cpfr- basics nikunj mohit am1 mbae htw
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Collaborative Planning,Forecasting & Replenishment
(CPFR)- Basics
Presentation By:Mohit SharmaNikunj Khurana
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FLOW OF PRESENTATIONIntroduction of CPFR
Evolution of CPFR
CPFR Model
CPFR: Tasks & Key Principles
CPFR: Benefits & ChallengesAM1_MBAE_HTW_Nikunj_Mohit 2
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Introduction
A business process for valuechain partners to coordinatesplans in order to reduce the
variance between supplyand demand.
VISIONTo build mutual profitable
volume growth throughflawless continuous product
flow to our consumer.
StockShopDeclineDemand
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What is CPFR?
A business practiceTrading partners working together in
planning fulfilling customer demand. Links sales and marketing best practices to
supply chain planning and executionprocesses.
Objective is to increase availability to thecustomer while reducing inventory,transportation and logistics costs.
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Modes of CPFR
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Basic CPFR: A limited number of business processes integrated between
a limited number of supply chain partners.
Advanced CPFR goes beyond data exchanges to synchronise forecasting
information systems and coordinate planning and replenishment
processes
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
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History
1995-CFAR
30th July 1996
1998-VICS
CPFR evolved from ECR (efficient consumer response)
Prior to ECR--Relationships often adversarial.-Little or no joint planning-Lack of information sharing results inunpredictable ordering patterns,excessive inventories, service failures.
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CPFR ECR VMI TSC
Manufacturer Retailer
DetermineProduction
Quality
FulfillRetailerOrder
DevelopDemandForecast
DevelopDemandForecast
FulfillCustomerDemand
DetermineOrder
Quantity
Track Inventory Leveland Backorder
Quantity
Track Inventory Leveland Backorder
Quantity
Products Shipped
No information is shared
Information Shared and Decision made in Traditional Supply ChainAM1_MBAE_HTW_Nikunj_Mohit 7Source: Benefits of CPFR and VMI Collaboration Strategies: A Simulation Study
ISSN: 1984-3046 Journal of Operations & Supply Chain Management Vol. 6 No. 2
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CPFR ECR VMI TSC
Manufacturer Retailer
DetermineProduction
Quality
FulfillRetailerOrder
DevelopDemandForecast
FulfillCustomerDemand
DetermineOrder
Quantity
Track Inventory Leveland Backorder
Quantity
Track Inventory Leveland Backorder
Quantity
Products Shipped
Information Shared and Decision made in VMI Supply Chain
Sales and Inventory Information
AM1_MBAE_HTW_Nikunj_Mohit 8Source: Benefits of CPFR and VMI Collaboration Strategies: A Simulation Study ISSN: 1984-3046 Journal of Operations & Supply Chain Management Vol. 6 No. 2
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CPFR ECR VMI TSC
Manufacturer Retailer
DetermineProduction
Quality
FulfillRetailerOrder
DevelopDemandForecast
FulfillCustomerDemand
DetermineOrder
Quantity
Track Inventory Leveland Backorder
Quantity
Track Inventory Leveland Backorder
Quantity
Products Shipped
Information Shared and Decision made in CPFR Supply Chain
Forecast, Sales and Inventory Information
AM1_MBAE_HTW_Nikunj_Mohit 9Source: Benefits of CPFR and VMI Collaboration Strategies: A Simulation Study ISSN: 1984-3046 Journal of Operations & Supply Chain Management Vol. 6 No. 2
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CPFR extends ECRs business processes toinclude:
Information systems for capturing and transferring
point-of-sales (POS), inventory, and other demand &supply information between trading partners
Formalized sales forecasting and order forecastingprocesses
Formalized exception handling processes Feedback systems to monitor and improve supply
chain performance
10Source: http://scm.ncsu.edu/public/cpfr/ AM1_MBAE_HTW_Nikunj_Mohit
ECR CPFR
http://scm.ncsu.edu/public/cpfr/http://scm.ncsu.edu/public/cpfr/http://scm.ncsu.edu/public/cpfr/http://scm.ncsu.edu/public/cpfr/ -
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The Collaborative Process
Manufacturer
Retailer Forecast Drivers In stock position
Fill Rate Consumer Demand Price Changes Growth Plans Distribution Channels
Common EventCalendar
Joint Forecast
Retailer
Manufacturer Forecast Drivers Capacity Order Lead time Consumer Behavior Product Availability Promotions Raw material supply
Joint Business Planning
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CPFR Process1. Front-End Agreement
2. Joint Business Plan
O n c e
Q t r .
