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Collaborative Planning,

Forecasting & Replenishment


(CPFR)- Basics
Presentation By:
Mohit Sharma
Nikunj Khurana

FLOW OF PRESENTATION
Introduction of CPFR

Evolution of CPFR
CPFR Model
CPFR: Tasks & Key Principles
CPFR: Benefits & Challenges
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Introduction

Shop

A business process for value


chain partners to coordinates
plans in order to reduce the
variance between supply
and demand.
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Stock

Decline
Demand

VISION
To build mutual profitable
volume growth through
flawless continuous product
flow to our consumer.
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What is CPFR?
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.
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Modes of CPFR
Basic CPFR: A limited number of business processes integrated between
a limited number of supply chain partners.
Developed CPFR: Typically involves 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 synchronise forecasting


information systems and coordinate planning and replenishment
processes
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History
CPFR evolved from ECR (efficient consumer response)

Prior to ECR-Relationships often adversarial.


-Little or no joint planning
-Lack of information sharing results in
unpredictable ordering patterns,
excessive inventories, service failures.

1998-VICS
30th July 1996

1995-CFAR

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CPFR ECR VMI

TSC

No information is shared

Manufacturer

Develop
Demand
Forecast

Fulfill
Retailer
Order

Track Inventory Level


and Backorder
Quantity

Products Shipped

Determine
Production
Quality

Determine
Order
Quantity

Retailer

Fulfill
Customer
Demand

Develop
Demand
Forecast

Track Inventory Level


and Backorder
Quantity

Information Shared and Decision made in Traditional Supply Chain


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Source: Benefits of CPFR and VMI Collaboration Strategies: A Simulation Study
ISSN: 1984-3046 Journal of Operations & Supply Chain Management Vol. 6 No. 2

CPFR ECR VMI

TSC

Sales and Inventory Information

Manufacturer

Develop
Demand
Forecast

Fulfill
Retailer
Order

Track Inventory Level


and Backorder
Quantity

Products Shipped

Determine
Production
Quality

Determine
Order
Quantity

Retailer

Fulfill
Customer
Demand

Track Inventory Level


and Backorder
Quantity

Information Shared and Decision made in VMI Supply Chain


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Source: Benefits of CPFR and VMI Collaboration Strategies: A Simulation Study
ISSN: 1984-3046 Journal of Operations & Supply Chain Management Vol. 6 No. 2

CPFR ECR VMI

TSC

Forecast, Sales and Inventory Information

Manufacturer

Fulfill
Retailer
Order

Track Inventory Level


and Backorder
Quantity

Products Shipped

Determine
Production
Quality

Determine
Order
Quantity

Retailer

Fulfill
Customer
Demand

Develop
Demand
Forecast

Track Inventory Level


and Backorder
Quantity

Information Shared and Decision made in CPFR Supply Chain


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Source: Benefits of CPFR and VMI Collaboration Strategies: A Simulation Study
ISSN: 1984-3046 Journal of Operations & Supply Chain Management Vol. 6 No. 2

ECR

CPFR

CPFR extends ECRs business processes to


include:
Information systems for capturing and transferring
point-of-sales (POS), inventory, and other demand &
supply information between trading partners
Formalized sales forecasting and order forecasting
processes
Formalized exception handling processes
Feedback systems to monitor and improve supply
chain performance
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Source: http://scm.ncsu.edu/public/cpfr/

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The Collaborative Process


Joint Business Planning
Retailer

Manufacturer
Common Event
Calendar

Retailer Forecast Drivers


In stock position
Fill Rate
Consumer Demand
Price Changes
Growth Plans
Distribution Channels

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Joint Forecast

Manufacturer Forecast Drivers


Capacity
Order Lead time
Consumer Behavior
Product Availability
Promotions
Raw material supply
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1. Front-End Agreement
2. Joint Business Plan

3. Create Sales Forecast


4. Identify exceptions
5. Resolve exceptions

Wk, Mo

Wk, Mo

Qtr.

Once

CPFR Process

6. Create Order Forecast


7. Identify exceptions
8. Resolve exceptions

Collaborative
Planning

Collaborative
Forecasting

Collaborative
Replenishment
9. Generate Order

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CPFR: Key Principles


The consumer is the ultimate focus of all efforts
Buyers (retailers) and sellers (manufacturers) collaborate at every
level
Joint forecasting and order planning reduces surprises in the supply

chain
The timing and quantity of physical flows is synchronized across all
parties
Promotions no longer serve as disturbances in the supply chain
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Source: http://cpfr.org/

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CPFR Business Model Roadmap

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Source: CPFR.org Website CPFR1998, VICS

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CPFR Reference Model &


Tasks

8 collaboration
tasks form cycle
of 4 activities. Each
activity consists of two
collaboration tasks, plus
individual tasks for each of
the Retailer and Manufacturer.
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Source: http://cpfr.org/

Strategy & Planning


Establish the ground rules for the
collaborative relationship.
Determine

product

mix

and

placement.
Develop event plans for the period.

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Demand & Supply


Management
Sales forecasting:

Projects demand at the point of sale

Order planning/forecasting:

Determines future product order &


delivery requirements based upon
the sales forecast.

Takes into account inventory


positions, transit lead times,
shipment quantities, and other
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factors.

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Execution
Place orders, prepare and deliver
shipments.
Receive and stock product on retail
shelves.
Record sales transactions and make
payments.
Majorily divided into two parts:
Order generation Transitions
order forecasts into firm demand
Order fulfillment Producing,
shipping, delivering, and stocking
the products
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Analysis
Monitor planning and execution
activities for exception conditions

Aggregate results and calculate key


performance metrics

Share product and market insights.

Adjust plans and processes for


continuously improved results
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Bull whip effect

Customer demand forecast = 10 units

Suppliers

Products &
Services

Producers

10 Units
10 Units
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Products &
Services

Information

Distributors

Retailers

10 Units

10 Units

10 Units

Products &
Services

10 Units

Key:

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= Inventory Levels

Benefits of CPFR

Cost reduction

Lower Inventories
for higher profits

Improved ROI on
Technology
investment

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Improved customer
service trough
better forecasting
techniques

Improved
relationships
between trading
partners

Source: Collaborative Planning, Forecasting and Replenishment: Research


Paper by Tuomas Toiviainen & Jeffrey Hansen

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Benefits for Retailer


Better store self
stock rates

Lower inventory
level

Higher sales

Lower logistics
cost

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Benefits for Manufacturer


Better customer
services

Lower inventory
level

Higher sales

Faster
replenishment
cycle

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CPFR Benefits: Factual

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Source: http://www.vics.org/docs/committees/cpfr

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Challenges in CPFR
Senior
Management
Buy In

Lack of trust

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No shared
target

Selection of
CPFR partners

Confidentiality

Cultural
Change

Source: CPFR: A White Paper (J.D. Edwards)

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Conclusion
Integrating the organization with its trade partners more
effectively to realize mutual benefits through exception based
communication.
Buyers benefit from reduced prices, better service levels and
synchronized operations.
Overall, it is a

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solution for all.

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References
Benefits of CPFR and VMI Collaboration Strategies: A
Simulation Study; ISSN: 1984-3046 Journal of Operations &
Supply Chain Management Vol. 6 No. 2
CPFR.org Website CPFR1998, VICS
http://www.vics.org/docs/committees/cpfr
http://scm.ncsu.edu/public/cpfr/
Collaborative Planning, Forecasting and Replenishment:
Research Paper by Tuomas Toiviainen & Jeffrey Hansen
CPFR: A White Paper (J.D. Edwards)
Wikipedia Internet: http://en.wikipedia.org/wiki/Logistics

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