Collaborative Planning

What is Collaborative Planning?

In the manufacturer to retailer model, customer collaborative partnerships have been a dominant theme since the 1990s. Although there was a lot of energy behind CPFR and retailers are adopting different versions of collaborative forecasting and replenishment strategies now. These include Collaborative-VMI, CPFR, CMI, Shared Single Forecast, and replenishment, etc.

The retailers have emphasized the adoption of Collaborative Planning for better forecasting promotional volume. So there is a broader adoption of CPFR and Account-Based Forecasting in this space although there is no consistent standard among either manufacturers or retailers. The CPFR that is being preached by retailers also varies in flavor from one retailer to the other and between Mass, Food and Drug.

Some retailers focus on the Sales or the POS forecasts, while others focus on promotional forecasts alone. Again some Retailers focus on starting the process with two different forecasts, while others emphasize the importance of a Shared Single Forecast.

More formally, collaboration is defined as the creation of a shared understanding between two participants where none had previously existed or could have come to on their own.

Test of Collaboration:

Is there good Communication between collaboration Partners?

• Honest and open communication. This should be clearly spelled out in the up-front business agreement. If there are constraints here then there is little chance the collaboration effort will succeed
• Frequent and timely communication. This is key. Communication forums, teleconference or in-person meeting, should be set up for the periodic exchange of information. This may be weekly by phone or monthly in-person or whatever the parties think is optimal depending on their industry and business considerations

Are they communicating the right information?

• Forecast Content. The process design should clearly outline what should be in the forecast that is shared. What items are included? What time period is covered? Clear process design and buy-in by both parties at the start will substantially help the success of the process
• Accuracy of the Forecast. As with any demand planning process, forecast accuracy is the key. Achieving forecast accuracy depends on the accuracy of the information that is shared as well as timeliness. If the demand information that is shared by the customer is inaccurate, a tight collaborative relationship will spread this incorrect forecast throughout the supply chain

Probability of an accurate Collaborative Forecast

The probability of an accurate collaborative forecast depends on the accuracy of the forecast as well as proper and timely communication.