Collaborative Planning, Forecasting and Replenishment (CPFR)

  • Collaborative planning, forecasting and replenishment (CPFR®) is a way to integrate the elements of demand management among supply chain partners.
  • CPFR is:
    • A collaborative process whereby supply chain trading partners can jointly plan key supply chain activities from production and delivery of raw materials to production and delivery of final products to end customers. Collaboration encompasses business planning, sales forecasting, and all operations required to replenish raw materials and finished goods.
    • A process philosophy for facilitating collaborative communications.

CPFR Model

The VICS CPFR model is broken into four major activities comprising eight collaboration tasks, with two tasks listed under each of the four activities. The eight collaboration tasks are further associated with 16 enterprise tasks carried out either by the buyer/retailer or seller/manufacturer.

CPFR Collaboration Activities and Tasks

The enterprise tasks function as links between the collaboration tasks and the overall operation of the enterprise. These links serve to eliminate redundancies and discrepancies that occur when the manufacturer and the retailer carry out those tasks in isolation.

Strategy and Planning

  • The purpose of strategy and planning is to establish rules for the relationship, define the mix of products, and develop plans for upcoming events.
  • There are two specific collaboration tasks to be completed within this area:
    • Collaboration arrangement:

      Collaboration arrangement involves setting business goals, defining the scope of collaboration, and assigning roles, responsibilities, checkpoints and escalation procedures.

    • Joint Business Plan:
      A joint business plan identifies significant events such as promotions, inventory policy changes, store openings and closings, and product introductions. Marketing planning is the responsibility of the manufacturer, while the retailer takes care of category management.

Demand and Supply Management

  • In this area, the partners forecast consumer demand at the point-of-sale and determine order and shipment requirements. The model specifies two tasks:
    • Sales Forecasting
      The manufacturer analyzes market data, while the retailer forecasts point-of-sale (POS) numbers.
    • Order planning/forecasting
      The manufacturer conducts demand planning, while the retailer undertakes replenishment planning.

Execution

  • This area, which is also known as the order-to-cash cycle, involves placing orders, preparing and delivering shipments, receiving and stocking products at the retail site, recording transactions, and making payments.
  • The model identifies two execution tasks:
    • Order Generation
      The manufacturer does production and supply planning, while the retailer conducts the activities associated with buying.
    • Order Fulfillment
      This involves logistics and distribution management for both manufacturer and retailer.

Analysis

  • In the analysis phase, the supply chain partners monitor planning and execution activities to identify exceptions.
  • They also aggregate results and calculate key performance metrics, share insights, and adjust plan as part of continuous improvement.
  • Analysis involves the following two tasks:
    • Exception Management
      This involves execution monitoring by the manufacturer and store execution by the retailer.
    • Performance Assessment
      Manufacturer and retailer keep scorecards to access each other’s performance.

Technology

  • CPFR is at heart about developing effective business processes to synchronize supply chain operations across enterprise boundaries.
  • The success of CPFR depends upon willingness to work with shared data efficiently in real time.
  • CPFR software solutions include systems that allow enterprise partners to:
    • Share forecasts and historical data.
    • Automate the collaboration arrangement and business plan.
    • Evaluate exceptions.
    • Enable two-way, real-time conversations, revisions and commentary.

CPFR Benefits and Challenges

Instituting CPFR and realizing its benefits may require meeting several predictable challenges:

  • Increased costs
  • Resistance to data sharing
  • Bridging internal functions

When setting up a CPFR relationship, cross-functional teams might bring together marketing and sales, financial product specialist, logistics specialists, and demand planners who would collaborate among themselves and speak with a single voice to the customer.

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