UNIT-2

SCM BY Jyotsana Kapoor

Axis Institute of Higher Education, Kanpur 1

CPRF MODEL
• CPFR is a business methodology which integrate multiple parties in the
planning and fulfilment of customer demand.
• The idea behind cpfr is that by coordinating activities throughout the
supply chain inventories can be moved more efficiently, in the correct
quantities , to the correct inventory locations to meet customer demand.
• CPFR is is a business practice that combines the intelligence and
capabilities of multiple trading partners in the planning and fulfilment of
customer demand . It is a process that helps companies work together
with their trading partners to improve forecasts, reduce inventory and
production costs, and increase sales and profit.

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CPRF MODEL
• Collaborative Planning, Forecasting and Replenishment (CPFR)
is an approach which aims to enhance supply chain integration by
supporting and assisting joint practices. CPFR seeks cooperative
management of inventory through joint visibility and replenishment
of products throughout the supply chain. Information shared
between suppliers and retailers aids in planning and satisfying
customer demands through a supportive system of shared
information. This allows for continuous updating of inventory and
upcoming requirements, making the end-to-end supply chain process
more efficient. Efficiency is created through the decrease
expenditures for merchandising, inventory, logistics, and
transportation across all trading partners.
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CPRF MODEL
• CPFR is being implemented at thousands of companies across the globe.
• A standard vision is needed to provide a common understanding of:
• Terminology and definitions
• The steps needed to implement CPFR
• Data and information system requirements
• Best practices

• The consumer is the ultimate focus of all efforts

• Buyers” (retailers) and “sellers” (manufacturers) collaborate at every level
• Joint forecasting and order planning reduces surprises in the supply chain
• The timing and quantity of physical flows is synchronized across all parties
• Promotions no longer serve as disturbances in the supply chain
• Exception management is systemized
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Features of CPRF
CPFR can be broken down into four key features:

1. Strategy and Planning

Strategy and planning require charting out or defining the collaborative working and communication
between all partners in the supply chain. This is also where procedures, responsibilities, and individual
roles are defined.
2. Demand and Supply Management
Demand and supply management lays out the goals for profit. This includes the company’s planning of
orders, forecasting orders, and the actual sales.
3. Execution
Execution takes on the physical work laid out by the previous processes. This piece involves all areas
responsible for producing, stocking, dispatching, and delivery of materials to retailers or customers.
4. Analysis
Analysis goes back and examines the effectiveness of the process. How did we do? The CPFR analysis
brings into account the management of exceptions in the fulfillment process and the assessment of
supply chain performance.

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What Is the CPFR Process?

1.Develop an agreement between supply chain partners. It’s very important to define

the conditions for CPFR cooperation in the beginning. Retailers, suppliers, and
manufacturers must be in agreement on how they will increase communication and
formalize any procedures and processes.
2.Create one business plan. The business plan has to be developed and agreed upon at
the beginning. This ensures every participant in the supply chain shares a common goal
for the success of the businesses. This is not a mission statement or vague “wish list” of
goals. The business plan has to spell out precise information on the organizational
management of the partners as well as order data.
3.Forecast the sales. Using the business plan created in Step 2, sales are now forecasted.
When forecasting sales, take into account production and inventory planning.
4.Identify exceptions/deviations in the sales forecast. This is the time to compare
various forecasts made at different stages in the supply chain. Look for significant
exceptions or deviations. This will help identify any fluctuations early in the process.

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5.Resolve exceptions/deviations in the sales forecast. Communicate all
exceptions and deviations immediately to the responsible and impacted
partners. Adjust the sales forecast after the exceptions and deviations have been
clarified.
6.Create the order forecast. Retailers and suppliers develop an order forecast
based on the sales data. This relies on the framework conditions of the business
plan.
7.Identify exceptions/deviations in the order forecast. This is similar to the
action taken in Step 4. Analysis is done on exceptions or deviations between
the various order forecasts of retailers and suppliers.
8.Resolve exceptions/deviations in the order forecast. This is similar to the
action taken in Step 5. Exceptions and deviations are communicated, updated,
and renewed in the order forecast.
9.Generate the orders. The actual ordering of the goods happens upon
receiving the final order forecast
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Demand Forecasting
• Demand forecasting is the process of using predictive analysis
of historical data to estimate and predict customers' future
demand for a product or service. Demand forecasting helps the
business make better-informed supply decisions that estimate
the total sales and revenue for a future period of time.
• For example, suppose we sold 200, 250, 300 units of product
X in the month of January, February, and March respectively.
Now we can say that there will be a demand for 250 units
approx. of product X in the month of April, if the market
condition remains the same.

