Collaborative Planning, Forecasting and Replenishment or CPFR is a process in which your company not only collaborates and integrates planning, forecasting and other data points from within your own company—but also uses data points provided by your suppliers and your customers.
The stakeholders in CPFR are therefore:
- Your Company
- Your Customers
For CPFR to work effectively, each of those stakeholders are required to buy into the concept of CPFR. Having that kind of stakeholder buy in is the only way CPFR can enhance your supply chain.
Stakeholder Buy In
Okay, yes, you get every one of the key players in your supply chain in a conference room or on a conference call or logged in to a Webex. And each one of those stakeholders—your suppliers' reps, you and your internal team and your customers' reps—agrees:
"Yes, indeed, we want to enhance this supply chain."
Your customer knows that means that they'll get on-time deliveries, quality products, fewer headaches and maybe even a cost down or two.
Your supplier knows that means less expediting, more transparency into customer demand, reduced costs and maybe even the opportunity to make an extra buck or two.
And you and your company realized—being at the center of that supply chain—that means all of those benefits:
- On Time Deliveries
- Improved Quality
- Less Expediting
- Lower Costs
- Improved Transparency
But other than nodding their collective heads—what does actual stakeholder buy in mean?
Stakeholder buy in—i.e. a commitment not only agreeing to CPFR, but to executing it—means resources will be made ready and prepared for:
- Strategy and Planning
- Demand and Supply Management
CPFR isn't a one-time activity. You're not going to go through the bullets points above and when you get through with "execution", sit back and relax.
The CPFR activity is as continuous as it is collaborative.
Upon completion of "execution"—it's time to begin "analysis."
Based on the results of your analysis, you can set or reset your "strategy and planning."
Your "demand and supply management" will depend upon the strategy that you've just set (or reset).
Then it's back to "execution."
And so on.
Sounds good, you say. But it also sounds very theoretical. How can CPFR actually enhance your supply chain?
In order to collaborate with your suppliers and customers, you're going to need to share information. Your customers are going to have to provide forecasts. Your suppliers are going to need to share production schedules.
You'll also need to align on metrics. How do each of you measure on time delivery? Is it on time if you put on you loading dock on the ship date, but it arrives late at your customer? Is it late if you placed an order with your supplier for a shipment on December 1 but then you contact the supplier a week later and ask for it shipped on November 15?
If your customer expects you to deliver all of their orders on time (i.e. 100 percent on time delivery) and your goal is 97 percent on time delivery—you and your customer are not aligned.
Forecasts and on time delivery are just examples of collaboration on data exchange. You, your suppliers and customers are also going to have to agree on some measure of information sharing on costs, quality and production lead times.
This can sometimes be sensitive. Along with that stakeholder buy in, there needs to be an upfront agreement on what collaboration entails.
CPFR doesn't work if it's only done "as needed." Effective CPFR will only succeed in enhancing your supply chain if it's systematically implemented.
An optimized supply chain is one that helps you deliver your customer orders accurately and when your customers want them—and accomplish that by spending as little money as possible.
By collaborating with your suppliers and customers—especially in planning, forecasting and replenishment—you use CPFR to drive:
- Replenishment accuracy
- Stock out reductions
- Overstock reductions
- Alignment of production planning to meet customer needs
If enhancing your supply chain through process driven collaboration sounds appealing to you, then work to get the right stakeholder buy in and implement CPFR.