1. Collaborative Planning, Forecasting
and Replenishment (CPFR)

2. • CPFR is a business practice that combines the
intelligence of multiple trading partners in the
planning and fulfillment of 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
Voluntary Interindustry Commerce Standards(VICS) Association

3. • CPFR is a strategy for improving supply chain
efficiency and effectiveness by making
demand transparency drive the execution of
the supply chain participants to maximize
value for the end-customer.

4. SCM Process

5. Genesis
Began as a 1995 initiative co-led by Wal-Mart's Vice
President of Supply Chain, Chief Information
Officer, Vice President of Application
Development, and the Cambridge, Massachusetts
software and strategy firm, Benchmarking
Partners
The aim of CPFR is to convert the supply chain from
a disjointed, ineffective and inefficient “push”
system to a coordinated “pull” system based
upon end customer demand.

8. CPFR Process Model
CPFR provides templates for supply chain partner collaboration.

9. • CPFR is not a technical standard but an
initiative that facilitates the reengineering of
the relationships between trading partners
and thus transactions.
• Initiative is based on an industry-recognized
set of standards which are not proprietary
• Companies start focusing on process
integration—managing the supply chain from
raw materials through delivery to the end user

10. Solution
• In early 1990s, P&G and Wal-Mart developed
a joint logistics process. The steps involved
were:
– Information sharing
– Joint demand forecasting
– Coordinated shipments.
Conscious attempt to better coordinate marketing, production, and
replenishment activities in a way that simultaneously increased value to the
consumer while improving supply chain performance for producers and retailers.

11. Walmart Test Case
The pilot focused on stock of Listerine
mouthwash kept in stores. The group actually
first tested the collaborative concept on paper,
and then demonstrated in a computer lab that
the Internet could be used for the information
exchange. Here’s what happened: Warner-
Lambert’s in-stock averages rose from 87% to
98%. Lead times dropped from 21 to 11 days.
And sales increased $8.5 million over the test
period

14. Assortment planning process for apparel and
footwear retailers and vendors is the activity of
determining product placement by location and
by delivery
Retailers and vendors work together to build and
modify assortment plans based upon financial
plans, historical sell-thru data, market trends, and
production schedules
The coordination and sharing of this information
both internally and among trading partners is
critical to delivering the right products to the
right place at the right time

15. Elements of CPFR
• Store Replenishment Collaboration
• Distribution Center Replenishment
Collaboration
• Retail Event Collaboration
• Standards & Schemas - On March 21, 2002 the
VICS CPFR® Business Message Standards and
CPFR® XML Schemas were approved by the EAN-
UCC Global Management Standards Process
(GSMP) and published by EAN-UCC as Global
Standards
• Scaling Collaboration

16. CPFR Activities
• Strategy & Planning Establish the ground rules for the collaborative
relationship.
• Determine product mix and placement, and develop event plans for
the period.
• Demand & Supply Management Project consumer (point-of-sale)
demand, as well as order and shipment requirements over the
planning horizon.
• Execution Place orders, prepare and deliver shipments, receive and
stock products on retail shelves, record sales transactions and make
payments.2
• 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
Distributors may also be participants in the process, in the buyer
role, the seller role, or both.

21. CPFR Benefits
• Retailer Benefits Typical Improvement
– Better Store Shelf Stock Rates 2% to 8%
– Lower Inventory Levels 10% to 40%
– Higher Sales 5% to 20%
– Lower Logistics Costs 3% to 4%
• Manufacturer Benefits Typical Improvement
– Lower Inventory Levels 10% to 40%
– Faster Replenishment Cycles 12% to 30%
– Higher Sales 2% to 10%
– Better Customer Service 5% to 10%

24. Risk Pooling

25. • A risk pool is one of the forms of risk
management mostly practiced
by insurance companies.
Insurance companies come together to form a
pool, which can provide protection to
insurance companies against catastrophic risks
such as floods, earthquakes etc.

26. • Risk pooling is an important concept in supply
chain management.
• Risk pooling suggests that demand variability is
reduced if one aggregates demand across
locations because as demand is aggregated
across different locations, it becomes more likely
that high demand from one customer will be
offset by low demand from another.
• This reduction in variability allows a decrease
in safety stock and therefore reduces
average inventory.

