1. COLLABORATIVE PLANNING,
FORECASTING AND REPLENISHMENT
GROUP : C2
Shreshtha Rath U111125
Budhadev nayak U111134
Parul Verma U111151
Rachna Bagaria U111154
Sampat Patnaik U111162
Manu Vats U111167

2. COLLABORATIVE COMMERCE
Definition -
Processes, technologies and the supporting standards that allow
continuous and automated exchange of information between trading
partners
Through collaboration, suppliers and retailers can work
together to fulfill consumer’s wishes better, faster and at less
cost by improving business process efficiency and reducing
waste.

3. COLLABORATIVE COMMERCE : INITIAL PARADIGM SHIFTS
 Greater sharing of data and responsibility
 Common goals and metrics
 Forecasts aligned, & time phased across supply chain
 Managed by shared exception criteria
 Committed forecast ---> frozen orders
 Pre-notification of issues in meeting consumer demand
 Capitalize on trading partner strengths, resources & systems

4. THE COLLABORATIVE PROCESS
Joint Business Planning
Retailer
Manufacturer
Common Event
Calendar
Retailer Forecast Drivers Manufacturer Forecast
• In stock position Drivers
• Fill Rate • Capacity
• Consumer Demand • Order Lead time
• Price Changes Joint Forecast • Consumer Behaviour
• Growth Plans • Product Availability
• Distribution Channels • Promotions
• Raw material supply

5. CPFR

6. INTRODUCTION
 A business practice
 Trading partners working together in planning fulfilling customer demand.
– Links sales and marketing best practices to supply chain planning and
execution processes.
– Objective is to increase availability to the customer while reducing
inventory, transportation and logistics costs.

7. A BRIEF HISTORY
 CPFR evolved from Efficient Consumer Response (ECR)
 ECR: Improve supply chain performance through better coordination of
marketing, production, and replenishment activities
 Prior to ECR
 Relationships often adversarial
 Little or no joint planning
 Lack of information sharing results in “unpredictable” ordering
patterns, excessive inventories and service failures.

8. A BRIEF HISTORY (contd.)
• In 1987, P&G and Wal-Mart pioneered in Continuous Replenishment Process
(CRP)
• Information sharing
• Joint demand forecasting
• Coordinated shipments
• CRP is best-known as the Vendor-Managed Inventory (VMI) program. This
partnership laid the foundation for ECR
• 1996, CPFR® (Collaborative, Planning, Forecasting, and
Replenishment) pilot between Wal-Mart and Warner
Lambert

9. THREE MODES OF CPFR
 Basic CPFR: a limited number of business processes integrated between a
limited number of supply chain partners
 Developed CPFR: will typically involve a greater number of data exchanges
between two partners, and may extend to suppliers taking responsibility for
replenishment on behalf of their customer
 Advanced CPFR goes beyond data exchanges to
synchronise forecasting information systems and
coordinate planning and replenishment processes

10. COLLABORATIVE COMMUNITIES TRADING EXCHANGES
One to One Many to Many
Price is not primary driver Price is key decision factor
Products are branded or differentiated Products are not differentiated
Fulfillment is competitive weapon Fulfillment is homogeneous
Discontinuous innovation, integrating Continuous Innovation, automating old
processes business to new business processes
Exception Based Self-Service based

11. CPFR PROCESS
Once
1. Front-End Agreement Collaborative Planning
Seller
2. Joint Business Plan
Qtr.
Order Forecast
3. Create Sales Forecast
Wk, Mo
Collaborative Forecasting
4. Identify exceptions
5. Resolve exceptions
6. Create Order Forecast Collaborative
Wk, Mo
7. Identify exceptions Replenishment
8. Resolve exceptions
Buyer 9. Generate Order
Sales Forecast

12. THE CPFR® OPPORTUNITY
• A set of guidelines supported and published by the Voluntary Inter-
industry Commerce Standards (VICS) Association
• Trading partners share their plans for future events, and then use an
exception-based process to deal with changes or deviations from plans
• By working on issues before they occur, both partners have time to react
– A supplier can build inventory well in advance of receiving a
promotional order and carry less safety stock at other times
– A retailer can alter the product mix to reduce the impact of supply
problems

13. CPFR® REFERENCE MODEL
8 collaboration tasks form
cycle of 4 activities. Each
activity consists of two
collaboration tasks.