CollaborativePlanning
3. Create Sales Forecast4. Identify exceptions5. Resolve exceptions W
k , M o Collaborative
Forecasting
6. Create Order Forecast7. Identify exceptions8. Resolve exceptions W
k , M o Collaborative
Replenishment
9. Generate OrderAM1_MBAE_HTW_Nikunj_Mohit 12
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CPFR: Key PrinciplesThe 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
AM1_MBAE_HTW_Nikunj_Mohit 13Source: http://cpfr.org/
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CPFR Business Model Roadmap
AM1_MBAE_HTW_Nikunj_Mohit 14Source: CPFR.org Website CPFR1998, VICS
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8 collaborationtasks form cycleof 4 activities. Eachactivity consists of twocollaboration tasks, plusindividual tasks for each ofthe Retailer and Manufacturer.
CPFR Reference Model &Tasks
AM1_MBAE_HTW_Nikunj_Mohit 15Source: http://cpfr.org/
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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 & SupplyManagement
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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ExecutionPlace orders, prepare and delivershipments.
Receive and stock product on retailshelves.
Record sales transactions and makepayments.
Majorily divided into two parts:Order generation Transitions
order forecasts into firm demand
Order fulfillment Producing,shipping, delivering, and stockingthe products
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AnalysisMonitor planning and executionactivities 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 Producers Distributors RetailersProducts &Services
Products &Services
Products &Services
Information
Key: = Inventory Levels
10 Units 10 Units 10 Units
10 Units 10 Units10 Units
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Benefits of CPFR
Cost reduction Lower Inventoriesfor higher profits
Improved customerservice trough
better forecastingtechniques
Improved ROI on
Technologyinvestment
Improvedrelationships
between tradingpartners
AM1_MBAE_HTW_Nikunj_Mohit 21Source: Collaborative Planning, Forecasting and Replenishment: ResearchPaper by Tuomas Toiviainen & Jeffrey Hansen
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Benefits for Retailer
Better store selfstock rates
Lower inventorylevel
Higher sales Lower logisticscost
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Benefits for Manufacturer
Better customerservices
Lower inventorylevel
Higher salesFaster
replenishmentcycle
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CPFR Benefits: Factual
AM1_MBAE_HTW_Nikunj_Mohit 24Source: http://www.vics.org/docs/committees/cpfr
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Challenges in CPFR
SeniorManagement
Buy In
No sharedtarget
Selection ofCPFR partners
Lack of trust ConfidentialityCulturalChange
AM1_MBAE_HTW_Nikunj_Mohit 25Source: 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 basedcommunication.
Buyers benefit from reduced prices, better service levels andsynchronized operations.
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Overall, it is a solution for all.
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ReferencesBenefits of CPFR and VMI Collaboration Strategies: ASimulation Study; ISSN: 1984-3046 Journal of Operations &Supply Chain Management Vol. 6 No. 2CPFR.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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http://www.vics.org/docs/committees/cpfrhttp://scm.ncsu.edu/public/cpfr/http://en.wikipedia.org/wiki/Logisticshttp://en.wikipedia.org/wiki/Logisticshttp://scm.ncsu.edu/public/cpfr/http://scm.ncsu.edu/public/cpfr/http://www.vics.org/docs/committees/cpfrhttp://www.vics.org/docs/committees/cpfr -
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