Through a special arrangement, what follows is an excerpt of a current article from Supply Chain Digest, presented here for discussion.
It's hard to think of any area of supply chain management that causes more debate than Collaborative Planning, Forecasting, and Replenishment (CPFR). Following a highly successful 1996 pilot aimed at keeping Listerine stocks on the shelves of Wal-Mart, the VICS committee of the Uniform Code Council (now called GS1) in the late nineties developed the famous "nine-step" model that was released with much fanfare, and strong early support from retailers, manufacturers, and supply chain software vendors.
What's happened from there is a matter of some debate.
In the inaugural issue of CSCMP's Supply Chain Quarterly magazine in mid-2007, consultant Rich Sherman wrote an article titled Why has CPFR Failed to Scale? In Mr. Sherman's view, the basic problem is a disconnect between the objectives of retailers and manufacturers.
"What's lacking is a reasonably straightforward capability to systematize the process of balancing and synchronizing retail replenishment requirements with manufacturers' shipping and production requirements," Mr. Sherman wrote. "As a result, CPFR implementations have been relegated to the strategic few -- that is, the largest customer/supplier relationships -- rather than scaling to encompass the entire market."
In response, Joe Andraski, president and CEO of VICS, rebutted Mr. Sherman's entire premise, "To the best of my knowledge, there has never been a negative CPFR article written by a member of VICS or anyone who has had direct experience with implementing CPFR."
However, Jeff Harrop of Demand Clarity, said, "The scalability of the current CPFR business process has been 'the elephant in the room' for quite a few years now. The simple fact is that the highest levels of both out-of-stocks and finished-goods inventory in the CPG (consumer packaged goods) supply chain are at the retail store. In and of themselves, higher-level management processes like CPFR were not designed to deal with what goes on day by day, item by item, and store by store."
Ed Nieuwenhuis, a former supply chain manager at retailer Meijer stores, also agreed with Sherman, but still sees great potential for CPRF.
"Our suppliers would refer to 'forward buys' and 'diversion'; we would look at making 'investment buys' and collaborating with each other to get the biggest economic punch from the pricing programs offered by our suppliers," Mr. Nieuwenhuis responded. "Only when the focus is on reducing total logistics cost can collaboration succeed."
Robert Nardone, former senior supply chain executive at Unilever North America, told SCDigest that for consumer goods manufacturers with advanced Sales and Operations Planning (S&0P) processes, collaborative forecasting data from retailers or other customers is key to the planning and decision-making process.
"It's essential to get good forecast information from retail customers to develop demand and supply plans," he added. "That is happening with leading manufacturers, whether you call it CPFR or not."
Discussion Questions: Is there a fundamental problem with the collaborative planning, forecasting, and replenishment (CPFR) model? Has it come close to meeting its potential? What are the real barriers to CPFR success?