Collaborative Planning, Forecasting and Replenishment (CPFR) is a business process that brings together several trading partners in the planning and fulfillment of customer demand. Its main objective is to raise availability of goods, while minimizing inventory and logistics costs.
There are three essential stakeholders in CPFR system: Your business, suppliers and customers. For CPFR to be effective, each of those stakeholders must participate in the CPFR process.
Being at the center of its own supply chain, your entire company should realize CPFR means more on-time deliveries, greater quality, less expediting, reduced costs and greater transparency. Your suppliers should realize CPFR means less expediting, more demand transparency, decreased costs and possibly the chance to make a higher profit. Your customer should have a sense that they’ll get more on-time deliveries, quality products and less problems, possibly at a lower cost.
To be able to work together with suppliers and customers, your organization must share data, customers must supply demand predictions, and suppliers have to share their production schedules.
Each stakeholder must also agree to various performance metrics. For instance, if a customer expects 100 percent of deliveries to be on time, and your objective is 97 percent, your performance metrics are not aligned.
Stakeholders must also agree on the degree of data sharing for things like quality assurance and production lead times. This information can be quite sensitive, which means trust is an essential component of stakeholder buy-in. An upfront, transparent and comprehensive agreement on what collaboration entails is the best way to get everyone on the same page and all pulling in the same direction.
Trust the Process
CPFR does not work properly if it’s only done on an “as needed” basis. Useful CPFR will only flourish in your supply chain if it’s methodically put in place. An optimized supply chain helps your company deliver customer orders correctly as your customers need them, and it does this while keeping costs down significantly.
By working together with your suppliers and customers, particularly in planning, forecasting and replenishment, CPFR can drive replenishment consistency and alignment of production planning with customer needs. It can also minimize stock out and overstock reductions.
The Process Should Be Ongoing
CPFR should not be a one-off activity, something that involves going through a checklist once and being forgotten about. Instead, CPFR activity should be continuous. After the initial alignment and execution, stakeholders should shift to analysis mode. The results of this ongoing analysis can then be used to adjust or reset strategy and planning.
Your company’s demand and supply management can then be based on a strategy that is regularly being modified based on incoming data and analysis.
Partner With the Supply Chain Experts
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