It is a fact that the supply chain has been facing new challenges. Technology has placed many powers in the hands of consumers, who have had their expectations increased and are demanding ever faster processes, without being willing to pay more for it. In addition, portfolio diversification, omnichannel and the globalization of goods flows have contributed to the complexity of logistical processes. Demand planning has been affected by all these changes, which are demanding better predictive techniques, the use of more advanced technologies and integration between the links in the chain. Currently, it is essential for companies to develop on these three fronts so that forecasts are more accurate, improving the level of service and reducing costs.
In 2016, Leonardo Julianelli brought here to the blog a post with the concept of CPFR – Collaborative Planning, Forecasting and Replenishment. It is about aligning the planning processes between players in the logistics chain, who jointly design their activities to ensure that their business plans are respected, minimizing costs and maximizing end-to-end efficiency. Collaborative planning improves inventory management along the chain, making it more responsive, more fluid and reducing shortages. This is reflected in the level of service provided to customers and increases the competitiveness of the chain as a whole.
Gartner predicting , there are five maturity levels of the collaborative chain, with CPFR present from the fourth step onwards. Below is a description of each one.
Figure 1 – The 5 degrees of maturity of the collaborative chain
Stage 1 – React: The first step is marked by the complete absence of a collaborative culture, where each department of the company makes autonomous decisions, seeking individual gain without consideration of the overall gain of the company. There are constant conflicts, mainly between the sales and operations areas.
Figure 2 - Characteristics of the first stage of maturity
Stage 2 – Anticipate: To resolve the issue of divergent plans between the various areas, create a first sales plan, usually influenced by the optimism of the commercial department.
Figure 3 - Characteristics of the second stage of maturity
Stage 3 – Integrate: The uncertainties generated from the use of a sales plan built without prior alignment between the areas leave room for a discussion of the costs resulting from this lack of integration. It is from this moment that the departments begin to work in alignment, in general, in processes known as S&OP (Sales and Operations Planning) or IBP (Integrated Business Planning).
Figure 4 - Characteristics of the third stage of maturity
Stage 4 – Collaborate: It is in the fourth stage of the collaborative chain that the CPFR appears. The alignment of the sales plan begins to be expanded, including chain partners. Thus, collaboration becomes the differential and there is greater visibility of demand.
Figure 5 - Characteristics of the fourth stage of maturity
Stage 5 – Orchestrate: The last stage, difficult to reach for most companies, presents intense integration and automation of decision-making between the links in the chain, from customers to suppliers, with real-time visibility.
Figure 6 - Characteristics of the fifth stage of maturity
The panorama prepared by ILOS in 2015 found that Brazilian companies made progress in internal integration, but were still lagging behind in external collaboration. Compared to countries like Germany and the United States, Brazil still needs to work to leave the “Integrate” stage and move on to the “Collaborate” stage. An informal survey carried out by the ILOS during the International Supply Chain Forum 2019 confirmed this fact, since only 10% of the companies, represented by the executives present, have their demand process in the “Collaborate” and “Orchestrating” stages.
Figure 7 – Comparison between adherence to S&OP and CPFR processes in Brazil, Germany and the United States.
Source: Panorama ILOS – 2015
As described by Gartner, it is necessary to go through each step in order to reach high stages of integration and it is known that it is not an easy process. It is necessary to choose the right partners, evolve in trust between the links and carry out an organizational restructuring that supports integration. At the same time, it is necessary to evolve in the technology used for data sharing.
Do you know how to recognize the degree of maturity in collaborative planning in which your company finds itself? Would you like to know more about how to implement such evolutionary changes in the logistics chain that your company is part of? ILOS has #CursosILOS for updating on various topics, including Collaborative Demand Planning. Get in touch with our team to learn more about this opportunity to improve your team's knowledge.
Sources:
Marina Pomaleski
He has been part of the ILOS Team since 2018, working on projects focused on Logistics and Supply Chain. His experiences encompass major players in the cement, polymers and consumer goods industries, as well as retail companies. Types of projects carried out at ILOS: Transport management, transport contracting strategy, advice on the impacts of setting minimum freight levels, fleet sizing, process mapping and optimization, reduction of return rates.
