Imagine this scenario: the industry is planning to sell, next year, 750,000 extra bottles of soda to their current business partners. But then they do not inform this goal to an important link in the chain: retail. Retail, in turn, has planned to reduce the orders in the next period, based on sales history, which recorded lower demand for soda on the shelves and, therefore, a drop in the inventory rotation for that item. You can see the confusion this creates, right?
To meet these needs, retail and industry are adopting the CPFR (Collaborative Planning, Forecasting and Replenishment) Methodology. This approach foresees inventory planning and replenishment based on an integrated process, in which all supply chain agents take part, with the aim of increasing profitability and competitiveness.
The methodology includes steps that align the planning between the internal (production, trade, marketing and sales) and external (business partners, whether industry, distributors or retail) areas of the company, adjusting the expectations among all of them at a specific time, called consensus (as the chart below). Bringing the perception of business partners to this step makes all the difference, as this will integrate scenarios that will help align strategies that increase the availability of products and productivity, impacting on profit margin.
The CPFR methodology acts as a facilitator in identifying solutions to various challenges, such as:
- Consensus of objective: foresees the definition of rules between the participants.
- Ideological consensus: concerns the nature of the activities or how they will be executed.
- Consensus for added value: defines which actions in an organization can positively impact the business partner.
- Work coordination consensus: through which collaboration and cooperation models can be established between the supply chain agents (which can come from either the industry or retail).
However, to reach agreements with this proportion, there is a need for greater maturity among all links in the supply chain. “Today the relationship between retail and industry is mostly a fearful one. They do not say how much inventory they have as they are afraid they would lose bargaining power. This does not happen in the USA and Europe, older markets, which have longer business experience,” stresses Camilo Manfredi, Director of Planning and Replenishment at NeoGrid.
As it requires more maturity, it is recommended to establish the CPRF methodology with key suppliers, whose planning and replenishment demand more time and attention from the team.
Stay tuned on the blog to better understand how this collaborative approach, along with technology, can increase the operational efficiency of the industry and retail.