Importance of CPFR implementation in SME : Discovering the need and insights of CPFR as a supply chain strategy

Abstract: This thesis intended to evidence the need for change in a SME to reduce levels of inventory based on their process related to their supply chain management. This research focused on CPFR which is a process innovation tool that stands for collaborative planning, forecasting and replenishment (Cassivi, 2006). The idea behind this process is to make collaborative actions on all members of the supply chain to come up with a share vision and objective. Based on the core concept of this process partners along the supply chain share information based on customer trends and needs to create a single forecast that is visualize at all times by its members to react accordingly to sudden changes in demand. The research´s main objective is to describe the main process needed for CPFR implementation in actual SME that is struggling in a supply chain that is under constant pressure and obtain insight on the benefits involved in this process to reduce levels of inventory. The research was made based on the concept of CPFR through the use of databases such as Google scholar to come up with a first idea of the concept and examples of other companies implementing CPFR as a their main process for their supply chain. The second approach was to contact the companies involved in our case and use questionnaires to identify the relationship and the problems involved in their supply chain structure. This methodology was used to establish a comparison between what has been done in other companies and what is needed in our case company. The companies involved in the research are a SME and a large manufacturer. The large manufacturer is working under CPFR but with final retailers setting aside the value of incorporating upstream suppliers. Due to bullwhip effect upstream suppliers are incrementing their warehousing facilities to react to changes on the demand. This is incrementing the cost of the operation and it is creating an unstable supply. The research demonstrated companies in where CPFR is proven to reduce stockouts, markdowns, levels of inventory, time to market, strengthen the relationship and overall reduce costs. Based on the discoveries in the retail industry it was clear the benefits from this process. Companies such as Condis revealed important information based on incorporating upstream suppliers. At the end observations were made based on implementation strategies such as following the 9 step guidelines set up by VICS, developing pilot programs, reducing the number of SKU´s at the beginning, working on seasonal products rather than standard products, and developing and implementing better IT systems to manage the level of information needed.