Collaborative Planning, Forecasting, and Replenishment

Collaborative Planning, Forecasting, and Replenishment (CPFR) is a methodology of supply chain management (SCM) and integration which combines the collective knowledge resources of multiple supply partners throughout the planning and fulfillment stages of customer demand.

The CPFR model provides an adaptable template for intra-supply chain collaboration of the aspects of planning , forecasting and replenishment. The template can be used in many disparate industries and is centered around the concepts of Strategy and Planning, Demand and Supply Management, Execution, and Analysis.

Strategy and Planning
encompasses business goals for the relationship, defining the scope of collaboration and assigning roles, responsibilities, checkpoints and escalation procedures. The Joint Business Plan then identifies the significant events that affect supply and demand in the planning period, such as promotions, inventory policy changes, store openings/closings, and product introductions.

Demand and Supply Management
which includes Sales Forecasting, which projects consumer demand at the point of sale, and Order Planning and Forecasting, which determines future product ordering and delivery requirements based upon the sales forecast, inventory positions, transit lead times, and other factors.

Execution
consisting of Order Generation, which transitions forecasts to firm demand, and Order Fulfillment, the process of producing, shipping, delivering, and stocking products for consumer purchase.

Analysis
tasks include Exception Management, the active monitoring of planning and operations for out-of-bounds conditions, and performance Assessment, the calculation of key metrics to evaluate the achievement of business goals, uncover trends or develop alternative strategies.

The goals are to improve the collaboration between the various supply chain players, manufacturers, distributors, and retailers, to effect the delivery of products is a positive way through the reduction of barriers within the supply chain relationships. This will lead to better inventory management, lower out-of- stocks, better forecasting and timely replenishment which support the company goals of reducing working capital used for inventory, reducing fixed capital and infrastructure expenses, reducing operating expenses, and by growing sales each year, consistent with the expectations of the stockholders.

Six Sigma Primer

Six Sigma at many organizations simply means a measure of quality that strives for near perfection. Six Sigma is a disciplined, data-driven approach and methodology for eliminating defects (driving towards six standard deviations between the mean and the nearest specification limit) in any process -- from manufacturing to transactional and from product to service.

To achieve Six Sigma, a process must not produce more than 3.4 defects per million opportunities. A Six Sigma defect is defined as anything outside of customer specifications. A Six Sigma opportunity is then the total quantity of chances for a defect.

Two Six Sigma sub-methodologies: DMAIC and DMADV.

The DMAIC processes (define, measure, analyze, improve, control) is an improvement system for existing processes falling below specification and looking for incremental improvement.

The DMADV process (define, measure, analyze, design, verify) is an improvement system used to develop new processes or products at Six Sigma quality levels

Roles and Responsibilities:

Quality Leader/Manager (QL/QM) - The quality leader's responsibility is to represent the needs of the customer and to improve the operational effectiveness of the organization. The Quality function is typically separated from the manufacturing or transactional processing functions in order to maintain impartiality. The quality manager sits on the CEO/President's staff, and has equal authority to all other direct reports.

Master Black Belt (MBB) - Master Black Belts are typically assigned to a specific area or function of a business or organization. It may be a functional area such as human resources or legal, or process specific area such as billing or tube rolling. MBBs work with the owners of the process to ensure that quality objectives and targets are set, plans are determined, progress is tracked, and education is provided. In the best Six Sigma organizations, process owners and MBBs work very closely and share information daily.

Process Owner (PO) - Process owners are exactly as the name sounds – they are the responsible individuals for a specific process. For instance, in the legal department there is usually one person in charge -- maybe the VP of Legal -- that's the process owner. There may be a chief marketing officer for your business -- that's the process owner for marketing. Depending on the size of your business and core activities, you may have process owners at lower levels of your organizational structure. If you are a credit card company with processes around billing, accounts receivable, audit, billing fraud, etc., you wouldn't just have the process owner be the chief financial officer, you would want to go much deeper into the organization where the work is being accomplished and you can make a big difference.

Black Belt (BB) - Black Belts are the heart and soul of the Six Sigma quality initiative. Their main purpose is to lead quality projects and work full time until they are complete. Black Belts can typically complete four to six projects per year with savings of approximately $230,000 per project. Black Belts also coach Green Belts on their projects, and while coaching may seem innocuous, it can require a significant amount of time and energy.

Green Belt (GB) - Green Belts are employees trained in Six Sigma who spends a portion of their time completing projects, but maintain their regular work role and responsibilities. Depending on their workload, they can spend anywhere from 10% to 50% of their time on their project(s). As your Six Sigma quality program evolves, employees will begin to include the Six Sigma methodology in their daily activities and it will no longer become a percentage of their time -- it will be the way their work is accomplished 100% of the time.