Study on Effective Supply Chain Management by Using CPFR
-The Example of Action Group in China
Graduate School of Management Sciences, Aletheia University,
70-11 Pei-Shi-Liao, Tainan 721, Taiwan ROC
Nan Jeon Institute of Technology
No. 178, Chau-Chin Road, Yen-Shui, Tainan hsien, Taiwan 737
Department of Information Commercet, Aletheia University,
Department of International Businessr Chang Jung Christian University
G396 Chang Jung Road.,Sec.1,Kway Jen, Tainan, Taiwan, R.O.C.
Graduate School of Management Sciences, Aletheia University,
70-11 Pei-Shi-Liao, Tainan 721, Taiwan ROC
In recent years, Enterprise conducts the supply chain management and it tends the
maturity, In spite of is the ERP or MRP which had many successful cases, so the
enterprise combines the CPFR and the supply chain management, becoming a set of
all-new management system.
This study used the case study and the way of interview, for the Action Group
conducting the CPFR and succeed of make the order estimate responded quickly, even
stabilized the follow-up to produce the programming, logistics to go together with to
give to repair the goods homework, and raise the competitive advantage of the whole
supply chain management.
This study also provides suggestions that Industry prepares for future
carrying out the CPFR and it also implement the supply chain management.
Organize explicit target a. inside the system. With the integration degree 、b. Of
the whole business strategy, management and homework observe and cautious
valuation、c. Duct into the industry the demonstration the result.
Keyword: CPFR、ERP、MRP、Supply Chain Management
Due to the development of information technology and Internet has reach
maturity and widely accepted. The competition of the enterprises has implemented the
supply chain system and the relationship of the organizations also changed
competition into collaborative one. And the supply chain system crosses the supplier,
manufactory and goes together with to sell the different enterprise individuals, such as
business and customer...etc., wanting the perpendicular integration system a member
or level to integrate the competitor, then obtaining the competitive advantage,
therefore, how to make collaborative management efficiently and it become the most
The VICS(the Voluntary Interindustry Commerce Standards) puts forward the
CPFR(the collaborative planning, the forecasting and replenishment) in 1998 then for
newly arisen in recent years of a set of be in conjunction with the mode of
As the result, the study mainly discuss under the environment that competition
tends more and more vehemence, how enterprise apply the CPFR (the Collaborative
Planning, Forecasting, the and Replenishment) to reach the supply chain the
integration of, and through instant information sharing, reduce estimate error, to the
exception condition immediately respond with processing, further reduce the stock
cost, make the whole cost descended.
2. Literature Review
2.1 SUPPLY CHAIN MANAGEMENT
2.1.1 Definition of Supply Chain
Chopra and Meindl (2001) describe that supply chain is dynamic and involves
the constant flow of information, product, and funds between different stages; and
Christopher (1998) regards supply chain as a network connects various organizations
and their customers and suppliers. These organizations participate various processed
and activities in order to produce value from the type of product and service.
Beamon (1998) defines Supply Chain as a integrated manufacturing process,
various corporations is included, such as Supplier, Manufacturer, Retailer and
Customer. Corporations in the supply chain cooperated to acquire the material and
transform the material into the specific end products and then deliver the end products
to the consumers.
Strader (1998) consider that supply chain connect members between upstream
supplier and the downstream customer to win the competitive advantages in market
by virtual integration that different from the traditional vertical integration. Supply
chain connects a series of value activities including the planning, organizing,
coordinating and control, and the information flow and material is also included.
From above definition, the business entity will integrate those related
corporations into a supply chain system and manage the competition in the market
through the cooperation among the corporations in the supply chain system.
2.1.2 Introduction to supply chain management
Supply-chain management handles the flow of material and information
throughout the supply chain in an attempt to deliver the right products in the right
quantities at the right place at the right time at minimal cost. The successful focus of
many companies has been to integrate the efforts of various internal functions and
external entities in the supply chain in order to improve planning and execution.
