Logistics

Collaborative Planning, Forecasting and Replenishment (CPFR) and the Network — Cracking the Bullwhip!

Prepared by James E. deMin BT Infonet

CPFR and The Network Volume 3 w w w. b t . i n f o n e t . co m

I ntr o d u c t i o n

This paper explores the network implications of an emerging business initiative in the consumer goods industry referred to as Collaborative Planning, Forecasting, and Replenishment (CPFR) where manufacturers, distributors, and retailers jointly work together to plan, forecast, and replenish products. While reliance upon some form of communications media is an obvious aspect of any CPFR initiative, all too often the network infrastructure is not adequately considered and the effectiveness of the CPFR initiative suffers. The ability to optimise the global wide area network communications infrastructure can greatly contribute to the end-to-end performance of collaborative planning between trading partners. This optimisation at the network-level can then generate orders-of-magnitude improvements in the business performance metrics of CPFR, which include; fill rates, supply chain cycle times, supply chain inventory levels, and shareholder value.

Figure #1 - Collaborative Planning, Forecasting and Replenishment (CPFR)

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CPFR and The Network

The genesis of CPFR can be traced to 1995/96 when Wal-Mart and Warner-Lambert (now part of Pfizer), together with SAP and Benchmarking Capital, initiated an experiment to jointly forecast and plan the replenishment of Listerine, a popular brand of mouthwash. The experiment was limited to one Warner-Lambert plant and three Wal-Mart distribution centres. As a result of CPFR, WarnerLambert’s service levels increased from 87% to 98%, while the lead times to deliver the product decreased from 21 to 11 days. The partnership also increased Listerine sales by $8.5 million over the test period. The success later prompted the Voluntary Inter-industry Commerce Standards (VICS) association, in...