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COLLABORATIVE PLANNING,

FORECASTING, AND
REPLENISHMENT
CPFR

Submitted By
Group 4
Irfan Ellahi
Muhammad Kamran
Muhammad Shaheryar Siddiqui

Submitted TO
Dr. Mubashir Ali Khan
Definition Processes, technologies and the supporting standards that allow continuous
and automated exchange of information between trading partners.
A business practice
Trading partners working together in planning fulfilling customer demand. –Links sales and
marketing best practices to supply chain planning and execution processes. –Objective is to
increase availability to the customer while reducing inventory, transportation and logistics costs.

A BRIEF HISTORY
 CPFR evolved from Efficient Consumer Response (ECR)
 ECR: Improve supply chain performance through better coordination of marketing,
production, and replenishment activities.
 Prior to ECR
o Relationships often adversarial.
o Little or no joint planning.
o Lack of information sharing results in “unpredictable” ordering.
o Patterns, excessive inventories and service failures.
 In 1987, P&G and Wal-Mart pioneered in Continuous Replenishment Process (CRP)
o Information sharing.
o Joint demand forecasting.
o Coordinated shipments.
 CRP is best-known as the Vendor-Managed Inventory (VMI) program. This partnership
laid the foundation for ECR.
 1996, CPFR® (Collaborative, Planning, Forecasting, and Replenishment) pilot between
Wal-Mart and Warner Lambert.

Modes of CPR
Three modes of CPFR

 Basic CPFR: a limited number of business processes integrated between a limited


numbers of supply chain partners
 Developed CPFR: will typically involve a greater number of data exchanges between two
partners, and may extend to suppliers taking responsibility for replenishment on behalf
of their customer.
 Advanced CPFR: goes beyond data exchanges to synchronize forecasting information
systems and coordinate planning and replenishment processes.

CPFR PROCESS

CPFR model presents the aspects in which industries focus. The model provides a basic
framework for the flow of information, goods, and services. In the retail industry the “retailer
typically fills the buyer role, a manufacturer fills the seller role, and the consumer is the end
customer.” The center of the model is represented as the consumer, followed by the middle ring
of the retailer, and finally the outside ring being the manufacturer. Each ring of the model
represents different functions within the
CPFR model. The consumer drives demand for goods and services while the retailer is the
provider of goods and services. The manufacturer supplies the retailer stores with product as
demand for product is pulled through the supply chain by the end user, being the consumer.
Some of the main processes shown in the model can be found in the second ring that has arrows
in a circular pattern. This is displayed with collaboration arrangement, joint business plan, sales
forecasting, order fulfillment etc. This stage will be described in detail below:
Strategy & Planning: Collaboration Arrangement is the process of setting the business goals for
the relationship, defining the scope of collaboration and assigning roles, responsibilities,
checkpoints and escalation procedures. The Joint Business Plan then identifies the significant
events that affect supply and demand in the planning period, such as promotions, inventory
policy changes, store openings/closings, and product introductions.
Demand & Supply Management: is broken into Sales Forecasting, which projects consumer
demand at the point of sale, and Order Planning/Forecasting, which determines future product
ordering and delivery requirements based upon the sales forecast, inventory positions, transit
lead times, and other factors.
Execution consists of Order Generation: which transitions forecasts to firm demand, and Order
Fulfillment, the process of producing, shipping, delivering, and stocking products for consumer
purchase.
Analysis tasks include Exception Management, the active monitoring of planning and operations
for out- of-bounds conditions, and Performance Assessment, the calculation of key metrics to
evaluate the achievement of business goals, uncover trends or develop alternative strategies
Wal-Mart supply chain and logistics management.

CPFR BENEFITS
CPFR BENEFITS: DEMAND
1. Enhanced Relationship
– Implicitly, CPFR strengthens an existing relationship and substantially accelerates the growth
of a new one
– Buyer and seller work hand-in-hand from inception through the actual result
2. Greater Sales
– The close collaboration needed for CPFR implementation drives the planning for an improved
business plan between buyer and seller.
– The strategic business advantage directly translates to increased category Sales
3. Category Management
– Before beginning CPFR, both parties should scrutinize and inspect shelf positioning activities
– This scrutiny will result in improved shelf positioning and facings through sound category
management.
4. Improved Product Offering
– Before CPFR implementation, the buyer and seller collaborate on a mutual product scheme
that includes SKU evaluation and additional product opportunities

CPFR BENEFITS: SUPPLY


1. Improved Order Forecast Accuracy
– CPFR enables a time-phased order forecast that provides additional information, greater lead
time for production planning, and improved forecast accuracy
2. Inventory Reductions
– CPFR helps reduce forecast uncertainty and process inefficiencies
– With CPFR, product can be produced to actual order instead of storing inventory based on
forecast
3. Improved Technology ROI
– Technology investments for internal integration can be enabled with higher quality forecast
information
– Driving internal processes with common, high-quality data.
4. Improved Overall ROI
– As other processes improve, the return on investment can be substantial.
5. Increased Customer Satisfaction
– With fewer out-of-stocks resulting from better planning information, higher store service levels
will prevail, offering greater consumer satisfaction.

CHALLAENGES in CPFR
 Selection of CPFR partners.
Trading partners who wish to collaborate with each other need to assess the potential
relationship according to anticipated, realistic benefits, pertinent to common business
goals, organizational and cultural issues. For a successful relationship, a ‘close fit’ on these
aspects is preferred, or some indication that the potential exists to develop a relationship
with joint objectives and goals.
 Senior Management Buy In.
Senior management must assume the role of CPFR sponsor for each of the trading
partners to ensure that the necessary resources (Human Resources, Technical
Infrastructure, Time and Project Budget) are prioritized and dedicated to the project.
 Confidentiality.
Sharing sensitive data reinforces the need to define rules around confidentiality.
Confidentiality agreements should document common understanding around areas
where confidentiality is paramount between the trading partners. Companies should also
be aware of their responsibilities regarding competition law at a national, European and
global level.
 Cultural Change.
Internal and external collaboration requires a mindset change. Traditional trading partner
relationships which have grown over a period of time must prove themselves capable of
flexibility in order to adapt to the collaborative approach.
o Industry standards for data exchange
o Interoperability between exchanges
o Technology as an enabler
Although CPFR is about business processes, it is clear that significant levels of technology
will facilitate the smooth implementation of CPFR. Furthermore, technology becomes a
key enabler in the process of reaching critical mass with CPFR.

CONCLUSION
CPFR is a great concept and is revolutionizing the business practices across different industries,
companies in India can reap great benefits by adopting it early on with the kind of boom expected
in consumer product industry and can gain a significant competitive advantage for their firms.
Buyers benefit by way of reduced prices and synchronized operations. Buyers who enter into
collaborative relationships get better service levels and long-term price reductions as
collaboration involved connect two businesses to jointly share in the risks and the rewards of the
transaction. Observations shared by the respondents about this initiative:

 CPFR will be used strategically with strategic channel partners.


 Relationship-building is a major element of CPFR.
 Vendor-managed inventory will be more prevalent than CPFR given partner capabilities
and ROI.

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