Distinguishing supply chain efficiency is through longer lead times with high set up costs, and large lot sizes that allow firm to produce or buy low unit cost at the expense of market receptiveness. Where a responsive supply chain, allow short lead-times with low set-up costs and small lot sizes to adapt quickly to changing market demands but frequently at a higher unit cost. Some firms organize collaboration with their contractors and suppliers to improve their supply chain structure to gain competitive advantage in their industry by increasing profits, and balance their supply and demand.
Forecasting with Suppliers:
Lawrence et al. (2009: p. 98 - 99) stated that ...view middle of the document...
6. Creating Order Forecast.
7. Identifying Exceptions for Order Forecast.
8. Resolving/Collaborating on Exception Items.
9. Order Generation.
Fernie & Sparks (2004) said that the model remains erratic because of ‘quick wins’ in ECR initiatives (Efficient Consumer Responses). The authors added that implementation of CPFR requires a close working relationship between trading partners in order to invest the necessary human resources to cultivate joint plans to generate real-time forecasts. In mid 90’s, we saw the successful collaboration of Wal-Mart and Warner-Lambert to jointly forecast and plan the replenishment of Listerine product, resulting to increase in service levels, reduced lead-times, and increase in sales over the test period (deMin, BT Infonet, 2005). Thus, VICS association was established and CPFR guidelines were created, to streamline business processes and standardization of technologies to share and synchronize information safely, simultaneously, globally and real-time. With technical platforms and ‘cultures’ of collaboration, like Wal-Mart, Tesco, and Sainbury having their own intranet exchnges could actually delay more universal adoption of common standards (Fernie & Sparks, 2004: p. 40).
Chopra & Meindl (2010, p. 484) defined CPFR in supply chain activities involved strategy and planning, demand and supply management, execution, and analysis as fundamental aspect of a successful collaboration. The authors added the effective forecasting should have collaborative forecast, sharing only true value data, and distinguishing sure demand and sales. In the latest VICS model, four CPFR scenarios were described such as; retail event collaboration, distribution center replenishment collaboration, store replenishment collaboration, and collaborative assortment planning (VICS, 2004: p. 13).
Implications of CPFR:
The risks of misuse in large-scale information sharing, technology, and culture are the impediments of CPFR, forcing firms to change or adjust organizational structure, technology resources, and close interaction in collaborative relationship (Chopra & Meidl, 2010: p. 488- 489). According to Andrews (2008) aligning business goals can be a challenge in the CPFR process, where firms tend to discontinue or modify business practices if it’s not equally rewarding to a potential collaborative partner. For example, large multi-national companies are requiring trading partners to apply disciplinary financial measures if the supplier did not meet upon or failed the requirements, and metrics needed by giving disincentives in the agreement.
Role of Information Technology:
Jacobs (2007, p. 194) supported the view of VICS (2004, p. 20) that CPFR process does not fundamentally depend upon technology and does not require advance or sophisticated information communication technology. CPFR software packages are more cost effective in automating and collaborating activities, making the...