Wisdom Without Waiting: CPFR - A Promising New Partnership Tool
© John L. Mariotti 2001
One of the hottest new partnership tools is an approach called Collaborative Planning Forecasting ands Replenishment, or CPFR for short. What is it? CPFR is a cross industry initiative designed to improve supplier-customer relationships through co-managing the planning and sharing of responsibility for the forecasting and replenishment of goods-primarily for retailers.
This process, developed by a group called the Voluntary Inter-industry Commerce Standards (VICS) Association, defines the best practices and protocols to make CPFR work for the partners who use it. This initiative began a few years ago with consultancy Benchmark Partners (now named Surgency) large suppliers like Warner-Lambert and large customers like Wal*Mart seeking a better ways to stay in stock, reduce inventory, and improve communications. Supply chain software companies like Manugistics and ERP software firms SAP were also involved early in the CPFR process.
A pilot project involved Warner-Lambert's Listerine® mouthwash sold via Wal*Mart stores. The process was first used in a paper-based form and then demonstrated on a computer. In-stock positions for Listerine=AE rose from 87% to 98%, lead times dropped from 21 to 11 days, and sales increased $8.5 million over the test period even though the test was limited to one Warner-Lambert plant and only three Wal*Mart distribution centers. This was clearly a powerful partnership tool.
The purpose of CPFR is to reduce or eliminate uncertainly through improved communications between supply chain trading partners. The key word in the name is "collaborative". Collaborate is defined by Merriam Webster's Collegiate Dictionary as: 1. To work together, especially in a joint effort, and 2. To cooperate treasonably as with an enemy occupation force in one's country. What a strange way to describe collaboration-"to cooperate treasonably". This is not as surprising as it might seem, because true collaboration (as in the first definition) is rare enough within companies, and rarer still between companies!
The keys to making CPFR work require changes in behavior of the people at the partners-a real challenge. The difficulty is getting all of those using the process to consistently act in the spirit of the collaborative process. Trust is the issue in most collaborative partnerships and this one is no exception. If both partners in the CPFR process realize that the end consumer is their customer, and behave accordingly, the process can work wonders. When they don't, it makes only minor improvements.
Although they don't overtly call it CPFR, the Manco-Wal*Mart relationship is one of the more productive ones using this methodology. Why? Because the people act, feel and work like partners. That is the only way any of these new initiatives will realize the greatest benefits for the partners involved. Wal*Mart's RetailLink system allows its suppliers to have unparalleled visibility of the performance and status of the goods in Wal*Mart's stores and distribution system. This kind of open information sharing is a hallmark of partnership.
