CPFR - Meaning & Definition

Published in Operations and Supply Chain Terms by MBA Skool Team

What is CPFR?

It is a business practice which enhances the integration of supply chain system with the use of IT to assist and support joint practices. Here the information is shared between the manufacturers, wholesalers, retailers and other players in the channels such that there’s better planning and satisfaction of consumer needs.

It makes the critical activities of trading partners more visible such that there’s a structured information sharing and joint decision making. Through the decrease in expenditure for inventory, logistics, merchandising and transportation; efficiency is created across all trading partners.

This CPFR is a trademark of VICS (Voluntary Inter-industry Commerce Standards). 

CPFR Model:

It describes a framework for the flow of goods, services and information. The 3 main players on which this model is based are:

• Consumer- occupies the center of the model and stimulates the demand of goods and services

• Retailer- occupies the middle ring and provides goods and services

• Manufacturer- occupies the outer ring and provides products to retailers in accordance with the demand, as stimulated by the consumer


The relationship among these 3 players can be summarized in the following functions:

• Strategy and Planning- includes business goals, responsibilities, scope of collaboration

• Demand and Supply Management- includes sales forecasting, inventory positions, order planning and forecasting, transit lead times

• Execution- includes order generation

• Analysis- includes performance assessment and exception management


The steps involved in the CPFR model can be-

• Development of the front end agreement

• Creation of the join business plan

• Creation of the sales forecast

• Identification of exceptions for the sales forecast

• Collaboration on the exception items

• Creation of order forecast

• Identification of exceptions for the order forecast

• Collaboration on the exception items

• Generation of Order


Some benefits of CPRF:

• Improving customer service by using better forecasting techniques

• Higher profits and lower inventories

• Investment in technology yields a higher ROI

• Improvement in relationships among the various trading partners

• Overall reduction in cost

Hence, this concludes the definition of CPFR along with its overview.

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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