The concept of supply chain management (SCM) is being with Houlihan (1985),
the concept is an important development in the logistics. SCM encompasses all
activities associated with the flow and transformation of goods from raw materials
stage, through the end user, as well as associated information flow. Material flows up
and down the supply chain
In addition to the academic researches, the practitioners are also dedicated to
promote SCM. APICS defines SCM as the planning, organizing and control of the
various activities of supply chain. SCM as transforming the materials into the product
to deliver to customer by the most efficient way in the link of material supply,
manufacture, distribution, storage and sale. Every member in the supply chain will
execute five basic activities: Buy, Make, Move, Store and Sale. Global Supply Chain
Forum (GSCF) describes SCM as integration of process from the supplier that
provides product, service and information to end customer. Lambert & Cooper (2000)
further indicates that SCM is not the chain link corporations one by one, but connect
through the network structure. SCM provides the synergy gained from the integration
and management among corporations.
The ideal supply chain model is the highly integrated material flow and
information flow, and able to provide identical information to all members.
To promote the performance and service effectively and reduce related cost,
every member in the supply chain should be devoted to consolidate the cooperation
with other members and integrate the operations, technologies and cooperation within
the supply chain. Through information sharing, the efficacy of supply chain
management will be maximized (Frentzl, 1996).
To catch the rapid variation of the market demand, corporations in the supply
chain have to adopt new business process design. Ronald H. Ballou et al. (2000)
suggest that the processes of value-added activities in SCM can be managed from the
following three dimensions: (1) Functional coordination inside business, (2) Cross-
functional coordination inside business and (3) coordination across organizations
within supply chain. According to the point, the coordination and cooperation of
values-added activities within the business and among corporations are also included
Lambert & Cooper(2000) further propose a simplified integrated network model
based on the relationship and collaboration of the internal and external function and
activities related the process among corporations. The integrated network model
include information flow, product flow and supply chain business process. From the
perspective of product flow, internal product flow includes R & D, purchasing,
production, marketing & sales, logistics, finance…etc, and the resource and data
correlated to the flow is widespread. In order to smooth the information flow inside
business and promote the flexibility and visibility, ERP system is needed to integrate
the data and resource.
Beside smoothing the information, the integration of cross-organizational and
cross-functional SCM processes such as Customer Relationship Management,
Customer Service Management, Demand Management, Order Fulfillment, Production
Process Management, Material Purchasing, Product Development and
Customization…etc are necessary. Through the close connection from upstream
supplier to the downstream customer and customer and smooth information flow , the
SCM process will be more effective and the information transparency will be
increased, and this will push other corporations within the supply chain to keep the
intact and smooth information to achieve the thinking ability of SCM.
Concluded from above-mentioned, a complete SCM must provided with the
Visibility, thinking ability and decision support functions to solve the physical
problem and increase the effectiveness of SCM implementation.
2.2 CPFR（Collaborative Planning, Forecasting and Replenishment）
The CPFR comes from September of 1995, by the Wal-Mart and its supplier
Warner-Lambert, SAP, the Manugistics software company, and the Benchmarking
Partners adviser company waits for 5 companies to establish together of the Retail
Supply Chain Working Group, the methodology that aims at to resolve the retail trade
supply chain problem to develop and pay.
After the VICS strategy meeting, suggest that let the 26 leading manufacturer to
establish the committee to formally develop the related guide line, in order to improve
the efficiency of the whole supply chain, and in 1998 the first times to announce the
guide line of CPFR, made to settle the nine greatest steps to help the enterprise how to
planning, forecasting and replenishment. The CPFR was formally a standard two
processing processes of enterprise partner's: Both parties need to agree and accept the
collaborative planning and forecasting and supervising the whole why go to
replenishment to be done, then confirm the excrescent condition, finally adopt the best
CPFR first definition by American VICS organization in the CPFR(the
Collaborative Planning, Forecasting, the and Replenishment) mode of 1998 beginning
of year a promotions, a series of guidelines(processing process) that announce, made
to settle the nine greatest steps to help the enterprise how to planning, forecasting and
replenishment .Its step, Table1:
Table1: The CPFR nine greatest steps explanation
Planning Step1 Establish Collaborative The enterprise of participating builds
Relationship up a set of cooperative relation of the
instruction policy and rule. Mainly is
for letting to participate of enterprise
to each other of be in conjunction
with the cooperation contain
consistent consensus and the
Step2 Create Joint Business The enterprise commutation of
Plan participating is each from of
information of enterprise strategy and
the business project with build up the
associated business project.
