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THE CPFR PROCESS

The VICS CPFR process provides a best-practices frame­work for managing the planning and replenishment process. The CPFR process is divided into nine steps:

      Seep 1—Front-end agreement: Participating companies identify executive sponsors, agree to confidentiality and dispute resolution processes, develop a scorecard to
track key supply chain metrics relative to success criteria, and establish any financial incentives or penalties.       Step 2—Joint business plan: Company personnel de­
velop plans for promotions, inventory policy changes, store openings/closings, and product changes for each product category.

Steps 3-5—Soles forecast col­aboration: Retailers and suppliers share consumer demand forecasts and identify exceptions that occur when partners' plans do not match or change dramatically. They resolve exceptions by determining causal factors, adjusting plans where necessary.

Steps 6-8—Order forecast collaboration: Retailers and suppliers share replenishment plans, identifying and resolving exceptions.

Step 9—Order generation/delivery execution: Results data (POS, orders, shipments, on-
hand inventory) is shared, and
forecast accuracy problems, overstock/understock con­ditions, and execution issues are identified and resolved. Step 1 ensures that each company has an adequate commitment to collaboration, and that all parties are aligned around common goals. This front-end agree­ment might be reviewed on an annual basis. Step 2 ap­plies good category management principles—borrowed from the Efficient Consumer Response (ECR) initiative— to create a joint plan for going to market. This would typically be revised quarterly, or semiannually. What makes CPFR unique is that this joint business plan is used to control the day-to-day activities of manufactur­ing, delivering, and selling products. Steps 3-9 support the ongoing execution of the plan.

A core assumption of CPFR is that each organization will enter the details of the joint business plans into their online planning systems, and then share the results on a regular basis as market conditions change and logistical problems occur. Because each company may manage thousands of products distributed across thousands of locations, it is not feasible for planners to compare these plans manually and determine which changes are signifi­cant. Instead, CPFR technology on the exchange com­pares each value using thresholds that planners have set. If changes in one plan, or differences between them ex­ceed the threshold, the CPFR system alerts the planner to the problem. Forecast revisions are compared on a regu­lar—usually weekly—basis.

CPFR technology is essential to identifying excep­tions, because of the millions of product/location com­binations that are planned, and because of the unique perspectives (product, location, and partner hierarchies) of each supply chain participant. Figure 3 illustrates ex­ceptions that might be triggered when a supplier's fore­cast is compared with the retailer's.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 13


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