|
In the manufacturer to retailer model, customer collaborative partnerships
have been a dominant theme since the 1990s. Although there was a
lot of energy behind CPFR, manufacturers and retailers are adopting
different versions of collaborative forecasting and replenishment
strategies now. These include Collaborative-VMI, CPFR, Account Based
Forecasting, CMI, Shared Single Forecast and replenishment etc.
The Retailers have emphasized the adoption of Collaborative Planning
for better forecasting promotional volume. So there is a broader
adoption of CPFR and Account Based Forecasting in this space although
there is no consistent standard among either manufacturers or retailers.
The CPFR
that
is being preached by retailers also vary in flavor from one retailer
to the other and between Mass, Food and Drug.
Some retailers focus on the Sales or the POS forecasts, while others
focus on promotional forecasts alone. Again some Retailers focus
on starting the process with two different forecasts, while others
emphasize the importance of a Shared Single Forecast.
More formally, collaboration is defined as the creation of a shared
understanding between two participants where none had previously
existed or could have come to on their own.
Test of Collaboration
 |
Is there good Communication between
collaboration Partners? |
| |
 |
Honest and open communication. This should be
clearly spelled out in the up-front business agreement. If there
are constraints here then there is little chance the collaboration
effort will succeed. |
| |
|
Frequent and timely communication. This is key. Communication
forums, teleconference or in-person meeting, should be set up
for periodic exchange of information. This may be weekly by
phone or monthly in person or what ever the parties think is
optimal depending on their industry and business considerations. |
|
Are they communicating
the right information? |
| |
|
Forecast Content. The process design should clearly outline
what should be in the forecast that is shared. What items are
included? What time period is covered? A clear process design
and buy-in by both parties at the start will substantially help
the success of the process. |
| |
|
Accuracy of the Forecast. As with any demand planning process,
forecast accuracy is the key. Achieving forecast accuracy depends
on the accuracy of the information that is shared as well as
timeliness. If the demand information that is shared by the
customer is inaccurate, a tight collaborative relationship will
spread this incorrect forecast through out the supply chain.
|
Probability of an accurate Collaborative
Forecast
The probability of an accurate collaborative forecast depends on
the accuracy of the forecast as well as proper and timely communication.
Probability of Correct Collaborative Forecast = Prob (Correct Forecast)
* Prob (Proper and timely communication)
Collaboration Accuracy
Perfect communication and poor Forecast ==> Collaboration accuracy
= 0
Good Forecast and untimely communication ==> Collaboration
accuracy = 0
In the Manufacturer to retailer model, the collaboration process
is based on the assumption that the retail customer can help create
a better forecast for the manufacturer. This is because customer
is close to where the retail take away occurs. They understand consumer
buying patterns better and have a vast database of store-level demand
and promotional information.
Secondly point of sale (POS) information is easily forecastable
since retail consumption is generally a smooth series. Volatility
occurs only when there are unexpected economic or natural events.
Case in point will be battery sales around before hurricanes.
Finally, the collaborative relationship allows you visibility into
your customer’s planned programs. Key events will include
promotions like features, tabs, price rollbacks as well as changes
in inventory policy.
If you would like to find out more details on facilitating or
developing a collaborative planning process, please
contact
us.
|