Online Brief 10.2
CPFR Implementation Issues
When implementing a CPFR process, the collaborators agree on a standard process, shown in Figure 10.2.1. The process ends with an order forecast. CPFR provides a standard framework for collaborative planning. Retailers and vendors determine the “rules of engagement,” such as how often and at what level information will be provided. Typically, they share greater amounts of more detailed information, such as promotion schedules and item point-of-sale history, and use store-level expectations as the basis for all forecasts. The idea is to improve demand forecasting for all of the partners in the supply chain and then communicate forecasts using information-sharing applications (already developed by technology companies such as Oracle and i2). For the retailer, collaborative forecasting means fewer out-of-stocks and resultant lost sales and less stored inventory. For the manufacturer, collaborative forecasting means fewer expedited shipments, optimal inventory level, and optimally sized production runs. Besides working together to develop production plans and forecasts for stock replenishment, suppliers and retailers also coordinate the related logistics activities (such as shipment or warehousing) using a common language standard and new information methodologies. A 2002 survey found that 67 percent of 43 large food, beverage, and consumer products companies were researching, piloting, or implementing CPFR. About half of the respondents who were looking at CPFR said they planned to go ahead with their initiatives. However, CPFR is not the answer for all trading partners or all types of stock-keeping units (SKUs). According to Tim Paydos, a vice president of marketing at Syncra Systems, CPFR has generated the highest payback with either highly promoted or seasonal goods, whose inventories historically have often been misaligned with demand. “If I’m going to make the investment in CPFR,” notes Paydos, “I want to do it with the products with the greatest return” (Bradley, 2002). The CPFR strategy has been driven by Wal-Mart and various benchmarking partners. After a successful pilot between Wal-Mart and Warner-Lambert involving Listerine products, a VICS (Voluntary Interindustry Commerce Standards) subcommittee was established to develop the proposed CPFR standard for the participating retailing industries (Wal-Mart’s suppliers). An interesting application of CPFR is that of West Marine, presented in Online Minicase 10.1. CPFR can be used with a company-centric B2B and with sell-side or buy-side marketplaces. For more on the beneﬁts of CPFR, see cpfr.org/cpfr_pdf/index.html. Also, for comprehensive coverage, see en.wikipedia.org/wiki/CPFR.
Bradley, P., “CPFR Gaining Converts,” Logistics, April 2002.
Company decides on participating suppliers
Agreement on scope of collaboration
Selection of supporting software (e.g., from JDA Software)
Develop jointly the forecasts, resolve forecasts’ exceptions
Determine specific project (e.g., demand forecast, logistics forecast)
Examine the value chain
Use result to make inventory and scheduling decision Figure 10.2.1 The CPFR process. W-90
Online Brief 10.3
ERP Implementation Issues
ERP System Selection
The Problem. ERP is such a complex, fully reaching technology that it is daunting to executives. How can they assess the needs of numerous people and processes within their organization? These technologies that link together various processes in the organization are also very expensive. How does an executive understand the differences between ERP vendors? The Solution. It is important to understand how much of the ERP solution is required in the time frame for rolling out the new technology. What is the speciﬁc business value for each module in the ERP system? Determine business...