Henkel Iberica Report

better forecasting  Reduced incidences of stock-outs/overstocking  Reduced costs in terms of promotional expenses as an indicator of lower quality)  May not be sustainable in the long term  Reduces responsiveness to competitor and external environment 3. CRP and Demand Planning Continuous Replenishment Planning (CRP) is an inventory/logistics management initiative which aims to eliminate inefficiencies in the process of replenishment. It is a method of real time replenishment of products which aims at reducing inventory levels with minimized chances of stock- outs. In case of Henkel Iberica, customers negotiate and set a trigger point for replenishment based on historical data. Once the trigger point is reached, a reorder request will be automatically sent to Henkel. The advantage of CRP is that it streamlines the ordering process as well as provides more visibility to Henkel about the stock levels of their products at the customer’s warehouse. To make the customers accept the CRP model, Henkel guarantees service level of 99.8% downstream. Although CRP streamlined replenishment, separate forecasting plans for suppliers, manufacturers and retailers created problems for the supply chain. 4. Collaborative Planning, Forecasting and Replenishment (CPFR) In order to improve the forecast accuracy, a new method known as Collaborative Planning, Forecasting and Replenishment (CPFR) can be implemented. Using CPFR, the various stakeholders, namely the supplier, manufacturer, distributor and retailer join hands in planning, forecasting and replenishing consumer products. In the traditional method, the retailers and the manufacturers use their individual forecasting systems in order to ensure supply of products to the respective customers. The retailer generally uses Point of Sales (POS) data, desired inventory, desired customer service levels and historical information to forecast and set reorder points to the manufacturer. Once the inventory level drops, such reorder points are triggered to the manufacturer. The manufacturer on the other hand, uses its own individual forecasting method based on previous retail orders and historical information. This independent planning often results in increased lead time, decrease in customer service level along with inefficient use of working capital. The CPFR method attempts to eliminate such inefficiencies by bringing all the stakeholders in the supply chain to a common platform where they can share real time data on the internet and use a common forecast. Henkel can coordinate with its suppliers and the customers (retail businesses) and create a joint business plan with specific focus on aspects such as desired service level, inventory level targets, production plans etc. CPFR will help especially useful for Henkel as it operates in an industry where special promotions are frequent and the forecast of demand does not follow patterns. Moreover, with the uncertainty associated with special promotions, ‘exceptional’ demand forecasting can become more accurate. Pros (CFPR) Cons (CFPR)  Integration between different stakeholders across the entire supply chain  Centralized forecasting resulting in better accuracy  Improved forecasting for exceptional  Reduced out of stocks and optimum inventory levels  Improved customer service levels  High costs associated for implementation  Difficult to implement, dissimilar data standards  Significant changes required in the working style of various stakeholders

APPENDIX A Price competition from private labels + Competition from national brands (new product launches/new variants) Large number of SKUs (product variants) + unique, retailer-specific promotions Complex forecasting lower accuracy Over-stocked Lower profit Sell at reduced price Under-stocked Lost sales Need for differentiation Unsteady operations High cost Obsolete stock Lack of common forecasting system