CPFR Concept

7/24/2019 CPFR Concept

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What is Collaborative Planning, Forecasting and

Replenishment (CPFR)?

Collaborative Planning, Forecasting and Replenishment (CFPR) is a business model that

takes a holistic approach to supply chain management and combines the intelligence of

multiple trading partners in planning and fullling customer demand by using common

metrics, language and rm agreements to improve eciency for all participants CFPR links

sales and marketing best practices ! category management, supply chain planning and

e"ecution processes to increase availability #hile reducing inventory, merchandi$ing,

transportation and logistics costs

The CPFR Model%he CPFR model provides a basic frame#ork for the &o# of information, goods and services

%he center of the model is represented as the customer, follo#ed by middle ring of the

retailer (buyer) and the outside ring the manufacturer (seller) %he consumer drives demand

for goods and services #hile the retailer is the provider of these goods and services %he

manufacturer supplies the retail channels'stores #ith the products as demand for products is

pulled through the supply chain by the end user, ie consumer

%he diagram belo# sho#s the relationships of the three main players along #ith the four

phases


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Strategy & Planning:establishes the ground rules for the collaborative relationship such

as business goals, scope of collaboration, assignment of roles, responsibilities, checkpoints

and escalation procedures

Demand & Supply Management:consists of sales forecasting, order planning'forecasting,

inventory positions, and transit lead times

Execution:consists of rder *eneration, ie transitions forecasts to rm demand, and

order fulllment, ie the process of producing, shipping and delivering and stocking products

for consumer purchase

Analysis:tasks include +"ception management and Performance assessment +"ception

management is actively monitoring planning and operations for out of bound conditions,

#hile performance assessment is evaluating the achievement of business goals to uncover

trends or develop alternative strategies

Steps in CPFR Model

%he oluntary -nterindustry Commerce .tandards (-C.) developed a / step approach to

guideline businesses to develop agreements for collaboration

VICS 9-Step Approac

0 1evelop the Front +nd 2greement

3 Create the 4oint 5usiness Plan

6 Create the .ales Forecast

7 -dentify +"ceptions for .ales Forecast

8 Resolve'Collaborate on +"ception -tems

9 Create rder Forecast

: -dentify +"ceptions for rder Forecast

; Resolve'Collaborate on +"ception -tems

/ rder *eneration

Challenges in CPFRCPFR may be a simple concept ho#ever turning it into practice is a dicult task .ince it

involves collaboration #ith several trading partners, cultural challenges #ith each

organi$ation are reali$ed and re


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.election of CPFR partners ! trading partners #ho #ish to collaborate #ith each other

need to assess the potential relationship according to anticipated, realistic benets,

pertinent to common business goals, organi$ations and cultural issues

.enior >anagement 5uy -n ! senior management must sponsor each of the trading

partners and get involvement from necessary resources, eg ?uman resources, technical

infrastructure, time and pro@ect budget etc

Condentiality ! .haring sensitive data reinforces the need to dene rules around

condentiality

Cultural Change ! -nternal and e"ternal collaboration reore reliable

forecasting allo#s a more eAective #ay to anticipate consumer demand across the entire

supply chain and therefore allo# the business to plan production capacity accordingly Risks

for stock=outs is reduced #hich improves customer fulllment orders #hich thereby

increases revenue, delivery and improved customer service

%oer In!entories #or iger pro'ts! accurate predictions of demand as mentioned

before #ill reduce stock=outs and provide a more ecient understanding of production

needs .afety stock inventory for over production #ould be reduced #hich decreases

carrying costs, storage space and potential spoilage'obsolescence 2dditionally, there isimproved material &o# and release of #orking capital that can be used in other areas of the

production instead of being tied up in inventory

Impro!ed ()I on *ecnology in!estment! eAective CPFR technology solutions benet

both manufacturers and retailers from reduced overhead costs because several

ineciencies are eliminated, ie, anti


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Practical pplication of CPFR

2 #orldBs leading manufacturer of ma@or home appliances, hirlpool, #as facing forecast

accuracy and demand variability challenges %he desired state #as to have hirlpool or

trade partners host a collaboration hub that #ould act as a single point of storage for all

forecast related data #hich is shared bet#een both companies #ithin a very secure

environment 2 prere


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>any intangible benets #ere reali$ed such as the one=to=one relationships bet#een

collaborating parties in both companies 2 culture of collaboration #as developed #hich put

together process improvement techni

Documents

CPFR Concept