CPFR: Collaborative Planning, Forecasting and Replenishment
If needs are communicated imprecisely along the supply chain, business efficiency suffers. “Collaborative Planning, Forecasting and Replenishment” provides a remedy.
CPFR (Collaborative Planning, Forecasting and Replenishment) is an inventory management strategy based on supply chain communication and data exchange. CPFR aims to mitigate fluctuations in demand between retailers and manufacturers and, as a result, increase business efficiency.
Fluctuations in demand within the supply chain are caused by the so-called “bullwhip effect”. Demand is communicated imprecisely along the supply chain. The more branched the supply chain is, the higher the fluctuations in demand can be and the more serious are the effects on the efficiency of the supply chain.
Implementation of CPFR in nine steps
Step 1: Partnership between supply chain participants
First, the framework conditions for CPFR cooperation between dealer and manufacturer are defined. The first step is to increase transparency and standardize procedures and processes.
Step 2: Drawing up a business plan
In order to live a goal-oriented cooperation, a business plan must be worked out in the second step. This plan should provide precise information about the commodity group management of the contractual partners as well as order data.
Step 3: Forecasting sales figures
In the next step, the sales figures are forecasted from the business plan, including production and inventory planning, in order to optimize the availability of the corresponding products.
Step 4: Recording significant deviations in the forecast
By comparing the forecasts made by the different stages of the supply chain, significant deviations are identified. In this way, any fluctuations can be identified at an early stage.
Step 5: Joint solution search for deviation from forecast
The identified deviations are then communicated directly between the parties concerned. Once the deviation has been clarified, the sales forecasted are adjusted.
Step 6: Forecasting purchase orders
In addition to the business plan and sales forecast, retailers and manufacturers determine an order forecast that is based on the sales data and takes into account the framework conditions of the business plan.
Step 7: Recording significant deviations in the forecast
Similar to the fourth step, significant deviations between the various order forecasts of dealers and manufacturers are now analyzed.
Step 8: Joint solution search for deviation from forecast
As in step five, the deviations are communicated, adjusted and renewed in the order forecast.
Step 9: Order process
Finally, the final order forecast results in the actual order of the goods.
Recommended action
A fully-integrated CPFR cannot avoid the bullwhip effect, but it can greatly reduce its magnitude. For SMEs, CPFR often offers potential savings that remain undiscovered due to inadequate communication.
This text was created together with Markt+Mittelstand.
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Contact
Kloepfel Group
Christopher Willson
rendite@kloepfel-consulting.com
Phone: +4921187545323