14. CPFR: KEY TENETS
 The consumer is the ultimate focus of all efforts
 Buyers” (retailers) and “sellers” (manufacturers) collaborate at every level
 Joint forecasting and order planning reduces surprises in the supply chain
 The timing and quantity of physical flows is synchronized across all parties
 Promotions no longer serve as disturbances in the supply chain

15. 1. STRATEGY & PLANNING
 Establish the ground rules for
the collaborative relationship.
 Determine product mix and
placement, and develop event
plans for the period.

16. 1.1 COLLABORATION ARRANGEMENT
• Setting the business goals and defining the scope for the relationship
• Assigning roles, responsibilities, checkpoints and escalation procedures
– 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.

17. OUTPUT : Memorandum of understanding
 Defines the process in practical terms
 Identifies the roles of each trading partner and how the performance of
each will be measured
 Spells out the readiness of each organization and the opportunities
available to maximize the benefits from their relationship
 Formalizes each party’s commitment and willingness to exchange
knowledge and share in the risk

18. 1.2 JOINT BUSINESS PLAN
• Trading partners exchange information on corporate strategies and business
plans to develop a joint business plan.
• Identifies the significant events that affect supply and demand, such as
promotions, inventory policy changes, store openings / closings, and product
introductions.

19. OUTPUT : joint business plan
– Joint calendar for promotions, inventory policy changes, store
openings/closings, and product changes for each product category, etc.
– Clearly identifies the roles, strategies, and tactics for the SKUs that are
to be brought under the umbrella of CPFR.
– Cornerstone of the forecasting process.

20. 2. DEMAND & SUPPLY MANAGEMENT
 Sales forecasting:
 Projects demand at the point of sale
 Order planning/forecasting:
 Determines future product order &
delivery requirements based upon the
sales forecast.
 Takes into account inventory
positions, transit lead times, shipment
quantities, and other factors.

21. 2.1 SALES FORECASTING OVERVIEW
• Consumption data is used to create a sales forecast.
• This consumption data differs depending on the product, industry, and
trading partners:
– Retailer POS data
– Distribution center withdrawals
– Manufacturer consumption data
• Important to incorporate information on any planned events (ex. –
Promotions, plant shut downs, etc.)

22. SALES FORECASTING STEPS
1. Analyze current joint business plan
– Analyze the potential effects of the current joint business plan on
future retail sales
2. Analyze causal information
– Analyze the potential effect of causal factors on future retail sales
based on historical events and the resulting sales impact
3. Collect and analyze consumption data
– Point-of-Sale (PoS) data, warehouse withdrawals, manufacturing
consumption

23. SALES FORECASTING STEPS
4. Identify planned events
– Store openings or closings, promotions, or new product
introductions
– This comprehensive list of events will be used to populate a shared-
event calendar
5. Update shared event calendar
– Align events from each trading partner, resulting in a common plan
– Agree upon this short-term event plan

24. SALES FORECASTING STEPS
6. Gather exception resolution data
– Gather sales forecast exception resolution data from previous
iterations
7. Generate sales forecast
– Generate the forecast for a given period with forecasting tools that
use all relevant information and guidelines. Either partner or both
partners may generate the sales forecast, depending upon the
scenario

25. OUTPUT
• Single sales forecast generated by one or both parties
• Used as a baseline for the creation of an order forecast, as well as other
supply chain activities.

26. 2.2 ORDER PLANNING/FORECASTING OVERVIEW
• Sales forecast, causal information, inventory policies, etc. are used to
generate a specific order forecast
• Actual volume numbers are time-phased and reflect inventory objectives
by product and receiving location
• The short-term portion of the forecast is used for order generation.
• The longer-term portion is used for planning

27. OUTPUT : Time-phased, netted order forecast
• The order forecast allows the seller to allocate production capacity against
demand while minimizing safety stock.
• The real-time collaboration reduces uncertainty between trading partners
and leads to consolidated supply chain inventories.
• Inventory levels are decreased, and customer service responsiveness is
increased. A platform for continual improvement among trading partners
is established.

