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SCRC Article Library: Introduction: Collaborative Planning, Forecasting and Replenishment (CPFR): A Tutorial

Introduction: Collaborative Planning, Forecasting and Replenishment (CPFR): A Tutorial

Published on: Mar, 21, 2011

by: Cecil Bozarth, Ph.D.

Professor of Operations & Supply Chain Management

Introduction

  • Learning objectives
  • What is CPFR?
  • Origins in ECR
  • Typical manufactururer-retailer relationship prior to ECR
  • Core elements of ECR
  • How CPFR differs from ECR
  • Another way to think about ECR and CFPR

Learning Objectives

By the end of this module, you will be able to:

  • Define CPFR and explain how it builds upon earlier Efficient Consumer Response (ECR) practices
  • Describe the CPFR process model, including the major processes and underlying collaboration tasks
  • Explain how collaboration is built into the major processes of the model
  • Discuss the organizational implications of CPFR, including category management

What is CPFR?

Collaborative Planning, Forecasting and Replenishment (CPFR):

CPFR is a business practice that combines the intelligence of multiple trading partners in the planning and fulfillment of 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

Origins in ECR

CPFR has its origins in Efficient Consumer Response (ECR).

ECR was a conscious attempt to better coordinate marketing, production, and replenishment activities in a way that simultaneously increased value to the consumer while improving supply chain performance for producers and retailers.

Typical manufacturer-retailer relationship prior to ECR

Situation

Arms-lengths relationships; little or no joint planning

Relationships were often adversarial.

The lack of information sharing made these relationships more costly than they needed to be (“unpredictable” ordering patterns, excessive inventories, service failures,…).

Solution

In early 1990s, P&G and Wal-Mart developed a joint logistics process

The steps involved were:

  • Information sharing
  • Joint demand forecasting
  • Coordinated shipments.

This partnership laid the foundation for ECR.

Core elements of ECR

Efficient assortment – Product offerings should be rationalized to better meet customer needs and improve supply chain performance (ex. – Why 100 different SKUs that confuse consumers when 30 SKUs would meet their needs?)

Efficient product introductions – New products should be introduced in response to real customer needs, and only after the impact on supply chain performance has been considered.

Efficient promotions – Prices should be kept as stable as possible. The supply chain impact of promotions and market specials should be carefully considered.

*Efficient replenishment *– All physical and information flows that link producers to the consumer should be streamlined to cut costs and increase value.

How CPFR differs from ECR

ECR’s core elements still apply under CPFR.
p. But CPFR extends the business processes to include:

  • Information systems for capturing and transferring 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

Another way to think about ECR and CFPR

Uncertainty ECR	Simplify the environment CPFR	Put processes in place to handle the added complexity

Categories:

SCM TutorialsCPFR

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