27. • The three critical points to risk pooling are:
– Centralized inventory saves safety stock and average inventory
in the system
– When demands from markets are negatively correlated, the
higher the coefficient of variation, the greater the benefit
obtained from centralized systems; that is, the greater the
benefit from risk pooling
– The benefits from risk pooling depend directly on the relative
market behavior. This is explained as follows: If we compare two
markets and when demand from both markets are more or less
than the average demand, we say that the demands from the
market are positively correlated. Thus the benefits derived from
risk pooling decreases as the correlation between demands
from the two markets becomes more positive

60. E-Business Models
• Content Provider: Reuters
• Direct to Customer: Dell
• Full-Service Provider: GE Supply Co.
• Intermediary: eBay
• Shared Infrastructure: SABRE
• Value Net Integrator: Seven-Eleven Japan
• Virtual Community: Monster.com
• Whole-of-Enterprise: Government

61. Service Package and E-Service
Selling
(providing)
information
Selling value-
added service
Selling
services with
goods
Selling goods
Used car
prices
Online travel
agent
Computer
support
Online retailer
Kelly Blue
Book
Biztravel.com Everdream Amazon.com
Information
dominates
service
package
Goods
dominates
service
package

63. E-Commerce Order Fulfilment Flow
Chart
Bank
Bank
Bank
Vendor
base
Logistics
partnerCustomer
Dot Com
company
Payment
instructions
Payment
instructions
Payment
remittance
Payment
remittance
Payment
clearance
Pick-up
instructions
Delivery
order
DeliveryOrder
placement
Payment by
credit card

64. Dot
Com
Compan
y
Vendor
base
Bank
Bank
Bank
Logistics
Partner
Payment
instructions
Payment
remittances
Order
placement
Payment by
credit card
Pick up
instructions
Payment
instructions
Payment
remittance
Delivery
order
Payment
clearance
Delivery
E-Commerce Logistics

65. Electronic Marketplaces / Portals /
Internet Hubs
Buying
companies
Customers
Selling
companies
Suppliers
Employees
Old
World
New
World
Partners

66.  On-line facility for organizing and tracking the
consignment
 On-line order status and documentation
 On-line dispatch documentation and invoice
 Auto reminder for payments
 Seamless interface with SCM and ERP systems
 On-line alert for critical information through
WAP/Mobile
 MIS reports on past data analysis and delivery
history
E-commerce Logistics
Solutions – Design
Considerations

67. Impact of Internet on Sourcing Strategy
• Advances in information technology in general, and the internet in
particular, costs related to computer-aided information search and
coordination have declined, averaging 25% per year.
• Initial reactions by practitioner/researcher community:
– Internet would fundamentally change sourcing practices.
• Optimal number of suppliers in the consideration set increases with lower search
and evaluation cost
• Suppliers in the consideration set would be globally distributed and not limited to the
geographical neighbourhood of firm.
• Internet fuelled a lot of electronic public-market exchanges and industry-sponsored
exchanges where information about suppliers can be obtained without much effort.
• Current understanding on the part of practitioner/researcher community:
• Basic logic underlying the sourcing strategy using the purchase portfolio matrix is
not going to change because of the internet.
• Internet is an enabler in implementing the sourcing strategy based on the purchase
portfolio matrix.

68. Reverse Auction
• What is Reverse Auction
Unlike a typical auction, the roles of the buyers and
sellers are reversed in reverse auction. Firms use this
approach to identify suppliers willing to supply specific
items like steel or service like freight at the lowest bid
price. Suppliers bid electronically for a contract over a
window of about 30-60 minutes.
At the bidding stage, all suppliers have access to
information about the lowest bid in real time, and since
the amount in an auction is usually large, the supplier is
under tremendous pressure to reduce his bid and
usually ends up bidding a lower amount than what he
would have bid during normal circumstances.

69. Reverse Auction
• Best Practices in Reverse Auction
 Use reverse auction for items under the low supply-risk market category
in the purchase portfolio matrix, as for these items usually there are a
large number of suppliers and there is surplus capacity in the market;
hence, there is enough incentive for suppliers to reduce their bids
during reverse auctions
 Specifications must be clearly stated in the RFQ (Request for Quotation)
document: RFQs must be detailed and take care of all the issues
including delivery lead times, treatment of urgent orders, warranty etc.
 Firms must have a robust supplier qualification process
 Firms must ensure that the purchase lots in a reverse auction are large
enough to motivate suppliers.

70. Economics of E-Business
• Sources of Revenue:
- Transaction fees
- Information and advice
- Fees for services and commissions
- Advertising and listing fees
• Ownership
- Customer relationship
- Customer data
- Customer transaction