CPFR: Considering the Options, Advantages and Pitfalls

A Collaborative Planning, Forecasting and Replenishment primer


On the other hand, products with inherently short lead times, that are not highly promoted, or those with future demand patterns that can be easily extrapolated from past demand provide less of a financial payback using CPFR.

Technology

In real-world applications, supply chain managers use a variety of technologies to support their CPFR operations. These tools generally fall into one of two camps: shared applications that are hosted either by a third party or one of the trading partners, or peer-to-peer communications processes in which each partner operates its own system.

In the latter example, both parties typically agree to use a common data-transfer protocol like electronic data interchange (EDI) or file transfer protocol (FTP) to exchange data. The key to making technology decisions regarding CPFR is agreement on the use of acceptable data standards and protocols, particularly when there are multiple trading partners in your CPFR marketplace.

Be advised that integrating partner data into your own planning systems and databases carries a significant change management risk that, if underestimated, can result in mistakes that may trigger delays in system design, development and deployment, as well as significant, unexpected expenses.

Exception Management

The sheer volume of data required to evaluate and execute supply chain decisions makes exception management an essential part of any CPFR solution. But many organizations don't have effective tools, processes or procedures in place within their internal supply chains to support exception management.

Since CPFR collaboration efforts typically occur on a weekly or monthly basis and not in real time, quick follow-up is necessary to prevent exception-management processes from going off track. In situations where trading partner agreements include financial penalties, exception management is especially vital to controlling costs.

Organizational Change Management and Education

One of the most difficult things to manage when engaging in CPFR is the organizational change necessary to support and enable the process. Even in organizations with well-developed supply chain processes and technologies, existing roles and responsibilities will need to be realigned to effectively support CPFR.

On the supplier side, supply chain, sales and customer service roles will need to be reorganized into virtual CPFR teams. On the customer side (i.e., the distributor or retailer), buying, marketing and merchandising functions will need to be organized and managed as a CPFR unit. For example, within a supplying partner's organization, personnel in the traditional roles of sales or account management will need to take a step back and cede control of traditional sales responsibilities to members of their CPFR team to handle issues such as specifying order size, timing and promotions planning. Within the customer partner's organization, some of the tasks traditionally associated with the role of product buyers will also shift to members of their own CPFR team.

This necessary realignment of traditional organizational roles can be quite disruptive, with strategic, tactical and "political" implications that extend far beyond the realm of supply chain operations. Self-interest is deeply ingrained in human nature, and as with any change-management initiative, very few companies will find it easy to overcome resistance to the change that is necessary to accommodate an effective CPFR business process. One of the challenges of transforming from an early-stage supply chain operation to a more mature model is breaking down the functional silos that exist internally within organizations to enable cross-functional collaboration. Bear this in mind as a point of reference as you consider the implications of collaborating with external partners.

CPFR initiatives require buy-in at every level of an organization. Existing S&OP processes will likely need to change when CPFR initiatives are launched; and in best-case scenarios, top management will drive change-management messaging and practices.

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