Pros And Cons Of Collaborative Planning Forecasting And Replenishment

Forecast:

As previously described, the company has a high average forecasting error leading to continuous challenges in meeting demand. We believe a major culprit is the disconnect between all the different supply chain members in the company when producing the forecast.

Therefore, one of our recommendations would be to implement a Collaborative Planning Forecasting and Replenishment (CPFR) program where partners in the supply chain, including the sales and promotion teams, forecast the sale and demand of each item and compare their results. The CPFR would then come to a consensus forecast, which should yield improved forecasting numbers as it factors the knowledge of all the different departments. For example, the manufacturer’s knowledge

The main benefit of this investment would be centralizing all transaction data and standardizing part numbers from each of the supply chain partners. By integrating all these systems, the ERP could produce system-wide visibility to real-time data across the entire supply chain and collect all data in a single system. This would greatly reduce data error, duplication work, and employee time looking for information while allowing company-wide access to essential data, weaknesses, and performance. In parallel, they can also introduce a point of sale system to track the production of all subcomponents. Currently, the company only tracks the final product. However, by tracking when a subcomponent is made, all supply chains could have instant visibility of the availability of subcomponents and would be able to utilize them quicker to improve production speed. Therefore, by integrating the ERP system and adding the point of sale system, there should be an immense increase in communication and collaboration among the entire enterprise. Per a study conducted by the Aberdeen Group, the industry average improvements resulting from implementing ERP are: 13% reduction in operating costs, 10% in reduction in administrative costs, 11% reduction in inventory cost, 13%

The company must make sure the benefits will outweigh the costs and a serious commitment must be made to successfully implement the system. Per a study by the Meta Group, among 63 companies surveyed implementing an ERP system, the average cost was $15 million with a high of $300 million and a low of $400,000. The study also showed that it took 8 months after the system was incorporated (31 months in total) to see any benefits (Stevenson, pg.