Study on Effective Supply Chain Management by Using CPFR-The Example of Action Group in China

Chien-Hung Chen Graduate School of Management Sciences, Aletheia University,

70-11 Pei-Shi-Liao, Tainan 721, Taiwan ROCa680514@yahoo.com.tw

Shao-Long Hong

Nan Jeon Institute of Technology

No. 178, Chau-Chin Road, Yen-Shui, Tainan hsien, Taiwan 737

e470907jini@yahoo.com.tw

Hsing-Hsin LeeDepartment of Information Commercet, Aletheia University,

hsinghsinlee@hotmail.com

Chich-Jen Shieh

Department of International Businessr Chang Jung Christian University

G396 Chang Jung Road.,Sec.1,Kway Jen, Tainan, Taiwan, R.O.C.

charles@mail.cju.edu.tw

Chun-Hao Lin

Graduate School of Management Sciences, Aletheia University, 70-11 Pei-Shi-Liao, Tainan 721, Taiwan ROC

haly0910@yahoo.com.tw

Abstract

In recent years, Enterprise conducts the supply chain management and it tends the

maturity, In spite of is the ERP or MRP which had many successful cases, so the

enterprise combines the CPFR and the supply chain management, becoming a set of

all-new management system.

This study used the case study and the way of interview, for the Action Group

conducting the CPFR and succeed of make the order estimate responded quickly, even

stabilized the follow-up to produce the programming, logistics to go together with to

give to repair the goods homework, and raise the competitive advantage of the whole

supply chain management.

This study also provides suggestions that Industry prepares for future

carrying out the CPFR and it also implement the supply chain management.

Organize explicit target a. inside the system. With the integration degree、b. Of

the whole business strategy, management and homework observe and cautious

valuation、c. Duct into the industry the demonstration the result.

Keyword: CPFR、ERP、MRP、Supply Chain Management

1. Introduction

Due to the development of information technology and Internet has reach

maturity and widely accepted. The competition of the enterprises has implemented the

supply chain system and the relationship of the organizations also changed

competition into collaborative one. And the supply chain system crosses the supplier,

manufactory and goes together with to sell the different enterprise individuals, such as

business and customer...etc., wanting the perpendicular integration system a member

or level to integrate the competitor, then obtaining the competitive advantage,

therefore, how to make collaborative management efficiently and it become the most

important issue.

The VICS(the Voluntary Interindustry Commerce Standards) puts forward the

CPFR(the collaborative planning, the forecasting and replenishment) in 1998 then for

newly arisen in recent years of a set of be in conjunction with the mode of

cooperation.

As the result, the study mainly discuss under the environment that competition

tends more and more vehemence, how enterprise apply the CPFR (the Collaborative

Planning, Forecasting, the and Replenishment) to reach the supply chain the

integration of, and through instant information sharing, reduce estimate error, to the

exception condition immediately respond with processing, further reduce the stock

cost, make the whole cost descended.

2. Literature Review

2.1 SUPPLY CHAIN MANAGEMENT

2.1.1 Definition of Supply Chain

Chopra and Meindl (2001) describe that supply chain is dynamic and involves

the constant flow of information, product, and funds between different stages; and

Christopher (1998) regards supply chain as a network connects various organizations

and their customers and suppliers. These organizations participate various processed

and activities in order to produce value from the type of product and service.

Beamon (1998) defines Supply Chain as a integrated manufacturing process,

various corporations is included, such as Supplier, Manufacturer, Retailer and

Customer. Corporations in the supply chain cooperated to acquire the material and

transform the material into the specific end products and then deliver the end products

to the consumers.

Strader (1998) consider that supply chain connect members between upstream

supplier and the downstream customer to win the competitive advantages in market

by virtual integration that different from the traditional vertical integration. Supply

chain connects a series of value activities including the planning, organizing,

coordinating and control, and the information flow and material is also included.

From above definition, the business entity will integrate those related

corporations into a supply chain system and manage the competition in the market

through the cooperation among the corporations in the supply chain system.

2.1.2 Introduction to supply chain management

Supply-chain management handles the flow of material and information

throughout the supply chain in an attempt to deliver the right products in the right

quantities at the right place at the right time at minimal cost. The successful focus of

many companies has been to integrate the efforts of various internal functions and

external entities in the supply chain in order to improve planning and execution.

