Semantic Scholar extracted view of “CPFR: an emerging supply chain tool” by Gene Fliedner. CPFR: an emerging supply chain tool Gene Fliedner Decision and Information Sciences Department, Oakland University, Rochester, Michigan. CPFR: an emerging supply chain tool Language: eng. Published: Emerald Subjects: Forecasting,Collaboration,Planning,Supply‚Äźchain management .

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An analysis of the dri An Analysis of the Dep Infrastructure of an A Session 5, Supply Chai Success tool to JIT is due in part to the practice of externally synchronizing the production planning, operations scheduling, purchasing, and shipping activities of the various trading partners comprising the supply chain. The fabrication and assembly supply chain depicted in Figure 1 is representative of the supply chain found in the automotive industry.

Through early communication of production planning information originating with the original equipment manufacturers OEMs and sequentially proceeding upstream through the supply chain, operating schedules, purchase plans, and shipping activities of the trading partners have been synchronized.

Synchronization of inbound OEM materials management activities has resulted chwin reduced inventories, improved capacity utilization, higher customer service levels, and a host of additional reported benefits for all participants. The exchange of planning information on the outbound side of distribution from the OEM to the retailer for the supply chain in Figure 1 has been largely overlooked. To date, the points na collaboration of most supply chains have focused on the synchronization of production plans that commence with the OEM and integrate production, purchase and shipping plans upstream.

Evidence of this abounds in today’s markets when analysts cite lack of future earnings visibility and excessive inventory accumulations.

Recently, a methodology referred to as collaborative planning, forecasting and replenishment CPFR is being espoused as a The Emerald Research Register for this journal is available at http: As depicted in the simplified supply chain of Figure 2, the point of collaboration utilizing CPFR becomes the retail level demand forecast, which is then used to synchronize replenishment and production plans throughout the entire supply chain.

This paper examines CPFR; explaining the CPFR process, tracing its short evolution, citing emergijg that have been achieved, identifying obstacles to implementation, and proposing the next logical development in the future of CPFR.

CPFR process CPFR is a Web-based attempt to coordinate the various activities including production and purchase planning, demand forecasting and inventory replenishment between supply chain trading partners. Its objective is to exchange selected internal information on a shared Web server in order to provide for reliable, longer term future views of demand in the supply chain.

CPFR: an emerging supply chain tool

There are two principal drawbacks of EDI. First, it is a slower approach. EDI may require manual tol of identical data Joachim, by both trading partners and is typically done in batch file transfer mode Cooke,which further delays the exchange of information.

The software used in EDI applications is less ubiquitous. It aupply The current issue and full text archive of this journal is available at http: On the other hand, CPFR is gaining acceptance due in part to technology breakthroughs associated with Web-based communications Wolfe, Regardless of the number of steps, CPFR uses a cyclic and iterative approach to derive consensus supply chain forecasts: Typically partners identify and coalesce Figure 1 Fabrication and assembly supply chain Figure 2 Supply chain with retail activities individual corporate strategies to create partnership strategies, design a joint calendar identifying the sequence of planning activities to follow which affect product flows, and specify exception criteria for handling planning variances between the trading partners’ demand forecasts Schenck, suppply.

A pilot study conducted between Wegman Foods and Nabisco to develop weekly collaborative forecasts for 22 Planters Peanut products took approximately five months to complete steps one and two Stedman, a. Forecast development may follow preexisting company procedures.

Retailers should play a critical role as shared point-of-sale POS data permits the development of more accurate and timely expectations compared with extrapolated warehouse withdrawals or aggregate store orders for both retailers and vendors Lewis, Given the frequency of forecast generation and the potential for vast numbers of items requiring forecast preparation, simple forecast procedures are commonly used within CPFR.

Simple techniques are easily used in conjunction with expert knowledge of promotional or pricing events to modify forecast values accordingly. Retailer order forecasts and vendor sales forecasts then electronically post their latest forecasts for a list of products on a dedicated server.


The server examines pairs of corresponding forecasts and issues an exception notice for any forecast pair where the difference exceeds a preestablished safety margin e.

If the safety margin is exceeded, planners from both firms may collaborate electronically to derive a consensus forecast. Given the number of individual product forecasts, a rules-based response system will ultimately be needed in order to accommodate the large number of potential exception messages Verity, Once the corresponding forecasts are in agreement, the order forecast becomes an actual order, which commences the replenishment process.

Each of these steps is then repeated iteratively in a continuous cycle, at varying times, by individual products and the calendar of events established between trading partners. In its short existence, CPFR has evolved considerably. Initially referred to as collaborative forecasting, the concept represented an exchange of early demand expectations between trading partners. It was subsequently referred to as collaborative forecasting and replenishment CFAR to denote the collaborative forecasting and replenishment objectives of the approach between trading partner relationships downstream from OEMs.

As it has evolved today, CPFR emphasizes coordinating the activities of production and purchase planning, demand forecasting and inventory replenishment through collaboration among all supply chain trading partners, as depicted in Figure 2.

The potential benefits of sharing information for enhanced planning visibility in the supply chain are enormous. These initiatives encourage supply chain partners to collaborate and share information over the control and reduction of inventories Stedman, b.

Although the methodology is applicable to any industry, CPFR applications to date have largely focused on the emerginv, apparel, and general merchandise industries. Many forces drive the need for the early exchange of reliable information in these particular industries. One of these driving forces is competition. Merchandise retailers such as Wal-Mart and K-Mart have expanded product offerings into food items in order to enhance the value of their customer service offerings through one-stop shopping.

