CPFR Model – Modern Concept Of Business Efficiency
CPFR Model also known as Collaborative Planning, Forecasting and Replenishment was developed by VICS in 1998. Actually, it is a nine-step process that aims to enhance supply chain integration. In simple words, CPFR Model helps to share forecast and planning information among several business partners and serves as a cooperative inventory management.
CPFR Model Stages
- Business agreement
- Developing business plan
- Developing sales forecast
- Exceptions identifying for sales forecast
- Collaboration on exceptions
- Order forecast creation
- Exceptions identifying for order forecast
- Collaboration on order forecast exceptions
- Generating order.
One of the main CPFR features is joint visibility and product replenishment through the supply chain. The information is shared between partners – suppliers and retailers – in order to plan end-customer demands and therefore improve supply chain effectiveness. The result of this will be a joint, transparent and coordinated system based on customer needs. CPFR allows regularly updating inventory, expenditures decrease for merchandise, logistics, transportation etc. and these results are available for all partners taking part in CPFR.
Let’s have a look at the main processes in CPFR Model. The first one is Strategy and Planning – trading partners collaborate in arranging business goals, assigning roles, responsibilities, checkpoints and escalation procedures, events, promotions, policy changes, stores openings (or closings), product releases etc. The next one is Demand and Supply management: predicting customer demands and order planning, delivery requirements, inventory positions etc. Execution process covers order generation and fulfillment as well as producing, shipping, stocking and products release for purchase. The process of Analysis represents monitoring and out-of-bounds conditions operations, key metric calculation, evaluation of business goals achievements, developing alternative concepts and strategies.
And now let’s sum it up and mention the main advantages of CPFR business model:
- Effective business relationships
- Raising sales volumes
- Category management
- Efficient product ordering
- Improved forecasting accuracy
- Improving ROI (Return of Investments)
- Customer satisfaction.