Vendor Managed Inventory. Electronic Data Interchange. Online Inventory Management.
These supply chain management initiatives aim to reduce lead time, reduce inventory levels, increase efficiency and reduce costs within an ever-competitive environment. However, what these initiatives do not link all parties transparently from the beginning of the chain till the end, at a level where each partner’s information is visible to everyone. The initiative with customer satisfaction as its ultimate purpose is known as Collaborative Planning, Forecasting and Replenishment (CPFR).
CPFR is meant to allow complete collaboration amongst trading partners. Here, in addition to data sharing on inventory levels, information on marketing promotion planning, merchandising and categorizing are also shared. Moreover, all information is current and is also updated by the hour. What this also means is that, partners at all stages are collaborating more closely than ever before.
One of the major purposes of CPFR is to facilitate increased accuracy in inventory and production forecasting and management, as well as highly efficient distribution and replenishment. This has only been made possible through recent information technology advancements.
In order to ensure that there is mutual agreement between trading partners, processes on information updates, the development of business objectives and the updating of replenishment plans are agreed upon by partners in every level. In fact, these processes are developed based on a set of guidelines of the Voluntary Inter-industry Commerce Standards Association.
ally, it has also been realized that with the availability of web-enabled technology, which allows CPFR to be implemented on top of existing IT infrastructure, CPFR does not require high capital investments for new equipment. With this, the high ROI and the improvements in business processes have justified the usage of CPFR for supply chain management.
Finally, although these positive findings have spurred others to adopt CPFR, it also has been noted that changes in corporate culture and investments in the education of human resources should be conducted at the same time. This is to ensure that everyone understands their individual role and plays them well. Only then will the full potential of CPFR be realized.
Ken Town is VP Research and Technology at Invendia, a leading provider of Vendor Managed Inventory (VMI) and Web-based Inventory solutions.