A second driving force is the innovative nature of products, or the length of the life cycle and the duration of retail trends in these industries. In the apparel industry, for example, the life cycle of some garments is six months or less. Yet, manufacturers of these garments typically require up-front commitments from retailers emerginng may exceed six months making long-term fashion forecasts risky.

General merchandise retailers know this year’s newest toy has a short product life cycle. It is imperative to cpvr the latest trend in consumer products to market quickly; otherwise, either tremendous lost suppply or markdown prices will be experienced. Long manufacturing lead times necessitate supply chain planning visibility.

A third driving force is the longer, more complex supply chain given moves to offshore production. International sourcing for apparel and general merchandise has lengthened the supply chain and cycle time, again necessitating supply chain planning visibility.

A fourth driving force behind CPFR is the nature of the supply chain cost structure. Global markets and more competitors are likely to move the supply chain system towards universal participation by all retailers in CPFR in an effort to cut costs Raghunathan, All of these driving forces support the need to respond quickly to volatile demand and other market signals.

This helps to explain the increasing exploration of CPFR among food, apparel, and general merchandise firms. Although the number of respondents was not cited, Progressive Grocer’s Annual Report of the grocery industry indicated that 33 percent of all executives plan to implement CPFR programs with trading partners over the next year.

CPFR: an emerging supply chain tool – Semantic Scholar

This figure increases to 37 percent for retailers and 45 percent among wholesale executives Lewis, CPFR benefits The early exchange of information between trading partners provides for reliable, longer term future views of demand in the supply chain. The forward visibility based upon information sharing leads to a variety of benefits within supply chain partnerships Yu et al.

Because CPFR is relatively new, data to evaluate its impact empirically are not readily available. Anecdotal evidence provided from the results of several pilot programs highlight benefits, which are: The results of several pilot programs indicate potential benefits for retailers including higher sales, higher service levels in-stock levelsand lower inventories.

Manufacturers have experienced tokl benefits plus faster cycle times and reduced capacity requirements Hill, ; Ireland and Bruce, ; Schachtman, b; Wolfe, KPMG Consulting conducted a poll of both retailers and manufacturers in concerning the frequency and the benefits derived from information exchange Chain Store Age, Manufacturers cited significant improvements in cycle time and inventory turns.


Retailers indicated that order response times as short as six days for domestic durables and 14 days for nondurables were being achieved.

Four out of ten cited at least a 10 eupply improvement in both response times and inventory turns. Forty-five percent cited reductions of at least 10 percent in associated costs. In the KPMG survey, retailers and manufacturers noted benefits received by eliminating the middlemen out of the supply chain Chain Store Age, Retailing respondents noted 66 percent of merchandise flowing directly to retail outlets, or passing through at most one distribution location before reaching the shelves.

This figure was higher for manufacturers, emerginb 73 percent noted either direct material flows or inventory that passed through only one distribution point before reaching the retailer. Even a small reduction in supply chain safety stocks is a sizeable dollar figure.

CPFR: an emerging supply chain tool – EconBiz

In the KPMG survey, 42 percent of respondents indicated at least a 10 percent reduction in total inventory in the past 12 months Chain Store Age, According to published reports, some companies have achieved percent reductions in inventory. CPFR allows for a more efficient deployment of supply chain inventories.

Almost cpvr after its initial efforts to collaborate on supply chain forecasts, Heineken’s North American distribution operations emerginb a 15 percent reduction in its forecast errors Hill and Mathur, Enhanced knowledge of future events e.

CPFR should result in lower product obsolescence and deterioration. For example, Riverwood International Corporation, a major producer of paperboard and packaging products is working to establish collaborative forecasting relationships with customers in order to make production scheduling and inventory control less risky. This company seeks to balance the need to stock up on inventory for sudden demand surges against the fact that paperboard starts emergign break down after 90 days Stedman, b.

With a higher degree of collaboration and a timelier sharing of information between retailer and manufacturer, greater stability and accuracy in dupply schedules result making inventory planning more accurate. Furthermore, as production schedules more accurately reflect the needs of the retailer to satisfy near term demand, reductions in manufacturer capacity requirements are possible. CPFR tolo result in lower system expenses. Some of the lower expenses will be due in part to previously cited benefits of lower inventories, lower product obsolescence and deterioration, and reduced capacity requirements.

Expense reductions will also be attributable to more ubiquitous technology. For example, some of Heineken’s distributors transfer forecast information only with a Web browser and an Internet connection Butler,which is less expensive than an EDI-based information exchange approach. With its integrative efforts to automate the supply chain planning system, Heineken’s North American operations also eliminated its data entry clerks that were once used to input distribution system forecasts into its distribution requirements planning DRP system Hill and Mathur, tol Almost immediately chsin its initial efforts to collaborate on supply chain forecasts, Heineken’s North American distribution operations cut order lead times in half Hill emreging Mathur, As order lead times are lowered, order response time improves.

Anecdotal evidence has noted percent increases in fill rates and half the number of out-of-stock occurrences Hill, One of the largest hurdles hindering collaboration is the lack of trust over complete information sharing between supply chain partners Hamilton, ; Stedman, b; Stein, The conflicting objective between the profit maximizing vendor and cost minimizing customer gives rise to the adversarial supply chain relationship.

Sharing sensitive operating data may enable one trading partner to take advantage of the other. Similarly, there is the potential loss of control as a barrier to implementation.

Some companies are rightfully concerned about the idea of placing suplly data such as financial reports, manufacturing schedules and inventory values online. Companies open themselves to security breaches Stein, However, in a survey of US manufacturing and service companies, AMR Research found only 16 percent of respondents that are established participants in a business-to-business trading exchange cite security and trust problems D’Amico,