CPFR is not a technical standard. It is actually an initiative that facilitates the reengineering of the relationships between trading partners and thus transactions. This initiative is based on an industry-recognized set of standards which are not proprietary. “True collaboration is something that completely reengineers the relationship or the transaction between trading partners,” notes Andrew White, vice president of product strategy for Logility, an Atlanta-based company that offers a CPFR-based supply chain management application. Although the Internet has enabled more self-service and faster service, as in the examples of Dell.com and Amazon.com, up to this point transaction methods have not really changed much. This kind of collaboration is all about doing things differently. CPFR provides templates for supply chain partner collaboration. The process model at below is segmented into three stages. The planning stage establishes and updates the relationship; the sales forecasting and order replenishment stages occur more frequently. CPFR Process Model
CPFR processes depend on the comparison of data: comparing one organization’s plans with another; comparing a new version of one organization’s plans with a previous plan; or comparing a plan to actual results. In other words, CPFR manages by exception—it addresses variances, whether plan-to-plan or plan-to-actual. An important premise of this model is that accuracies in the forecast can be improved by having the customer and supplier participate in the forecast. A retailer can compare its demand or sales forecast with the manufacturer’s order forecast. If a discrepancy occurs, the two trading partners can react—they can get together and decide on the replenishment quantity to recify any such discrepancies. Hence, a supplier can build inventory well in advance of receiving a promotional order, and carry less safety stock at other times. A customer can alter the product mix to reduce the impact of supply...
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