Forecasti Step3 Create Sales Forecast The dealer and supplier together
ng Step4 Identify Exceptions for predict the need of the consumer,
Sales Forecast pointing out what condition under will
Step5 Resolve/Collaborate on produce the exception condition, then
Exception Items the basis may cause exception of
reason take in to solve, or adjust the
Step6 Create Order Forecast The dealer and supplier together
Step7 Identify Exceptions for predict the order, and draft to repair
Order Forecast the goods project, similarly, the
Step8 Resolve/Collaborate on exception condition that aims at the
Exception Items possible occurrence takes in to solve.
Replenish Step9 Order Generation Predict from order to the creation of
ment the actual order, no matter the order is
what manufactory or wholesaler send
out, will consume at first the order
Data source: VICS
It’s easy to see from the Table one, nine steps divided into four set: step 1 and 2
is Group 1, is concerning to establish the same target on starting both parties. Step 3,
4 and 5 is Group 2 is to inquire the sales forecasting. Step 6, 7 and 8 for Group 3 is
the part that inquires the order estimate, the finally steps is use the priority analysis to
make the forces and get the order.
The biggest different between sale and order is that sale is a past tense, the goods
that pass through hand over, and the order is a present tense, the goods that didn't
hand over yet. The CPFR differs from the management style of the traditional
concentrated type (Centralized), only can consider the condition of the part, by the
integration of the be in conjunction with type, will contribute to accelerating the
information to flow and more accurately predict (Framling, K. The and J. Holmstrom,
Integrate and talk, the CPFR is the procedure that matched a pair of scrolls to the
programming and it estimated to obtain the consensus in the past to turn formally,
through repair the goods to supervise and control the success of the programming
estimate, and respond any exception condition immediately. The CPFR is an
establishment in the Efficient Consumer Response, the ECR principle on, the ECR
includes the VMI, JMI, CRP and category management.
CPFR main target for increase the need estimate and the stock within since low
supply chain of the accuracy that repair the goods programming and can make the
right product acquired the higher service level in the right place. Needing only of
being the enterprise can by a series of common processing processes come when each
other cooperate and share the knowledge, this purpose just probably carry out. And
this a series of common enterprise processes is exactly CPFR main spirit.
2.3 Cultural heritage summary
Industry the most important development is the competition increment which
comes from the whole world, upsurge increasingly to the request of the quality in 80's,
the product life cycle is rapid to shorten, the manufacturing process improves quickly
with aggressive, and build up flexible labor force; and up to now, information science
and technology advances by leaps and bounds, the enterprise technique trend will
have a following development:
．The enterprise applies system: Link a company.
．The infrastructure remits to flow: The speech, data, and image blends increasingly.
． Have heavy thoroughfare integration: The computer telephone integration and
． The wireless application gets into main current.
．Invested in the past of re- develop: The integration applies system of medium lie
On the integration of the applied system, include the aggressive enterprise
process reengineering(the Business Process Reengineering, BPR),the enterprise
resource programming system(the Enterprise Resources Planning, ERP)...etc. of the
enterprise field, can peep to know from here the enterprise pursues the integration of
the inner part continuously, going to the effort F that integrate recently is turned by
the inner part and to the enterprise exterior, include the enterprise and the enterprise,
even BE the supply chain and the supply chain.(Kalalota,R.& M.Robinson, 2001)
3.1 Case study
This study used case study and it aim at a certain or minority certain few
particular individual cases carry on the thorough interview, the depth interviews of the
advantage lies in studying the leading of the structure by the idea namely, being easy
to the difference of the analysis comparison individual cases, and finding out the
system key factor from it. Interview the aspect in the depth, make use of to design the
good open type interview outline in advance to carry on the interview, can control to
interview the process, economical interview time; Secondly, the basis interview the
outline and can do again the discussion of the extension, making the process of the
interview even hading the flexibility the outside, and then can insure to interview the
quality, and get more detailed thorough of data.
