Business Intelligence in Collaborative Planning, Forecasting and Replenishment
Collaborative Planning, Forecasting and Replenishment (CPFR) is a business process or practice that combines the intelligence of multiple businesses or trading partners in the planning and fulfillment of consumer demand. CPFR can be applied to any industry that has a supply chain and brings about significant benefits like reducing inventory, transportation and logistics costs. While CPFR provides an innovative way for companies to manage demand and inventory optimally there is significant amount of intelligence about Supply Chain, Category Management that can be derived by using Business Intelligence in CPFR processes. This article gives an introduction to CPFR model and then dives into the sub processes where Business Intelligence can provide significant benefits to organizations and their trading partners. It also provides on overview of BI collaboration architecture that can be utilized by trading partners for information dissemination.
CPFR – Background
A common business requirement across industries like Retail, Hard Goods, Consumer Packaged goods (CPG) is to optimally manage the supply chain as well as meet the consumer demand. Collaborative Planning, Forecasting and Replenishment (CPFR) emerged as a standard based on the guidelines defined by the Voluntary Interindustry Commerce Standards (VICS). Some key facts about CPFR -
- Over 300 companies have implemented the CPFR process since 1998.
- There have been numerous case studies about CPFR implementation where in stock percentage improvements for products in stores as well as inventory reductions across the supply chain.
- The success of CPFR has led to new standards in other industries like chemicals (Chemical Industry Data Exchange).
The CPFR reference model provides a framework for planning, forecasting and replenishment process. Figure below represents the framework components. A buyer and a seller work as Collaboration Partners and work together to satisfy the customer demand which at the centre of the model.
Figure 1 – VICS CPFR Model (Source VICS)
- From a retail perspective the retailer plays the buyer role and manufacturer plays the seller role.
- The key CPFR activities to enhance performance of Collaboration partners are –
1. Strategy & Planning – Establish the rules for collaborative relationship. Determine the product mix and develop event plans for the period.
2. Demand and Supply Management – Project consumer (POS) demand, as well as order and shipment requirements over the planning period.
3. Execution – Place orders, prepare and deliver shipments, receive and stock products in retail stores, record sales transactions and make payments.
4. Analysis – Monitor planning and execution activities for exception conditions. Aggregate results and calculate KPI’s. Share insights and adjust plans for better performance.
5. The CPFR model can be extended to include supplier as well. The Suppliers would be represented in the outer periphery implying that they supply to manufacturers.
CPFR Tasks in Detail
To understand in greater detail what businesses and their trading partners need to plan as part of their collaboration activities we need to analyze the tasks under each of the four identified Collaboration Activities. The collaborations tasks and their mapping to collaboration activities is given in the table below –
Table A – CPFR Activity Task Mapping
|Strategy & Planning||Collaboration Arrangement Joint Business Plan||Manufacturer, Retailer|
|Demand & Supply Management||Sales Forecasting
Figure 2 – CPFR Model – Collaboration Tasks (Source VICS)
Each of the collaboration tasks are identified in more detail –
Collaboration Arrangement – is the process of defining business objectives & goals for the trading partners, defining the scope of collaboration with roles and responsibilities.
Joint Business Plan – identifies significant events that can impact supply and demand during the planning period. Examples of such events are introduction of new products, promotions, inventory policy changes and store openings/closing.
Sales Forecasting – Sales Forecasting deals with forecasting consumer demand at the Point of Sale.
Order Planning/Forecasting – forecasts future products orders and delivery requirements based on the Sales Forecast, inventory position, transit lead times, safety stock levels etc.
Order Generation – this transitions forecasts to actual demand.
Order Fulfillment – deals with the process of producing, shipping, delivering and stocking products for consumer purchases.
Exception Management – deals with monitoring of planning and operations for exception conditions or out of bound conditions.
Performance Assessment – deals with calculation of KPIs that evaluate performance with respect to business goals, gather insights about performance trends and develop alternate plans to counter situations.
The collaborations tasks can be further divided into Manufacturer and Retailer tasks.
Figure 3 – Manufacturer and Retailer Tasks in CPFR Model (Source VICS)
Strategy & Planning
|Vendor Management||Collaboration Arrangement||Account Planning|
|Category Management||Joint Business Plan||Market Planning|
Demand & Supply Management
|POS Forecasting||Sales Forecasting||Market Data Analysis|
|Replenishment Planning||Order Planning/Forecasting||Demand Planning|
|Buying/Re-buying||Order Generation||Production & Supply Planning|
|Store Execution||Exception Management||Execution Monitoring|
|Supplier Scorecard||Performance Assessment||Customer Scorecard|
Table B – Manufacturer and Retailer Tasks
The retailer’s aspects of the CPFR process are covered by Retailer Tasks and similarly the manufacturing aspects of the CPFR process are covered by Manufacturer tasks.