Is Collaborative Planning, Forecasting and Replenishment the Holy Grail of Supply Chain Management?

Supply Chain Management (SCM) means many things to many people but fundamentally it’s the management of the flow of materials and services needed to make a product and deliver it to customers. For many companies, it’s an integral part of their overall strategy for meeting customer demand.

Stage one of SCM involves selecting suppliers for the goods and services needed to create the product. Stage two relates to developing processes with suppliers for pricing, delivery and payment. So far so good…

Stage three and beyond though is where an experienced SCM Manager can really command big bucks because a manufacturer or retailer able to collaborate with suppliers on a mass scale and schedule production, manage inventory, verify shipments, authorize payments, transfer goods to manufacturing and co-ordinate logistics as seamlessly, quickly and cost effectively as possible makes the difference between a Wall Street performer or flop.

Initially thought of as the relationship between manufacturers and retailers, supply chain collaboration (SCC) is a business to business (B2B) concept that has now been extended to include raw materials, logistics and service suppliers.

In essence, SCC is two or more companies working jointly to develop shared information, develop joint plans based on that shared information, and consequently execute their businesses with greater success than when acting independently. Until recently though, such collaboration was rarely attained within a company let alone between companies.

With the introduction of the Collaborative Planning, Forecasting and Replenishment (CPFR) business model though, which many consider the standard for direct material planning and fulfilment, companies now have a firm foundation on which to base their operational plans and supply chain solutions.

CPFR is intended to eliminate the uncertainty in demand and supply by actively promoting the exchange of information and data, including demand signals, forecasts, inventory and logistics across supply chain partners. Post implementation, companies experience increased sales, reduced inventory and cycle time and lower cost of sales. Furthermore, successful partners exhibit mutual trust and believe that both sides profit equally when both supplier and customer are responsible for using inventory efficiently, keeping stock levels low and more effectively managing transportation.

Thankfully, there is now SCM software that supports CPFR standards and enterprises that have invested time, resources, and money in Enterprise Resource Planning (ERP) systems needn’t worry because it compliments not competes with their investment. This could explain why some of the emerging Software-as-a-Service (SaaS) supply chain software vendors are seen as such hot property.

One such vendor is Perceptant (http://www.perceptant.com), the cloud computing supply chain management, B2B collaborative portal and EDI software vendor, who has openly endorsed CPFR and during a recent interview revealed it received on average two offers of venture capital a month.