Case Study 3: CPFR Initiatives at Ace Hardware and Sears
Due Week 8 and worth 60 points
Read Application Case 10.6 titled, “CPFR Initiatives at Ace Hardware and Sears”, located in Chapter 10 of the textbook.
Write a four to five (4-5) page paper in which you:
1.Examine the business drivers for implementing Collaborative Planning, Forecasting, and Replenishment (CPFR) at Ace Hardware.
2.Explain how Ace Hardware deployed its CPFR system and suggest at least two (2) improvement opportunities.
3.Explain why Sears started using CPFR with tires. Recommend an alternative area that Sears should start with CPFR and explain your reasons.
4.Explain the business benefits of CPFR to Sears and to its suppliers, and explain how the suppliers may improve Sears’s operational efficiency.
5.Use at least three (3) quality resources in this assignment. Note: Wikipedia and similar Websites do not qualify as quality resources.
Case Study 3
APPLICATION CASE 10.6: CPFR Initiatives at Ace Hardware and Sears Ace Hardware Corp. (acehardware.com), based in Oak Brook, Illinois, is a chain of 5,100 independently owned stores that sell everything from 10-penny nails to toasters. In 1999, Ace implemented a CPFR process, using its buy-side private exchange, to achieve more intelligent relationships with its suppliers. This platform creates and executes a single, shared demand forecast, allowing Ace to increase revenue while reducing costs. Ace began using CPFR with a single supplier, Henkel Consumer Adhesives, a manufacturer of duct tape, adhesives, and other do-it-yourself home and office products. During the first year of implementation, the two companies improved forecast accuracy by 10 percent, lowered distribution costs by 28 percent, lowered freight costs by 18 percent, increased annual sales by 9 percent, and increased employee productivity by more than 20 percent. Since then, Ace has implemented CPFR initiatives with several dozen suppliers, including Black & Decker, Rust-Oleum, Master Lock, and Sherwin-Williams. More accurate forecasts and seasonal profiles ensure that products are available when consumers want to buy them. Improved service levels, increased sales, and decreased supply-chain costs have combined to make Ace Hardware more competitive. To improve efficiency and effectiveness of inventory management with its major suppliers, Sears (sears.com) is using CPFR software from GNX (gnx.com). The system enables total supply-chain visibility. The first experiment was with all major tire vendors (e.g., Michelin, Goodyear, Sumitomo). Using this software, all partners collaborated weekly about optimal replenishment and inventory plans to minimize stock, maximize customer service level, and optimize transport. Each week’s actual and forecast sales information was refreshed for more than 500 SKUs related to tires. The initial results of the pilot project were so successful that Sears is implementing the program with all its strategic partners. Sources: Compiled from D. Buss, “CPFR Initiative Allows Ace to Boost Revenue While Cutting Costs,” Stores, September 2002; and H. L. Richardson, “The Ins & Outs of VMI,” Logistics Today, Vol. 45, No. 3, 2004.