In individual cases interviewing stage, we mainly are to the actual management
condition of the individual cases company and conduct the strategy and conduct the
results to make the interview, finding out the individual cases company with the
period after ducting into the CPFR to the Supply Chain Management whether the
positive help, and future development trend have. Assist again with the individual
cases company provide of data to understand, analysis.
4. THE INDIVIDUAL CASES COMPANY STUDY
The Action group establishes in 1976, the capitalization was about
15,000,000,000 dollars, main business item inside the company and production
& sales for the vehicle-use audio-visual equipment: Vehicle-use display, vehicle-
use multi-media system, personal audio-visual equipment: LCD TV, LCD
MONITOR, open air can the take type TV, the game machine manifestation
equipment, digital electronics music record the equipment, components etc.
Establish the research & development center in the head office in Taiwan ,
continuously strengthen to develop the new product, raise the product additional
value, to keep height of competition ability, at TFT-LCD applied the development of
the product has already accumulated 10 years above of experience, the dimensions of
development are innovation, turn over new and innovation continuously to satisfy the
demand of market, accelerating the new product development , reach the better
competitive advantage, overall, the plan of the development of the new product is as
follows: The vehicle-use digital satellite broadcasts live the television flat surface
antenna system, the digital wireless broadband communication network multimedia to
deliver system, digital multi-media applied system, TV/DVD/PF/MONITOR combine
the DVD, digital frame...etc. of household-use LCD television, 8-10"the spa SPA wall
faces the TV, IN-DASH DVD/MONITOR, digital compass, wireless to link the
vehicle-use audio-visual system.
4.2 Industry general situation
4.2.1 The industry current conditions and development
Along with the evolution of the mobile communication technique and the
development of the information product, plus the consumer pay more attention to
the leisure activity, the automobile equipment towards combine the
communication and amusement, provide the action service of the user
diversification, the Telemetric is the automobile electronics system product that
from here emerge with the tide of the times, mainly can be divided into the
hardware and serve this two greatest markets.
Action group the vehicle-use television, vehicle-use display that sell the
manufacturing combines the multi-media equipment of the DVD Player etc. of the
vehicle-use audio-visual product is to belong to the hardware market, showing by the
research data of the Telemetric Research Group, in 2002 the global Telemetric
hardware market scale for USD 1,580,000,000, would grow up to USD 2,190,000,000
in 2003, growth rate for 38.60%, went to the market scale to will amount to USD
16,447,000,000 in 2010, the compound growth rate amounted to 34.02%, the
development potential that show the Telemetric market.
In addition, in vehicle-use audio-visual equipment, the display is necessary of
one of the important materials, gradually popularize along with the TFT-LCD price, in
the future an automobile inside, will not only be limited by a display. Show according
to the covariance data of the professional think factory Display search, the global
vehicle-use display took delivery of goods the amount of money as USD 536,000,000
in 2002, estimating 2003 as USD 628,000,000, the growth rate also amounted to
4.2.2 Industries in the connection of the downstream
The Action group is mainly the display manufacturing for the center,
matching with the multi-media equipments, such as DVD Player and the game
machine...etc. it sale with, be placed in the industry belonged to in swim, upper
stream is the related components and material, in order to respond each market
need, downstream sale object much is car factory, distributor or thoroughfare
4.3 Ducting CPFR
4.3.1 Ducting purposes
The manager of the Action group has the forward-looking viewpoint and more
modern leadership style about the market, therefore through ducting CPFR to reach
the following purpose:
a. By the development of this strategy, make the company have the first place in the
market, and offensive of strategy does work.
b. Increase the service and the cooperative relation toward the customer and the
c. Reduce the cost and the increment time limited efficacy.
d. The data can be obtained through single Windows, is also the portal website
(Portal) of the enterprise.
e. Help the strategy planning and establishment.
f. For the market it expanding and having help, and can promote the city to have
4.3.2 Process and the content of the ducting
The Action group regards the homework of the logistics section as principle
first while ducting into. As the carrying, invoice document etc. of the goods; The
second stage is the communication, the purchase programming...etc. that aims at
the supplier; The end is the cooperative relation that strengthens through the
system with the of customer and supplier.