The concept of supply chain management (SCM) is being with Houlihan (1985),

the concept is an important development in the logistics. SCM encompasses all

activities associated with the flow and transformation of goods from raw materials

stage, through the end user, as well as associated information flow. Material flows up

and down the supply chain

In addition to the academic researches, the practitioners are also dedicated to

promote SCM. APICS defines SCM as the planning, organizing and control of the

various activities of supply chain. SCM as transforming the materials into the product

to deliver to customer by the most efficient way in the link of material supply,

manufacture, distribution, storage and sale. Every member in the supply chain will

execute five basic activities: Buy, Make, Move, Store and Sale. Global Supply Chain

Forum (GSCF) describes SCM as integration of process from the supplier that

provides product, service and information to end customer. Lambert & Cooper (2000)

further indicates that SCM is not the chain link corporations one by one, but connect

through the network structure. SCM provides the synergy gained from the integration

and management among corporations.

The ideal supply chain model is the highly integrated material flow and

information flow, and able to provide identical information to all members.

To promote the performance and service effectively and reduce related cost,

every member in the supply chain should be devoted to consolidate the cooperation

with other members and integrate the operations, technologies and cooperation within

the supply chain. Through information sharing, the efficacy of supply chain

management will be maximized (Frentzl, 1996).

To catch the rapid variation of the market demand, corporations in the supply

chain have to adopt new business process design. Ronald H. Ballou et al. (2000)

suggest that the processes of value-added activities in SCM can be managed from the

following three dimensions: (1) Functional coordination inside business, (2) Cross-

functional coordination inside business and (3) coordination across organizations

within supply chain. According to the point, the coordination and cooperation of

values-added activities within the business and among corporations are also included

in SCM.

Lambert & Cooper(2000) further propose a simplified integrated network model

based on the relationship and collaboration of the internal and external function and

activities related the process among corporations. The integrated network model

include information flow, product flow and supply chain business process. From the

perspective of product flow, internal product flow includes R & D, purchasing,

production, marketing & sales, logistics, finance…etc, and the resource and data

correlated to the flow is widespread. In order to smooth the information flow inside

business and promote the flexibility and visibility, ERP system is needed to integrate

the data and resource.

Beside smoothing the information, the integration of cross-organizational and

cross-functional SCM processes such as Customer Relationship Management,

Customer Service Management, Demand Management, Order Fulfillment, Production

Process Management, Material Purchasing, Product Development and

Customization…etc are necessary. Through the close connection from upstream

supplier to the downstream customer and customer and smooth information flow , the

SCM process will be more effective and the information transparency will be

increased, and this will push other corporations within the supply chain to keep the

intact and smooth information to achieve the thinking ability of SCM.

Concluded from above-mentioned, a complete SCM must provided with the

Visibility, thinking ability and decision support functions to solve the physical

problem and increase the effectiveness of SCM implementation.

2.2 CPFR（Collaborative Planning, Forecasting and Replenishment）The CPFR comes from September of 1995, by the Wal-Mart and its supplier

Warner-Lambert, SAP, the Manugistics software company, and the Benchmarking

Partners adviser company waits for 5 companies to establish together of the Retail

Supply Chain Working Group, the methodology that aims at to resolve the retail trade

supply chain problem to develop and pay.

After the VICS strategy meeting, suggest that let the 26 leading manufacturer to

establish the committee to formally develop the related guide line, in order to improve

the efficiency of the whole supply chain, and in 1998 the first times to announce the

guide line of CPFR, made to settle the nine greatest steps to help the enterprise how to

planning, forecasting and replenishment. The CPFR was formally a standard two

processing processes of enterprise partner's: Both parties need to agree and accept the

collaborative planning and forecasting and supervising the whole why go to

replenishment to be done, then confirm the excrescent condition, finally adopt the best

solution.

CPFR first definition by American VICS organization in the CPFR(the

Collaborative Planning, Forecasting, the and Replenishment) mode of 1998 beginning

of year a promotions, a series of guidelines(processing process) that announce, made

to settle the nine greatest steps to help the enterprise how to planning, forecasting and

replenishment .Its step, Table1:

Table1: The CPFR nine greatest steps explanation

Planning Step1 Establish Collaborative

Relationship

The enterprise of participating builds

up a set of cooperative relation of the

instruction policy and rule. Mainly is

for letting to participate of enterprise

to each other of be in conjunction

with the cooperation contain

consistent consensus and the

commitment.

Step2 Create Joint Business

Plan

The enterprise commutation of

participating is each from of

information of enterprise strategy and

the business project with build up the

associated business project.

Forecasti

ng

Step3 Create Sales Forecast The dealer and supplier together

predict the need of the consumer,

pointing out what condition under

will produce the exception condition,

then the basis may cause exception of

reason take in to solve, or adjust the

project.

Step4 Identify Exceptions for

Sales Forecast

Step5 Resolve/Collaborate on

Exception Items

Step6 Create Order Forecast The dealer and supplier together

predict the order, and draft to repair

the goods project, similarly, the

exception condition that aims at the

possible occurrence takes in to solve.

