CPFR: Considering the Options, Advantages and Pitfalls

Collaborative Planning, Forecasting and Replenishment (CPFR) is an evolving business practice that seeks to reduce supply chain costs by promoting greater integration, visibility and cooperation between trading partners' supply chains.

The term trading partner can be applied to almost any combination of suppliers, manufacturers, distributors or retailers. CPFR itself is an outgrowth of earlier collaboration efforts like JIT (just in time), VMI (vendor managed inventory) and others.

The Voluntary Interindustry Commerce Solutions (VICS) Association has taken the lead role in defining a framework and guidelines for conducting CPFR. The VICS CPFR model outlines a general framework for CPFR that includes the following elements: Strategy and Planning, Demand and Supply Management, Execution, and Analysis.

Strategy and Planning encompasses the development of joint business plans and the terms of collaboration. Demand and Supply Management focuses on forecasting and order planning. Execution involves the generation and fulfillment of replenishment orders. Finally, Analysis addresses processes for exception management and scorecarding.

At present, CPFR represents the most encompassing, well-defined framework for enabling supply chain integration across organizational boundaries. There are some factors that make CPFR appealing, as well as some reasons why it can be challenging – or in some cases, impractical – to implement and sustain.

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