bottom-up demand forecasts for each product are received from the 210 sales officers of the company, which is later used to plan for M1 (month beginning 30 days hence), M2 and M3. The M0 (current month) plans are typically left unchanged. The final plans from the S&OP process are used to plan production, logistics, and sales. Prior to CPFaR, there was no 'automated replenishment' system in place. Distributors were replenished based on current inventory levels and guess estimated sales. A major problem with the monthly cycle was that it didn't allow absorption of sudden and unexpected variations in demand. Further, precise distributor inventory position and sales information was available to the central marketing and planning teams on a monthly basis only. Also, there was a tendency of the sales personnel to 'overstock' distributors.

The basic issues were:

• Product-wise sales and inventory information was available to the central marketing and planning team at the 'state' level and not at the 'distributor' level.
• 'Overstocked' distributors who  were looking to reduce service levels.
• Out-of-stock situations due to unexpected demand not visible till the month end.
• Inability to build accurate plans at a frequency better than monthly plans.

Here, the common thread is the non-availability of accurate information, affecting decision-making from the retailer/distributor level to production at the factories. What was required was a solution that would enable the affected parties to share information via the Internet, synchronize orders, and schedule production cycles—for higher efficiency and productivity. Such a solution would ensure quick and accurate availability of information, resulting in inventory in the supply chain, better forecasting, better sales and production planning, and strong relations with trading partners. For the sales team, the anticipated benefits were less time spent on collection of data, data-based discussions and plans with distributors and better information on distributors' stock levels. Says Hoshedar K Press, Executive Director & President, GCPL, "We needed a virtual link that connected the distributor, the C&F agents and us to transact business seamlessly." This was possible through the integration between the distributor software and the back-end systems at GCPL. The company was keen on a single software running across all its 300 distribution centres with a centralised repository of information. "In essence, we were looking at a single Web-based vent for distributors to obtain real-time product information," Hoshedar points out. "The aim was to obtain real time information of secondary sales across the country, do supply chain planning and tie this in with the production planning procedures."

The choice fell on CPFR since:

• It focuses on improving the efficiency and effectiveness of the sales and distribution system.
• It enables distributor connectivity, thereby hastening information exchange between the distributor and GCPL on critical factors like, for instance, inventory at the distributor and sales, helping GCPL to replenish the distributors and reduce their inventory levels in the supply chain.
• CPFR will also aid in better planning and forecasting as accurate data will be used for planning.

According to Hoshedar, CPFR fitted with GCPL's plans to move to a replenishment-based model. While top management monitored the project through quarterly project review meetings chaired by the Group Chairman, and monthly review meetings by the management team. The project was planned and executed by a cross-functional team. According to Hoshedar, the CPFaR system mirrors existing business processes with only a few minor exceptions like the introduction of the concept of route days. With CPFaR, GCPL wanted to have select days every week to ship stocks to the distributors. Says, Hoshedar, "The challenge was integrating 300 distributor locations with single software. We needed centralized database to obtain visibility of secondary sales data for better production planning and distribution planning. That's how we decided on a customized Distribution Information System (DIS) across 300 locations with call centre based support and EAI integration using MQ Series." The DIS is akin to a micro-ERP application. The distributors use it for their day-to-day activities i.e. billing and stock management. Says Hoshedar, "The DIS helps the distributor conduct his day-to-day business like inventory management and billing online. It tracks all transactions from the distributor's end and consolidates it into a centralized repository. This enables the distributor to generate all he necessary reports that would help in administering the distribution operations with ease." Further, the daily inventory and sales information is transmitted to GCPL each day. According to Hoshedar, the issues encountered during the implementation period centered around:

• Understanding the new system
• Migrating the distributors from the old to the new

To overcome these:

• Field force orientation was carried out during the pre-rollout phase to help the distributors understand the objective of the project and help the migration.
• A Distributors Meet was organized to address post-installation queries.
• Proper and detailed sign-off sheets with emphasis on actual outputs were included to ensure that the system was understood by the distributor and the training imparted was complete.
• The implementation partners were short-listed under GCPL's supervision, taking into account their technical and training skills.

Commenting on the future plans, Hoshedar says, "We are examining the feasibility of extending CPFaR beyond 300 distributors. The first phase of the DIS rollout and training of distributors has been completed. Further to this, distributor inventory management and replenishment will be the second phase of the project after which we will gauge the results from the software against the set objectives of the project."