CPFR - Basics Nikunj Mohit Am1 Mbae HTW

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
AM1_MBAE_HTW_Nikunj_Mohit
Introduction
Shop
A business process for value

chain partners to coordinates
plans in order to reduce the
variance between supply
and demand.
Stock
Decline
Demand
VISION
To build mutual profitable
volume growth through
flawless continuous product
flow to our consumer.
3
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.
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
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
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

and Backorder
Quantity
Information Shared and Decision made in Traditional Supply Chain

7
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

and Backorder
Quantity
Products Shipped
Determine
Production
Quality
Determine
Order
Quantity
Retailer
Fulfill
Customer
Demand

and Backorder
Quantity
Information Shared and Decision made in VMI Supply Chain

8
CPFR ECR VMI
TSC
Forecast, Sales and Inventory Information
Manufacturer
Fulfill
Retailer
Order

and Backorder
Quantity
Products Shipped
Determine
Production
Quality
Determine
Order
Quantity
Retailer
Fulfill
Customer
Demand
Develop
Demand
Forecast

and Backorder
Quantity
Information Shared and Decision made in CPFR Supply Chain

9
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
Source: http://scm.ncsu.edu/public/cpfr/
10
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
Joint Forecast
Manufacturer Forecast Drivers

Capacity
Order Lead time
Consumer Behavior
Product Availability
Promotions
Raw material supply
11
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
12
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
Source: http://cpfr.org/
13
CPFR Business Model Roadmap
Source: CPFR.org Website CPFR1998, VICS
14
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.
15
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.
16
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
factors.
17
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
18
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
19
Bull whip effect
Customer demand forecast = 10 units
Suppliers
Products &
Services
Producers
10 Units
10 Units
Products &
Services
Information
Distributors
Retailers
10 Units
10 Units
10 Units
Products &
Services
10 Units
Key:
20
= Inventory Levels
Benefits of CPFR
Cost reduction
Lower Inventories
for higher profits
Improved ROI on
Technology
investment
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
21
Benefits for Retailer

Better store self
stock rates
Lower inventory
level
Higher sales
Lower logistics
cost
22
Benefits for Manufacturer

Better customer
services
Lower inventory
level
Higher sales
Faster
replenishment
cycle
23
CPFR Benefits: Factual
Source: http://www.vics.org/docs/committees/cpfr
24
Challenges in CPFR
Senior
Management
Buy In
Lack of trust
No shared
target
Selection of
CPFR partners
Confidentiality
Cultural
Change
Source: CPFR: A White Paper (J.D. Edwards)
25
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
solution for all.
26
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
27
28

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Collaborative Planning,

Forecasting & Replenishment

A business process for value

Advanced CPFR goes beyond data exchanges to synchronise forecasting

Prior to ECR-Relationships often adversarial.

CPFR ECR VMI

Track Inventory Level

Track Inventory Level

Information Shared and Decision made in Traditional Supply Chain

CPFR ECR VMI

Sales and Inventory Information

Track Inventory Level

Track Inventory Level

Information Shared and Decision made in VMI Supply Chain

CPFR ECR VMI

Forecast, Sales and Inventory Information

Track Inventory Level

Track Inventory Level

Information Shared and Decision made in CPFR Supply Chain

CPFR extends ECRs business processes to

The Collaborative Process

Retailer Forecast Drivers

Manufacturer Forecast Drivers

3. Create Sales Forecast

6. Create Order Forecast

CPFR: Key Principles

CPFR Business Model Roadmap

Source: CPFR.org Website CPFR1998, VICS

CPFR Reference Model &

Strategy & Planning

Demand & Supply

Projects demand at the point of sale

Determines future product order &

Takes into account inventory

Aggregate results and calculate key

Share product and market insights.

Adjust plans and processes for

Bull whip effect

Customer demand forecast = 10 units

Source: Collaborative Planning, Forecasting and Replenishment: Research

Benefits for Retailer

Benefits for Manufacturer

CPFR Benefits: Factual

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

solution for all.

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