Collaborative planning, forecasting and replenishment helps customers enjoy
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How much do you know about CPFR? If you’ve never heard of it, have a quick read through this post and you’ll understand the basics of CPFR in the supply chain profession. CPFR is the acronym for collaborative planning, forecasting and replenishment, a practice developed to reduce supply chain costs through collaboration among what may be many partners in a single supply chain. Show
Origins of CPFR in Supply ChainCPFR is no vague or loose concept with a fancy name. It was in fact developed by The Voluntary Interindustry Commerce Solutions (VICS) Association, which created a framework and set of guidelines for conducting CPFR in supply chains. Since emerging, CPFR has been adopted cautiously by some organisations and more wholeheartedly by others. For example, home appliance giant Whirlpool adopted CPFR for its supply chain and enjoyed immense success. Before CPFR was adopted, Whirlpool was struggling with a forecast error rate of 70%, which reduced to 11% after the company and its supply chain partners began working together under the CPFR framework.
The Four Phases of CPFR in Supply Chain Collaboration
There are four key elements to practicing CPFR in supply chain operations. These can be briefly described as follows: Strategy and Planning: This phase involves laying down the strategy for collaborative relationships between supply chain partners. The idea is that all organisations involved in partnership share an agreed scope of collaboration, common business goals. Roles, responsibilities and procedures are also set out in the strategy and planning phase. Demand and Supply Management: This is the element which focuses on sales and order forecasting and the planning of orders. Execution: This is the phase concerned with the processes of producing, stocking, dispatching, and delivery of materials to end-customers. Analysis: This element comprises the management of exceptions in the fulfillment process, along with assessment of supply chain performance.
The Benefits of CPFRInitiating a supply chain CPFR program is not without challenges. The companies involved must be prepared to work on cultural change and alignment, agree rules around confidentiality, and secure buy-in from senior management teams. However, when the adoption of CPFR in a supply chain is successful, there are a number of key benefits, which include:
When CPFR partners are able to collaborate effectively and align on the use of technology, the model can also facilitate improved system integration and simplify business processes, for example by eliminating manual process steps.
Everyone Wins When CPFR is EffectiveWhen CPFR is effectively adopted and managed, win-win opportunities abound. The customer at the end of the supply chain benefits from improved service levels and product availability, so ultimately, everyone is happy. CPFR can be a great help in improving perfect order performance and garnering customer loyalty. You can learn more about perfect order and customer service in Supply Chain Secrets, my book of practical tips for saving money in supply chain operations. If you’d like to preview Supply Chain Secrets, along with other supply chain books that I’ve authored, you can see an overview of each title by visiting the Book Store on this website. What companies are demanding now is what Gartner is calling a demand-driven value network (DDVN) oriented architecture, which is similar in concept to a “Consumer-Driven” network.One Network Enterprises Resources
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December 11, 2014 · By Joe Bellini Prior to today’s advanced capabilities around Demand Driven Value Networks, the prevailing strategy was to implement Collaborative Planning, Forecasting, and Replenishment (CPFR). Given the state of technology platforms a few years ago, CPFR was a prime focus for many of the Enterprise Resource Planning/Manufacturing Resource Planning type vendors. In fact some vendors have even published comparisons of the workflows in their systems to the structure of CPFR. What is CPFR?
In the past this flow was the best available option, but in today’s fast-paced world it just isn’t sufficient. What companies are demanding now is what Gartner is calling a demand-driven value network (DDVN) oriented architecture, which is similar in concept to a “Consumer-Driven” network. It seeks to align and synchronize demand, supply, and product cycles, as well as enable the ability to sense and shape demand to make a profitable demand response. Focusing on a single view of the consumer for all members of the extended supply chain requires an approach that includes retailers, manufacturers, and logistics providers to all be connected across a multiparty execution backbone that orchestrates a coordinated response to the end-consumer’s demand signal. Unfortunately the CPFR design is a limited architecture and basically constitutes a push or ERP batch oriented type environment, where an attempt is made to collect and react to exceptions, but this architecture just isn’t designed to resolve these issues in a timely fashion (e.g. daily) given its long lead times and serially integrated nature. Using this method means a price must be paid in lost sales along with excess and obsolete inventory. Today’s DDVN technologies now provide new opportunities to add value within the replenishment process such as by optimizing truckloads simultaneously with inventory using pull policies. In fact under today’s prevailing strategies around Lean, many companies are implementing technologies that will allow them to move from push to pull, basically moving away from CPFR type architectures toward more DDVN oriented capabilities. For example KanBan, being one of the simplest DDVN pull policies, is designed to pull supply based on a rate of consumption. The KanBan binning technique is designed to provide discrete quantities the supplier must monitor and use to calculate required shipment quantities.  Min/Max, a more flexible pull policy, provides a range of acceptable inventory levels the supplier must monitor and use to calculate their required shipment quantities. Supply is done dynamically based on a consumption rate, and therefore additional consideration can be made for transportation optimization under this policy. Using these types of DDVN based inventory replenishment policies allows customers to reduce supply chain variability, optimize inventory levels, and minimize freight expense. Typical measurements include inventory turns, truck utilization, and premium freight reduction. Unfortunately, in order to provide this type of functionality most ERP-type vendors must use plug-ins that are not integrated as part of the transactional flow. Thus, this type of replenishment may be listed as a capability, but given the batch architecture it just can’t be engaged on a real time, exception oriented basis which is what is really required in today’s rapid replenishment environments. In addition to improved performance, companies that expand beyond CPFR to a DDVN environment will also enjoy full internal & external visibility of component parts (at retailer DC’s, supplier DC’s, export hubs, etc) based on a technology platform which supports both an automated and an interactive capability to enable full electronic commerce, including the ability to communicate replenishment signals across the global supply network in real time. Finally, CPFR systems typically takes retailers 1.5 and 4 years to implement. Many of these retailers never get the system to work properly in part because of heavy maintenance requirements. Former demand planning sales executives have estimated that as many as 60% of demand planning system implementations have failed. Conversely, DDVN-based systems have been implemented in major portions of retail inventories in as little as six month windows. What is the need for collaborative planning forecasting and replenishment strategies?Collaborative Planning, Forecasting and Replenishment (CPFR) is an approach which aims to enhance supply chain integration by supporting and assisting joint practices. CPFR seeks cooperative management of inventory through joint visibility and replenishment of products throughout the supply chain.
What is collaborative planning forecasting and replenishments function in the planning and process between supply chain partners for demand fulfillment activities?Collaborative Planning Forecasting and Replenishment (abbreviated as CPFR) is a joint strategic practice amongst partners in a supply chain to utilize customer inputs and data from partners in the value chain whilst producing forecasts, planning resources and replenishment policies of stocks.
Why is collaborative forecasting important?Collaborative forecasting software helps strengthen supplier partnerships and enables meaningful information-sharing. It lets stakeholders access real-time updates and sense subtle changes in demand to allow for proactive decision-making.
What is the first step in collaborative planning and forecasting replenishment?Step 1: Definition of (CPFR)
(CPFR) is the exchange of the chosen internal information on a shared webserver to provide reliable, longer-term future estimates of demand within the supply chain.
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