Full form is collaborative planning ,forecasting and replenishment ( CPFR)CPFR is a business practice thatcombines the intelligence of multipletrading partners in the planning andfulfillment of customer demand.It links sales and marketing bestpractices to supply chain planning andexecution processes.Objective is to increase availability to thecustomer 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::;
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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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 TODEFINE ITS CATEGORIES DEPENDS ON THEEXTENT OF CONTROL IT WISHES TO EXERCISEAND THE LEVEL AFTER WHICH THE DIFFERENCESIN BEHAVIOUR OF CUSTOMERS BECOMEINSIGNIFICANT.THE RETAILER CAN COLLECT INFORMATION ONEACH SKU. A RETAILER WOULD STOP AT A LEVEL BEYONDWHICH THE DEFINATION BECOMES MEANINGLESSIN 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 used To classify product roles as staples , niches, variety enhancers and fill – ins and adequate strategies cab be developed accordingly .High staples nichesfrequency ofpurchaseLow Variety Fill- insfrequency of enhancerspurchase High penetration Low penetration