28. 3. EXECUTION
• Place orders, prepare and deliver
shipments, receive and stock
product on retail shelves, record
sales transactions and make
payments.
• Order generation— Transitions
order forecasts into firm demand
• Order fulfillment —
Producing, shipping, delivering, and
stocking the products

29. ORDER GENERATION OUTPUT
• Committed orders by the buying organization (the retailer) and delivery
shipments from the vendor
– The buyer receives and stocks products, records sales
transactions, sends order acknowledgment and makes payments
• Buyer and seller agree on a “time fence” where forecasts are frozen
– Near-term orders are fixed; Long-term ones are used for planning

30. 4. ANALYSIS
• Monitor planning and execution
activities for exception conditions
• Aggregate results, and calculate key
performance metrics
• Share insights and adjust plans for
continuously improved results

31. PERFORMANCE ASSESSMENT
• Trading partners calculate key performance metrics (e.g., in-stock
level, forecast accuracy targets, etc.)
– To evaluate achievement of business goals, uncover trends, or develop
alternative strategies;
– To share insights and adjust plans for continuous improvement.
• Generate and agree to a list of exception items for your CPFR initiative.
– Develop a process to resolve sales forecast exceptions.

32. EXCEPTION MANAGEMENT
• Monitor plan vs. execution to identify deviations and exceptions.
– Trading partners resolve exceptions by determining causal
factors, adjusting plans where necessary.
– Forecast accuracy problems, overstock/stock-out conditions, and
execution issues must be identified and resolved in a timely manner.

33. BARRIERS TO COLLABORATION
 Internal Alignment
 Silo Mentality
 Silo Compensation
 Not Invented here mentality
 Business Practices Out of Sync With Reality
 Legacy Systems
 Personal Comfort Zones
 Lack of Leadership
 Uninformed Opinions

34. CPFR BENEFITS

35. CPFR BENEFITS: DEMAND
1. Enhanced Relationship
– Implicitly, CPFR strengthens an existing relationship and substantially
accelerates the growth of a new one
– Buyer and seller work hand-in-hand from inception through the actual result
2. Greater Sales
– The close collaboration needed for CPFR implementation drives the planning
for an improved business plan between buyer and seller.
– The strategic business advantage directly translates to increased category
sales

36. CPFR BENEFITS: DEMAND
3. Category Management
– Before beginning CPFR, both parties should scrutinize and inspect
shelf positioning activities
– This scrutiny will result in improved shelf positioning and facings
through sound category management
4. Improved Product Offering
– Before CPFR implementation, the buyer and seller collaborate on a
mutual product scheme that includes SKU evaluation and additional
product opportunities

37. CPFR BENEFITS: SUPPLY
1. Improved Order Forecast Accuracy
– CPFR enables a time-phased order forecast that provides additional
information, greater lead time for production planning, and improved
forecast accuracy
2. Inventory Reductions
– CPFR helps reduce forecast uncertainty and process inefficiencies
– With CPFR, product can be produced to actual order instead of storing
inventory based on forecast

38. CPFR BENEFITS: SUPPLY
3. Improved Technology ROI
– Technology investments for internal integration can be enabled with
higher quality forecast information
– Driving internal processes with common, high-quality data.
4. Improved Overall ROI
– As other processes improve, the return on investment can be substantial.
5. Increased Customer Satisfaction
– With fewer out-of-stocks resulting from better planning information,
higher store service levels will prevail, offering greater consumer
satisfaction

39. CPFR® BENEFITS
Improved
Improved
customer
profitability
service
More effective
inventory
management

40. CPFR® ROI BENEFIT CATEGORIES
Inventory 41% Sales Benefits 34%
• Storage Costs 22% • Increased Sales 25%
• Inventory Expense 17% • Improved Margin 1%
• Intransit inventory for Rail >1% • Customer Retention 8%
• Reduced 3’rd Party Storage 13%
Total Benefit
100%
Transportation 19% Process Efficiencies 6%
• Carrier Management >1% • Inventory Control 1%
• Load Planning >1%
• Truck Tendering/Carrier Selection 1%
• Logistics 2%
• Truck Cycle Time 6% • Order Management / CSR 2%
• Rail Cycle Time 10% • Purchasing >1%
• Demurrage >1%
• Excess Freight Charges 2%

41. CPFR® Initiative Participants
Staples
SARA LEE
JCPenney
Federated Dept. Stores Kimberly Clark
Mead
School & Office
VF Corp.

42. Shrestha Rath U111125
GROUP : C2
Budhadev nayak U111134
Parul Verma U111151
Rachna Bagaria U111154
Sampat Patnaik U111162
Manu Vats U111167