EHS402: OPERATIONS AND SUPPLY CHAIN
MANAGEMENT (Elective)
VIII Semester [Link] CSE B5
Lecture Notes
in
O&SCM
****
Prepared and Compiled
by
Dr. Smt. Padmini.R
Assistant Professor
Department of Industrial Engineering
GITAM Institute of Technology
GITAM (Deemed to be University)
Visakhapatnam-530045
(with Sincere acknowledgements to authors of the prescribed textbooks as per syllabus
and online content)
OSCM Module IV
Topic I
1.1 Collaborative Planning, Forecasting and Replenishment (CPFR):
Collaborative Planning, Forecasting and Replenishment (CPFR) is a business
practice that combines the intelligence of multiple trading partners in the
planning and fulfillment of customer demand (figure 1).
➢ Links sales and marketing best practices to supply chain planning
and execution processes
➢ Objective is to increase availability to the customer while reducing
inventory, transportation and logistics costs
1.2 CPFR is one of a series of supply chain initiatives:
➢ JIT (Just-In-Time),
➢ ECR (Efficient Customer Response)
➢ VMI (Vendor Managed Inventory)
1.3 CPFR Makes Organizations:
➢ more responsive
➢ reduce the impact of Bullwhip effect”
➢ reduced inventory levels
➢ achieve fine tuning between supply chain drivers and end customers
needs
➢ visualize the bigger picture in terms of the entire supply chain rather
than their enterprise alone
➢ develop trust between trading partners
Figure1. Representation of CPFR model
1.4 Origins of ECR
➢ CPFR has its origins in Efficient Consumer Response (ECR).
➢ ECR was a conscious attempt to better coordinate marketing,
production, and replenishment activities in a way that simultaneously
increased value to the consumer while improving supply chain
performance for producers and retailers.
➢ Typical manufacturer-retailer relationship prior to ECR
➢ Situation
➢ Arms-lengths relationships; little or no joint planning
➢ Relationships were often adversarial.
➢ The lack of information sharing made these relationships more costly
than they needed to be (“unpredictable” ordering patterns, excessive
inventories, service failures etc.,)
1.5 Example of implementation of CPFR :
P & G and Wal-Mart’s Strategy in 1990
The steps involved were:
➢ Information sharing
➢ Joint demand forecasting
➢ Coordinated shipments
This resulted in ECR
1.6 Core elements of ECR
Efficient assortment – Product offerings should be rationalized to better meet
customer needs and improve supply chain performance (ex. – Why 100
different SKUs that confuse consumers when 30 SKUs would meet their
needs?)
Efficient product introductions – New products should be introduced in
response to real customer needs, and only after the impact on supply chain
performance has been considered.
Efficient promotions – Prices should be kept as stable as possible. The supply
chain impact of promotions and market specials should be carefully
considered.
*Efficient replenishment *– All physical and information flows that link
producers to the consumer should be streamlined to cut costs and increase
value.
1.7 Differences between ECR and CPFR
ECR’s core elements still apply under CPFR
CPFR extends the business processes to include: Information systems for
capturing and transferring POS, inventory, and other demand & supply
information between trading partners
➢ Formalized sales forecasting and order forecasting processes
➢ Formalized exception handling processes
➢ Feedback systems to monitor and improve supply chain performance
1.8 ECR and CPFR at a glance
