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Part - II

1. Introduction

While annual consumer demand for a brand across the nation may be well understood, it is difficult to determine the right number of specific products to put in an individual store on a particular day of the year. Unpredictable factors such as weather, transportation delays, production problems, and administrative errors can all wreck havoc on supply and demand. But more fundamentally, promotions create massive swings in demand. A single promotion can dwarf the average weekly demand for a product. Suppliers are forced to carry unprecedented amounts of safety stock, or stay lean and risk being unable to fulfill demand. The first option raises costs for everyone; the second results in lost sales, and frustrates customers. This gave rise to a new wave for supply chain management - CPFR.

2. Evolution of CPFR

The 1990-s saw an explosion of collaboration attempts. Dixon and Porter (1994) describe JIT II, a process initiated by BOSE, the audio system manufacturer. Under JIT II, BOSE brought key suppliers in-house and gave them authority to function as an integral part of the BOSE material and purchasing systems. The process replaced traditional buyers, planners, and salespeople with "in-plant" supplier personnel, thereby freeing up buyers' time to conduct value added activities. At the same time it gave the in-plant supplier representatives a better understanding of their customer's changing needs.

Many leading companies adopted the process on a small scale but it never aught on across whole industries, since many companies were not ready to make the long-term commitment to their suppliers and engage in the openness required for the JIT I process to work. The Efficient Consumer Response (ECR) movement began by the grocery industry in the US in 1993. ECR focused on category management (enhancing the effectiveness of the demand creation and satisfaction process through better promotions, new product introductions and store assortment); product replenishment with high consumer service and low inventories; and the development of enabling technologies.

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* Contributed by -
Deepak Bisht & Nilesh Dewangan,
Students of PGDIE,
NITIE, Mumbai.