This is a partial preview of the document found here: https://flevy.com/browse/business-document/consumer-driven-replenishment-87 Description: This is a sales presentation example for Consumer Driven Replenishment (CDR) project work. CDR is an analytical approach to supply chain integration between a consumer goods supplier and its customers.

1. Consumer Driven Replenishment
Sales Presentation Example
This is a sales presentation example for Consumer Driven Replenishment
(CDR) project work. CDR is an analytical approach to supply chain
integration between a consumer goods supplier and its customers.

2. Initiatives such as Vendor-Managed Inventory (VMI) and Collaborative
Planning, Forecasting and Replenishment (CPFR) Have Produced Mixed
Results at Best (2)
“The most significant limitation of VMI has been that since it is not
interactive, it is not really collaborative.” (3)
“The downside of CPFR is that to get the benefits, it requires the active
participation of both trading partners. Manufacturers typically have
planning departments that are staffed to do this, but retailers may lack the
staff, and the margins to support the staff, required to get benefit from
CPFR.” (3)
“Consumption-based demand management stifles CPFR. As firms
continue to improve internal forecasting consensus processes and
internal business group collaboration, they will de-emphasize CPFR
initiatives --which are still mostly pilot projects today. As manufacturers
improve internal cycles, replace distribution with store-level demand data,
and drive production directly from consumption, the need to share and
agree upon forecasts with customers will be unnecessary. As a result,
retail customers will shelve CPFR projects and instead invest the money in
RFID and flexible manufacturing apps”. (4)
Source:
(2) “SCM: Making the Vision a Reality”, SCMR September/October 2003
(3) CIGA Information Group, 2000
(4) “Demand Forecast Done Right”, Forrester October 2002 3

3. Consumer-Driven Replenishment
CDR Transcends Traditional Approaches to Retailer – Supplier Integration
and Collaboration
Consumer-Driven Replenishment
Economic Efficiency
Vendor Managed Inventory (CDR)
(VMI)  Retailer significantly reduces inventory and
 Retailers vulnerable to Supplier’s inventory push replenishment effort
 Suppliers not accountable for store performance  Supplier gains control over its products’
 Focus is execution instead of planning replenishment all the way to the store level
 Not collaborative
Disconnected Supply Chain Collaborative Planning, Forecasting,
and Replenishment (CPFR)
 Excess inventory, poor service  High resource requirements for Retailer to produce quality plans
 Supplier has no visibility into POS consumption  High-level planning (e.g., national level) hides store-level
 Retailer has no visibility to supply disruptions replenishment issues
 Inventory and capacity planning are not addressed
Degree of Collaboration Effectiveness
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4. Consumer-Driven Replenishment
Our CDR Comprehensive Approach
Process
• Value and ROI Analysis
• CDR Process Design
• Retailer/Supplier Contract
• Information Flows
Technology People
• APS Configuration • CDR Organization
• Outsourcing • Inter-company Alignment
• New Enablers: • Enhanced Skills
RFID, UCCNET • Change Management
Performance Metrics
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5. Consumer-Driven Replenishment
Case Study of The Scotts Company
Company Profile
• Scotts is a leading global manufacturer and marketer of consumer branded products for lawn and garden care,
professional turf care, and professional horticulture business. Sales for 2003 totaled $1.91 billion
• The North American Consumer segment includes the Lawns, Gardens, and Controls business groups. These
groups market the leading brands in every major lawn and garden category - Lawns (Scotts®), Gardens (Miracle-
Gro®), Controls (Ortho® and Roundup®)
• Scotts’ customers consist of mass merchandisers, home improvement centers, wholesale clubs, hardware chains,
drug chains, independent hardware stores, nurseries, and garden centers. 75% sales are with five major
customers – Home Depot, Wal-Mart, Lowe’s, Kmart, and Costco
• Scotts’ sales are seasonal in nature and are susceptible to weather conditions
Challenge
• Poor inventory management at retailers’ stores negatively impact in-stock service
• Lack of POS visibility results in slow reaction to changes in market demand
• Very large demand variability observed at Scotts creates significant forecast errors
• Low fill rate despite large amounts of inventory (stock in wrong locations)
• Trade promotions are ineffective due to poor season timing
• No supply chain collaboration with main customers
• Overall ROIC at 9% versus industry average of 13.5%
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6. Consumer-Driven Replenishment
Quantifiable Benefits
 Inventory turns in the low 2s  Inventory turns closing 5.5
target
 Fill Rates at 90%
 Fill rates at 98%
 Order Forecast Accuracy Below
50% at National Level  Order Forecast Accuracy better
than 80% at Regional Level
 In-stock Service at 90%
 In-stock Service at 95%
Scotts efforts in Supply Chain and Customer Collaboration make the
Company Vendor of The Quarter by Wal-Mart and Vendor of The Year
by The Home Depot.
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7. Consumer-Driven Replenishment
CDR Is a Key Enabler to Other Supply Chain Initiatives
Better alignment of Scan-Based Focus on GMROII and
prizing and promotion Trading faster inventory turns
decisions thru visibility at store level is key to
on POS and inventory generating value from
consumption at store SBT to both suppliers
level and retailers
Pricing Consumer Collaborative
and Revenue Driven Logistics
Optimization Replenishment Management
Dynamic assortment Ability to generate
planning and outbound forward-looking
merchandizing based plans by store to better
on store’s specific Collaborative plan truck loads,
product flow warehouse labor, multi-
information (category Merchandizing stop delivery routes, etc,..
management) Planning
Supplier-Retailer Collaboration
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