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Keywords
Forecasting, Collaboration, Planning, Supply-chain management
Abstract
This paper examines collaborative planning, forecasting, and replenishment (CPFR), a Webbased tool to coordinate the various supply chain management activities including production and purchase planning, demand forecasting, and inventory replenishment between supply chain trading partners. This paper identifies what CPFR is, explains the CPFR process, cites benefits that have been achieved, identifies obstacles to implementation, and discusses the future of CPFR.
Introduction
The 1980s witnessed the development of justin-time (JIT) as a philosophy to improve operations. Success attributable 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 in 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 of 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 means of integrating all members of the supply chain, including distribution and retail activities. 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 benefits that have been achieved, identifying obstacles to implementation, and proposing the next...