Full form is collaborative planning , forecasting and replenishment ( CPFR)CPFR is a business practice that combines the intelligence of multiple trading partners in the planning and fulfillment of customer demand.

It 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.

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.

Earlier to cpfr Relationships between retailer and manufacturer were without any planning .The lack of information sharing made these relationships more costly than they needed to be ( unpredictable ordering patterns , excessive inventories , service failures..)

Origin :it began as a initaitive in 1995 co – led by Wal – mart and P & G

Core elements : Efficient assortment : product offering should be

rationalised to better meet customer needs and improve supply chain performance ( ex- why 100 different SKU’s that confuse consumers when 30 SKU’s would meet their needs)

Efficient production 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 replenishment – all physical and information flows that link producers to the consumers should be streamlined to cut costs and increase value.

CPFR extends the business processes to include : Information systems for capturing and

transferring POS , inventory, and other demand & supply information between trading partners.

Feedback systems to monitor and improve supply chain performance.

CPFR PUT PROCESSES IN PLACE TO HANDLE THE ADDED COMPLEXITY.

FEATURES: It is a collaborative inventory management system in

which a retailer shares information with vendors. CPFR generates exception reports that spit out

unusual sales patterns.Then when authorised by both the retailer and vendor, the computer makes automatic changes in the amount of merchandise going to the stores or distribution centre based on the changes in the forecasting plan.

The data in the CPFR system can be concentrated into a common pool that can be accessed by multiple vendors, as well as by multiple users within the retail chain, including the retailers transportation specialists, buyers , merchandisers , logistics and store operations people.

BENEFITS: It benefits both retailers and their vendors. Because parties are working together with

sophisticated forecasting and inventory management software,sales and gross margin increase and in- store inventory levels is maintained at optimum level, resulting in a higher GMROI.

As the forecast is accurate so fill rate ( the % of an order that is shipped by the vendor) increases.

High Fill rate means that in store merchandise availability increases. so lesser stock –out situation.

TO INCREASE ON SHELF AVAILABILITY WHILE LOWERING INVENTORY THROUGHOUT THE SUPPLY CHAIN

Methodology was developed by voluntry interindustry commerce standards or VICS ( www.vics.org) a U.S. organisation, and adopted by ECR Europe(www.ecrnet.org). This methodology comprises a nine – step process designed for planning , forecasting and replenishment of retail inventory by enhancing coordination of all trading parties in a supply chain.

It centers on the sharing of the following data: business plans, promotion plans, new- product plans, inventory data, POS data, production and capacity plans and lead- time information.

It has been recently adopted and stores ( like procter & gamble, wal – mart , pillow tex ,kmart ) have reported benefits such as reduced out – of – stocks , higher order – fill , improved forecast accuracy , higher inventory turn – overs..

Category management is a process of managing categories as strategic business units, producing enhanced business results by focusing on delivering value to the customer.

How this to be achieved ??? This can be achieved by optimizing new product introductions, enhancing repeat purchases , and increasing the turn around of the merchandise.

The category management process involves certain strategic and operational decisions.

Main components are discussed in next slide::;

Strategic decision

Operational decision

Category defination

Category roles

Category strategies

Category tactics

Managing category mix

Assessment and feedback

Category definition is the first step in the category management process.

Category is defined and the product assortment is determined from the consumer perspective.

The category definition leads to the formation of departments and sections in the store.

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hair lotion

Hair soap

Hair shamp

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hHair gel

Hair cream

eHair dye

Herbal medicinal

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Without conditioner

It illustrates how retailers can use their understanding of the consumer’s definition of the category and its structure to build a product assortment.

For this retailers need to understand the way consumers organise product forms,price options ,sizes and brands when they buy and use the category.

This yields a specific name for the category in light of the benefit or solution sought by consumers.

It provides clustering of the product and their SKU’s that belong to the category.

Retailers can draw the decision tree of the consumers based on their choice patterns.

THE LEVEL TO WHICH THE RETAILER NEEDS TO DEFINE ITS CATEGORIES DEPENDS ON THE EXTENT OF CONTROL IT WISHES TO EXERCISE AND THE LEVEL AFTER WHICH THE DIFFERENCES IN BEHAVIOUR OF CUSTOMERS BECOME INSIGNIFICANT.

THE RETAILER CAN COLLECT INFORMATION ON EACH SKU.

A RETAILER WOULD STOP AT A LEVEL BEYOND WHICH THE DEFINATION BECOMES MEANINGLESS IN TAKING MERCHANDISE DECISIONS

Assigning roles to categories : Each category , as defined in the first step, needs to

be assigned specific and strategic roles. The roles are derived after comparing the categories

in the light of customers , competition and retailer’s objectives .

By focusing on the roles, retailers develop strategies that would utilize resources efficiently. Category roles are developed with the consumer in mind and reflect typical consumer shopping behavior.

It enables retailers to understand why competitors are doing better or worse

This enables retailers to reallocate its resources across categories to improve its overall market position.

Categories are assigned roles based on the purchase behavior of the consumers. Two variables that may be taken into

consideration for assigning roles are 1) the penetration of the category in the market 2)the frequency of purchase

This yields a classification that can be used for developing strategies.

As seen in the figure this methods can be usedTo classify product roles as staples , niches,

variety enhancers and fill – ins and adequate strategies cab be developed accordingly .staples

Fill- ins

niches

Variety enhancers

High penetration

Low penetration

High frequency of purchase

Low frequency of purchase