CPFR
Collaborative Planning, Forecasting and Replenishment (CPFR) stands for cooperative planning, forecasting and management of commodity streams. The process is oriented around the extensive processing of Point-of-Sales data along the value creation chain.
Brief description
CPFR is supported by members of the Voluntary Interindustry Commerce Standards Association - VICS, which are, for example, Wal-Mart, Procter & Gamble, FedEx, Unilever and many others. They formed their own committee to identify Best Practices and the basis for CPFR system applications. As part of this unification, a nine-step company model was created for the essential course of CPFR-oriented partnerships.
The company's model is built on three important phases:
1.The first phase „Planning (planning)” deals with agreeing on the framework conditions for cooperation.
2.In phase two, „Forecasting”, the most important point is to create tailored forecasting processes. What influencing factors should be taken into account in future sales planning?
3.In the last phase „Replenishment (replenishment)” the organization of the flow of goods is determined. CPFR assumes intensive use of IT systems. In this sense, information flows will be adjusted according to the framework conditions (who needs? When? What information?).
Tasks and objectives
In CPFR systems, the goal is to standardize cooperation between manufacturers and distributors to improve supply chain efficiency. Besides, it shows limited data exchange between buyer and seller and aims to reduce inventory and avoid bottlenecks.
Features and conditions
The most important conditions for the successful use of the CPFR system are:
- the use of technology (this varies in sophistication from Excel tables to e-mail or fax to specific software solutions;
- Guidelines for data exchange processes (e.g., via extranet, electronic marketplaces, etc.);
- Connection to internal processes (e.g., transportation, demand planning, production, etc.).
Success factors for the introduction of CPFR:
- These are, on the one hand, factors such as the agreement of the company's management, cooperation, the pursuit of realistic goals, clear priorities, a cooperative mindset in the sense that joint decisions are made, factors that enhance trust, and risk sharing;
- On the other hand are factors such as hiring qualified personnel, establishing a functioning IT infrastructure, adequate data and compatibility with EPP systems.
Advantages:
- Increasing supply security and delivery capabilities and jointly developing forecasts,
- Out-of-stock strategy development,
- It can also be used for variable demands,
- Increasing the quality of forecasts through joint development,
- Improved response to changes in demand behavior,
- Reducing the „bull whip” effect and standardizing the production load,
- Reduction in storage resources due to reduced fluctuations in demand,
- Create order-related production (end-customer-oriented production) through better quality forecasting and information transfer,
- Reducing erroneous deliveries and costs associated with the consequences of errors,
- less effort to make arrangements through exception handling,
- No change in sales forecasts for some time.
Disadvantages:
- High investment costs in integrated software systems and hardware,
- The need to transfer sensitive planning data to partners,
- associated with partially significant personnel resources,
- a major effort to put all nine steps of the CPFR model into practice.