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• There is a huge role of forecasting in functional areas of accounting. Good
forecast helps in appropriate production planning, process selection,
capacity planning, facility layout planning, and inventory management,
etc.
• According to Pynes , “ Demand Forecasting is the anticipation of the
leadership workforce that will be needed to accomplish future functional
requirements and carry out the mission of the origination.”
• According to Cundiff and Still, “Demand forecast is an estimate of sales
during a specified future period which is tied to a proposed marketing plan
and which assumes a particular set of uncontrollable and competitive
forces.”
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Significance of Demand Forecasting
The various points of significances of demand forecasting are:
1. Production Planning –
Demand forecasting is necessary for the production planning of
the business firm. If proper planning is not done than
overproduction will be done which will lead to loss in the
business.
2.Sales Forecasting-
The sales forecasting depends on the demand forecasting. Entire
planning of promotional activity if the firm is also based on the
sales forecasting.
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• 3. Control of Business-
• The business control can be established by the help of proper budgeting
of costs and profile which depends on the predication of annual demand,
sales and prices.
• 4. Inventory Control-
• The demand forecasting helps in proper controlling of the business
inventories , raw materials , intermediate goods, semi finished products,
finished product, spare parts, etc, by evaluating the future requirements
• 5. Economic Planning and Policy making-
• The demand forecasting is useful for the government in planning the
policies for the proper utilization of the available country’s resources.
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Techniques of Demand Forecasting
• I Quantitative forecasting methods
• 1. Straight-line Method
• The straight-line method is one of the simplest and easy-to-
follow forecasting methods. A financial analyst uses
historical figures and trends to predict future revenue
growth.
• 2. Moving Average
• Moving averages are a smoothing technique that looks at
the underlying pattern of a set of data to establish an
estimate of future values. The most common types are the
3-month and 5-month moving averages.
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• 3. Simple Linear Regression
• Regression analysis is a widely used tool for analyzing the
relationship between variables for prediction purposes. In this
example, we will look at the relationship between radio ads and
revenue by running a regression analysis on the two variables.
• 4. Multiple Linear Regression
• A company uses multiple linear regression to forecast revenues
when two or more independent variables are required for a
projection. In the example below, we run a regression on
promotion cost, advertising cost, and revenue to identify the
relationships between these variables.

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II. Qualitative forecasting methods
• This method is characterised by the opinion of different forces
that drives the demand i.e., buyers, experts, retailers, etc. The
information provided by them serves the base for the demand
forecasting.
• 1.Consumer Survey Methods
• Survey method is the most commonly used direct method in
short run for the projection of the demand i.e., buyers, experts,
retailers, etc. Under this different surveys are organised in
routine to gather the information about the likes and dislikes of
the buyers and probable future surveys.

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I. Complete Enumeration Survey
The survey is done by visiting all houses during the forecast and all the household
opinions are taken into consideration.
Advantages-
• Quite accurate as it surveys all the consumers of a product.
• It is simple to use.
• It is not affected by personal bises.
• It is based on collected data.
Disadvantages-
• It is costly.
• It is time consuming
• It is difficult and practically impossible to survey all the consumer
• There is a possibility of faulty recording and wrong interpretation.
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2.Sample Surveys and Test Marketing
In this method, some households are selected randomly and their
responses are sought . One underlying assumption is considered
that the sample is the true indicator of the population .As an
outcome of their response, the future demand is projected.
Advantage-
• An important tool especially for short term projections
• It is simple and does not cost much.
• Takes less time to conduct.
Disadvantage-
• The sample may not be a true representation of the entire
population.
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• End –Use Method:
• Demand survey is conducted for the industries that are actively using the product as
an intermediate.
• The consumption of the intermediate product is considered as the base for the future
projections of the final product.
Advantage-
• The method yields accurate predictions.
• It provides sector wise demand forecast for different industries.
Disadvantage-
• It requires complex & diverse calculations.
• It is costlier as compared to the other survey methods and is more time consuming
too.

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II. Sales Force opinion method
• It is also termed as Collective opinion method . Under this ,
rather than approaching the consumers for the opinions, the
verdict of those affecting the sales are given priority, i.e., the
shop keepers and the salesmen.
• The individual forecasts are put forth for further study and find
data for the organisation as a whole is prepared.

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Order fulfilment and order management
• The supply chain receives a more precise demand signal as a
result of collaborative planning and execution activities, which
reduce waste and increase responsiveness.
• The main tasks are coordinated order fulfilment, cooperative
capacity planning, and collaborative demand planning.
• 1. Collaborative demand planning
• To provide a more accurate demand signal for all supply chain
participants is the main aim of collaborative demand planning.
All partners share consumer and operational data to do this and
it may also involve working together to estimate demand.
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• 2. Synchronised Order Fulfilment
• Synchronised order fulfilment is characterised by negotiated or
shared decisions on order size and frequency as well as the
transfer of inventory management and ownership from the
supplier’s client.
• 3.Joint Capacity Planning
• Supply chain companies lack sufficient coordination when it
comes to collaborating on medium to long term capacity and
material planning.

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