4.3.3 face the dilemma
a. The top executive objection
Because the early and general information system promotes of condition homology,
the cost and energy's putting into the increment, and duct into the results and
benefiting of back can't effectively evaluate to turn with quantity, ducting into the
difficulty of period and problem will continuously appear, therefore, cause the parts of
top executive objection.
b. The companionate objection of the cooperation
It has to put into a great funds while ducting into, therefore, many cooperation
partners don't approve this project, thinking the original operation mode is very good,
don't need to spend again the funds to improve.
The Action group lets cooperate the partner to realize with top executive first
in regard to the industry value chain standpoint of now, CPFR for increase the
service of the product value. And does the understanding cooperate the partner to
hope with top executive to acquire which values through the CPFR? Connect
down, then communicate whether the value that CPFR increase match to
cooperate the partner and the need of the top executive and the value of the
enterprise or not. The point of this stage is moderate how will claim of ducting
benefit, as: Increases to predict the accuracy, the inventory turnover increase, the
order period time shortens to reduce with the logistics homework cost etc. the
homework benefit, making to cooperate the partner and top executive can realize
its result. The partner's main foundation of the cooperation is a mutual trust, and
operation of the results can strengthen the mutual trust, making both parties be in
conjunction with the commitment of the cooperation to immediately raise.
According to the above-mentioned cultural heritage study and the individual
cases interview, this study would be induced the following conclusion:
Currently the Action group is personal successful of duct the CPFR into the
supply chain management of the company, become the competitive advantage of
the Action group supply chain management. Among them, the competitive
advantage is as follows:
a. Fast consultation integration
Currently personal was been close to 100 systems by successful ducting
inside of up and down swim the partner, they are each from of applied system all
mutually on-line, succeed of make the order estimate responded quickly, even
stabilized the follow-up of production planning and control, logistics, and
replenishment, make the Action group and up and down swim the partner
relation more close.
b. The supply chain process optimization
Through the optimization of the supply chain process, reduce the operation
cost of the whole individual department, then increase the speed and ability that
responds to the market, the competitive advantage of the whole supply chain
management of the increase Action group.
After this study thorough to the Action group interview and study, induce
following and at all point, offer some suggestions for the companies that is going
to duct into the CPFR in the future:
a. Organize explicit target inside the system:
The main purpose of The CPFR is want to build up and provide the partner with
a benefit and the information share of value chain system; Therefore, establish
the value chain system inside explicit of target, can let each member in the
supply chain system, clearly know to also together join force toward target to
b. With the whole business strategy, the integration degree of management and
If the CPFR is only to request of the passive concert bargain colleague or only
for the sake of ducting and ducting, not with the whole business, manage and
homework come carry on integrate, so the CPFR will become an alone and isolated
system, completely can't develop and reach its original benefit; Relatively, because its
benefit can't show, even can't make it smoothly promote. Therefore, if can carry on
the integration with the whole business strategy, management and system, not only at
organize inside or enterprise can smoothly promote, but also can make its benefit
c. Observe and cautious valuation F duct into the industry the demonstration the
The industry that have already had already duct into the CPFR currently all is the
bigger manufacturer of the scale, the big factory leads off the reason of the ducting to
mainly lie in oneself to be placed in the industry leadership position, or in order to
fight for more source orders, plus the subsidy of the government policy demonstration
and guide, so it will not emphasize the problem of the consideration cost burden.
Nevertheless, the future of CPFR’s development is still the indetermination containing
mostly, everything does try out the stage in the first step, and its result still needs the
operator and government to come to common valuation.
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