Page 87 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Logistics and Supply Chain Management

Notes Self Assessment

Fill in the blanks:
1. …………………… tools help in the analysis of the environment and provide inputs on
how the organization can use its resources for maximum leverage.

2. Forecasting demand levels is a part of …………………… forecasts.
3. Supply and demand reflects the …………………… dimension.
4. …………………… demand uses statistical forecasting techniques.
5. …………………… location of demand is needed to plan warehouse locations, balance
inventory levels across the supply chain network, and geographically allocate
transportation resources.

4.2 Collaborative Forecasting

As technology becomes faster and smarter and as the willingness of supply chains to share
information increases, companies will benefit from such forecasting models. Inventory will
increasingly be replaced with information. This hope is reflected in Collaborative Planning
Forecasting and Replenishment (CPFR). CPFR is accepted as an extension of supply chain
management and as a part of supply chain philosophy.
The first CPFR exercise was undertaken by Wal-Mart and Warner-Lambert for Listerine products.
They used special CPFR software to exchange forecasts. Supportive data, such as past sales
trends, promotion plans and even the weather, were transferred in an iterative fashion. This
allowed them to develop a single forecast based their original forecasts. The results were
gratifying. Listerine sales increased, the fill rates improved, and there was a significant reduction
of inventory investment.
CPFR is forecasting based on the concept of supply chain management. It is a business model
that takes a holistic approach to supply chain management and information exchange among
trading partners. It uses common metrics, standard language, and firm agreements to improve
supply chain efficiencies for all participants.
In other words, collaborative forecasting is based on considering the entire supply chain or
partnerships as a single unit and the sharing of information between the links in the chain. The
objective is to collectively, as members of the supply chain, meet the needs of the final consumer.
This is accomplished by supplying the right product at the right place, right time and right price
to the customer.

According to the Round Table held at the University of Denver in May, 2002, the “CPFR Overview
Committee” developed target objectives of business benefits using CPFR. These are shown
below:
 Increased in-stock at shelf 5-8%
 Reduced average network inventory 10%
 Increased sales 8-10%
 Reduced operating expense 1-2%

 Reduced cost of goods 3-4%
 Reduced lead time/cycle time 25-30%
 Decreased account receivables 8-10%
 Reduced forecast error +/-20% (six weeks out) and +/-30% (twelve weeks out)

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