The Manufacturer Magazine : Promoting best practice in Manufacturing

It’s time for a trading partner standard

Manufacturing News, Source : The Manufacturer US
Published : 06 Jan 2003 9:57

Manufacturers who are not at least considering a trading partner collaboration program such as CPFR (collaborative planning, forecasting, and replenishment) are missing out on an enormous opportunity to improve their business.

Manufacturers who are not at least considering a trading partner collaboration program such as CPFR (collaborative planning, forecasting, and replenishment) are missing out on an enormous opportunity to improve their business.

For those who don’t know, CPFR is an industry standard created by the Voluntary Interindustry Commerce Standards (VICS) and adopted by the Global Commerce Initiative. Supply chain standards such as CPFR are extremely important because they provide a framework that encourages common business and technology approaches to trading partner collaboration.

One of the major benefits of CPFR is that it takes a business process first approach. The standard includes a nine-step recommended guideline on how trading partners can effectively collaborate through trading partner arrangements and joint business plans. The CPFR standard also covers technology for EDI and XML. The CPFR standard is composed of 80% business process and 20% technology.

CPFR does two things that can help you as a manufacturer. First, you can become proactive in your planning and execution. You can better plan replenishment, promotions, and new item introductions; make sales and operations planning more effective; and optimize your supply chain. Second, CPFR can help you avoid disasters by providing visibility into potential supply chain planning errors. You can look forward rather than using the rear-view mirror.

When companies institute collaboration best practices, they can realize some powerful financial benefits. For example, according to the VICS CPFR Working Group, the following financial benefits have been achieved with CPFR:

Sales revenue growth: 8% to 10%

Inventory reduction: 10%

Forecast accuracy improvement: 20% to 30%

Reduction of cost of goods sold: 3% to 4%

One reason companies fail in implementing collaborative trading partner relationships like CPFR is that they leap into them before fully understanding what it takes to be a successful trading partner. To avoid this, consider taking the following steps:

• Assess the risk of entering/not entering collaborativetrading partnerships

• Become educated on collaborative trading partnerships

• Evaluate how better trading partner collaboration could improve your company’s financial performance

• Start a collaborative trading partner pilot

Don’t allow yourself to stand on the sideline watching this supply chain best practice pass you by.

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