Collaborative Planning, Forecasting and Replenishment CPFR

The CPFR model has a general framework, illustrated in Fig. 4.13, by which a buyer and seller can use collaborative planning, forecasting, and replenishing processes in order to meet customer demand. To increase performance, the buyer and seller are involved in four collaboration activities that are fisted in logical order, but companies often engage in these activities simultaneously. 

Sales forecasting, which projects point-of-sale consumer demand, is one of the collaboration tasks associated with this activity. The retailer task here is Point of Sale (POS) Forecasting and the manufacturer task is Market Data Analysis. The other collaboration task is Order Planning/Forecasting which uses factors, such as transit lead times, sales forecast, and inventory positions to determine future product ordering and requirements for delivery. The associated retailer task is Replenishment Planning, and Demand Planning is the associated manufacturer task. 

The first collaboration task under the Execution activity is Order Generation. This task transitions forecasts to demand for the firm. The retailer task related to this collaboration task is Buying/Replenishing, and the manufacturer task is Production and Supply. The second collaboration task is Order Fulfillment, and this is the preparation of products for customer purchase through the process of producing. 

Exception Management, which oversees the planning and operations for conditions that are out-of-bounds, is one of the collaboration tasks associated with this activity. The retailer task is Store Execution, and the manufacturer task is Execution Monitoring. 

The other collaboration task is Performance Assessment which calculates important metrics in order to discover trends, develop other strategies, and assess the attainment of business goals. The retailer task here is Supplier Scorecard, and the manufacturer task is Customer Scorecard. The model described above is a two-tiered model. However, this model can be extended to include more than two layers in the supply chain. VICS calls this N-tier Collaboration, which is a relationship that develops from retailers through manufacturers/distributors to suppliers. 

Bullwhip effect results in poor aggregate production plans that lead to increased safety stocks, reduced customer service due to shortages, increased transportation cost, and inefficient allocation of resources (labor and equipment). By increasing the communication of actual downstream demand and collaboration between trading partners, the bullwhip effect can be minimized. One such collaborative process is known as collaborative planning, forecasting and replenishment (CPFR). Refer to the appendix in Chapter 3 of this book for a detailed description of the bullwhip effect in supply chains. 

For detailed information on CPFR, the reader is referred to the VICS website (www.vics.org). CPFR guidelines, case studies, and other information can be ordered from the website. VICS also provides online CPFR education, workshops, and certification programs. McKaige (2001) gives an excellent Q and A primer on CPFR. 

End-to-end communication among trading partners minimizes the bullwhip effect, which results in decreases in inventory at all levels in the supply chain. VICS conducted a survey of retail companies using CPFR pilot programs in 1998-1999. They reported that due to CPFR there was an 80% increase in sales with the CPFR partners, 10% reduction in inventory, improved fill rates, and near 100% service levels. One of the large and best practices of CPFR implementations has been between P G and Wal-Mart. Several CPFR implementations between other companies are presented as case studies in the VICS website. 

1 Explain the differences between qualitative and quantitative forecasting methods. Which method is applicable under what conditions  

2 What are the advantages and disadvantages of the Exponential Smoothing method  

Key issue How can collaboration be extended to strategic as well as to operational levels  

Collaborative planning, forecasting and replenishment (CPFR) is aimed at improving collaboration between buyer and supplier so that customer service is improved while inventory management is made more efficient. The trade-off between customer service and inventory is thereby altered. 

Alexander coordinated the provision of forecast data from both manufacturer and supplier. Both forecasts were posted on a web site, and he was asked to provide instruc- 

Define single point of contact for each trading partner to ensure that information is neither lost nor deteriorates during the exchange. 

Define agenda for collaboration (short-medium-long term) to stabilise the collaborative goals over time. 

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Efficient Consumer Response (ECR) and Collaborative Planning, Forecasting and Replenishment (CPFR) both are operations models in the consumer goods industry to ensure delivery capability and avoid stockouts based on an automated replenishment of outlets using product inventory, historic and/or planned sales information at the point-of-sales (POS). CPFR focuses on a close cooperation between retailer and manufacturer. ECR focus on the customer-facing reaction on customer responses in logistics, sales and promotions. 

Users require collaborative tools—DSS wiU need to aUow for collaboration in the same company and across different companies. One of the first tools in this area is the forecasting portion of collaborative planning forecasting and replenishment (CPFR), which aUows partner companies to collaborate on forecasting and utilizes a DSS that assists in finding discrepancies in the process. 

Collaborative planning, forecasting, and replenishment (CPFR) is based on information sharing between supply ehain members in these areas to... 

Throughout this book we have described the barriers to more effechve supply chains. We have also described many of the tools and techniques that address this barrier. For example. Section 3-7.2 describes a eollabo-ration effort called Collaborative Planning Forecasting and Replenishment, CPFR for short. CPFR requires a business relationship between partners and has taken root in the retail industry. Collaboration strives to better match demand and supply, improve inventory management practiees, and capitalize on new systems through sharing. CPFR is primarily a link between retailers and their manufacturer suppliers. However, it is expected that the CPFR concept will expand to other industries. 

Besides, Tesco introduced IT system that fostered collaborative planning, forecasting, and replenishment (CPFR) in 1999. Sharing of information using CPFR led to reduce the response time. Suppliers obtained Tesco customer needs and led to produce the appropriate goods. Thus, the use of information became more important in logistics. Tesco introduced a loyalty card and got the consumer needs from its loyalty card. Loyalty card fostered up store loyalty. 

The firm has created real-time integration between its sales configurator and its scheduling system. The firm also developed an application to attract customer orders that get published on the site. This integration, combined with improved supply chain planning, has enabled Miller SQA to reduce order fulfillment time from 21 days to fewer than 5 days. The most advanced networks are now hard at work on collaborative planning, forecasting, and replenishment (CPFR). 

Customer relationship management (CRM) systems will finally flourish and link the nucleus firm with its most important business customers, while collaborative planning, forecasting, and replenishment (CPFR) techniques will be at work with any retailers or business customers benefiting from this type of shared effort. Distributors and resellers will play a familiar... 

This section focuses on coordinated management in the SC. It discusses the role of coordinated management, its interface with SC and the coordinated management mechanisms including (s, S) policy, QR, ECR, VMI and collaborative planning, forecasting, and replenishment (CPFR). 

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