CPFR: an emerging supply chain tool
| Pages | 14-21 |
| DOI | https://doi.org/10.1108/02635570310456850 |
| Published date | 01 February 2003 |
| Date | 01 February 2003 |
| Author | Gene Fliedner |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
CPFR: an emerging supply chain tool
Gene Fliedner
Decision and Information Sciences Department, Oakland University, Rochester,
Michigan, USA
Introduction
The 1980s witnessed the development of just-
in-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
logical development in the future of CPFR.
For improved supply chain management
(Lummus and Vokurka, 1999), CPFR is
emerging as an important tool.
CPFR process
CPFR is a Web-based attempt to coordinate
the various activities including production
and purchase planning, demand forecasting
and inventory replenishment between supply
chain trading partners. Its objective is to
exchange selected internal information on a
shared Web server in order to provide for
reliable, longer term future views of demand
in the supply chain. As such, CPFR is being
used to replace the 15-year-old approach of
electronic data interchange (EDI).
There are two principal drawbacks of EDI.
First, it is a slower approach. EDI may
require manual entering of identical data
(Joachim, 1998) by both trading partners and
is typically done in batch file transfer mode
(Cooke, 1998), which further delays the
exchange of information. Second, EDI is
more expensive than CPFR given its
proprietary nature, variety of standards, and
the reliance on value added networks, or
VANs (Cooke, 1998). The software used in
EDI applications is less ubiquitous. It makes
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[14]
Industrial Management &
Data Systems
103/1 [2003] 14-21
#MCB UP Limited
[ISSN 0263-5577]
[DOI 10.1108/02635570310456850]
Keywords
Forecasting, Collaboration,
Planning, Supply-chain management
Abstract
This paper examines collaborative
planning, forecasting, and
replenishment (CPFR), a Web-
based 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.
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