The attached diagram (in PDF format) illustrates how a company might synchronize supply and demand with its vendors and trading partners through the business-process model known as collaborative planning, forecasting and replenishment (CPFR).
In this example, a 300-store, $1.4 billion sporting goods retailer wants to share its sales planning and decision-making tools with business partners over an extranet. The company’s largest supplier, a sneaker manufacturer, has agreed to participate in the trial implementation.
The retailer began by analyzing its daily, weekly, monthly, quarterly and annual sales down to the store level, and combining this data with distribution and transportation statistics. These analyses yielded a plan to eliminate nonperforming products, introduce high-margin stock, replenish items in response to demand and align the retailer’s forecasts with the sneaker manufacturer’s production and distribution plans.
By the end of the first year of operations, the retailer could track 60% of its SKUs through the new process. The partners had reduced their order-to-delivery time from nearly seven months to just more than three, fulfillment rates had improved from 94.8% to 97.8%. The retailer saved millions in distribution and warehousing costs as improved sales and order forecasts reduced the need to overstock in-house supplies.
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