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Collaborative Commerce
Definition Processes, technologies and the supporting standards that allow continuous and automated exchange of information between trading partners
Through collaboration, suppliers and retailers can work together to fulfill consumers wishes better, faster and at less cost by improving business process efficiency and reducing waste.
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.
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
Relationships often adversarial. Little or no joint planning Lack of information sharing results in unpredictable ordering patterns, excessive inventories, service failures,
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. CPFR
Value chain partners co-ordinate plans to reduce the variance between supply and demand and share the benefits of a more efficient and effective supply chain . Allow trading partners time to react A supplier can build inventory well in advance of receiving a promotional order and carry less safety stock at other times. A retailer can alter the product mix to reduce the impact of supply problems.
JCPenney
Federated Dept. Stores
Kimberly Clark
Mead
VF Corp.
Manufacturer
Joint Forecast
CPFR Benefits
More effective inventory management Improved customer service Improved profitability
Manufacturer Benefits Lower Inventory Levels Faster Replenishment Cycles Higher Sales Better Customer Service
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 inspect shelf positioning and exposure for targeted SKUs to ensure adequate days of supply, and proper exposure to the consumer. This scrutiny will result in improved shelf positioning and facings through sound category management.
2. Inventory Reductions
CPFR helps reduce forecast uncertainty and process inefficiencies. How much inventory does your company hold to cover up for forecasting errors or a trading partners inability to have the product available in a timely manner? With CPFR, product can be produced to actual order instead of storing inventory based on forecast.
CPFR Is Consumer-Centric
Consumer
At the center of the model. Retailers, manufacturers and suppliers work together to satisfy the demand of the end consumer.
The circling arrows between the retailer ring and the manufacturing ring show the eight CPFR collaboration tasks.
Collaboration tasks are NOT numbered; NO predetermined sequence is implied.
http://scm.ncsu.edu/public/cpfr/ .
Important to incorporate information on any planned events (ex. Promotions, 29 plant shut downs, etc.)
Output
Single sales forecast generated by one or both parties Used as a baseline for the creation of an order forecast, as well as other supply chain activities.
Sales forecast, causal information, inventory policies, etc. are used to generate a specific order forecast. Actual volume numbers are time-phased and reflect inventory objectives by product and receiving location. The short-term portion of the forecast is used for order generation. The longer-term portion is used for planning.
...and this information is then used to generate a replenishment forecast for the DC.
http://scm.ncsu.edu/public/cpfr/
The same process can be used to develop an order forecast for the manufacturer.
The order forecast allows the seller to allocate production capacity against demand while minimizing safety stock. The real-time collaboration reduces uncertainty between trading partners and leads to consolidated supply chain inventories. Inventory levels are decreased, and customer service responsiveness is increased. A platform for continual improvement among trading partners is established.
Execution
Place orders, prepare and deliver shipments, receive and stock product on retail shelves, record sales transactions and make payments. Order generation Transitions order forecasts into firm demand Order fulfillment Producing, shipping, delivering, and stocking the products
Buyer and seller agree on a time fence where forecasts are frozen.
Near-term orders are fixed; Long-term ones are used for planning.
4. Analysis
Monitor planning and execution activities for exception conditions. Aggregate results, and calculate key performance metrics. Share insights and adjust plans for continuously improved results.
Performance assessment
Trading partners calculate key performance metrics (e.g., in-stock level, forecast accuracy targets, etc.)
To evaluate achievement of business goals, uncover trends, or develop alternative strategies; To share insights and adjust plans for continuous improvement.
Generate and agree to a list of exception items for your CPFR initiative.
Develop a process to resolve sales forecast exceptions.
Exception management
Monitor plan vs. execution to identify deviations and exceptions.
Trading partners resolve exceptions by determining causal factors, adjusting plans where necessary. Forecast accuracy problems, overstock/stockout conditions, and execution issues must be identified and resolved in a timely manner.
Weeks of Supply
(Improvement)
Inventory Turnover
(Improvement)
7.85% 3.10%
3.72 n/a
Thank you
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