Step7 Identify Exceptions for

Order Forecast

Step8 Resolve/Collaborate on

Exception Items

Replenish Step9 Order Generation Predict from order to the creation of

ment the actual order, no matter the order is

what manufactory or wholesaler send

out, will consume at first the order

predicted.

Data source: VICS

It’s easy to see from the Table one, nine steps divided into four set: step 1 and 2

is Group 1, is concerning to establish the same target on starting both parties. Step 3,

4 and 5 is Group 2 is to inquire the sales forecasting. Step 6, 7 and 8 for Group 3 is

the part that inquires the order estimate, the finally steps is use the priority analysis to

make the forces and get the order.

The biggest different between sale and order is that sale is a past tense, the goods

that pass through hand over, and the order is a present tense, the goods that didn't

hand over yet. The CPFR differs from the management style of the traditional

concentrated type (Centralized), only can consider the condition of the part, by the

integration of the be in conjunction with type, will contribute to accelerating the

information to flow and more accurately predict (Framling, K. The and J. Holmstrom,

2000).

Integrate and talk, the CPFR is the procedure that matched a pair of scrolls to the

programming and it estimated to obtain the consensus in the past to turn formally,

through repair the goods to supervise and control the success of the programming

estimate, and respond any exception condition immediately. The CPFR is an

establishment in the Efficient Consumer Response, the ECR principle on, the ECR

includes the VMI, JMI, CRP and category management.

CPFR main target for increase the need estimate and the stock within since low

supply chain of the accuracy that repair the goods programming and can make the

right product acquired the higher service level in the right place. Needing only of

being the enterprise can by a series of common processing processes come when each

other cooperate and share the knowledge, this purpose just probably carry out. And

this a series of common enterprise processes is exactly CPFR main spirit.

2.3 Cultural heritage summary

Industry the most important development is the competition increment which

comes from the whole world, upsurge increasingly to the request of the quality in 80's,

the product life cycle is rapid to shorten, the manufacturing process improves quickly

with aggressive, and build up flexible labor force; and up to now, information science

and technology advances by leaps and bounds, the enterprise technique trend will

have a following development:

．The enterprise applies system: Link a company.

．The infrastructure remits to flow: The speech, data, and image blends increasingly.

． Have heavy thoroughfare integration: The computer telephone integration and

speech recognition.

．The wireless application gets into main current.

．Invested in the past of re- develop: The integration applies system of medium lie

software rise.

On the integration of the applied system, include the aggressive enterprise

process reengineering(the Business Process Reengineering, BPR),the enterprise

resource programming system(the Enterprise Resources Planning, ERP)...etc. of the

enterprise field, can peep to know from here the enterprise pursues the integration of

the inner part continuously, going to the effort F that integrate recently is turned by

the inner part and to the enterprise exterior, include the enterprise and the enterprise,

even BE the supply chain and the supply chain.(Kalalota,R.& M.Robinson, 2001)

3. Methodology

3.1 Case study

This study used case study and it aim at a certain or minority certain few

particular individual cases carry on the thorough interview, the depth interviews of the

advantage lies in studying the leading of the structure by the idea namely, being easy

to the difference of the analysis comparison individual cases, and finding out the

system key factor from it. Interview the aspect in the depth, make use of to design the

good open type interview outline in advance to carry on the interview, can control to

interview the process, economical interview time; Secondly, the basis interview the

outline and can do again the discussion of the extension, making the process of the

interview even hading the flexibility the outside, and then can insure to interview the

quality, and get more detailed thorough of data.

3.2 Sampling

In individual cases interviewing stage, we mainly are to the actual management

condition of the individual cases company and conduct the strategy and conduct the

results to make the interview, finding out the individual cases company with the

period after ducting into the CPFR to the Supply Chain Management whether the

positive help, and future development trend have. Assist again with the individual

cases company provide of data to understand, analysis.

4. THE INDIVIDUAL CASES COMPANY STUDY

4.1 Introduction

The Action group establishes in 1976, the capitalization was about

15,000,000,000 dollars, main business item inside the company and production

& sales for the vehicle-use audio-visual equipment: Vehicle-use display, vehicle-

use multi-media system, personal audio-visual equipment: LCD TV, LCD

MONITOR, open air can the take type TV, the game machine manifestation

equipment, digital electronics music record the equipment, components etc.

Establish the research & development center in the head office in Taiwan ,

continuously strengthen to develop the new product, raise the product additional

value, to keep height of competition ability, at TFT-LCD applied the development of

the product has already accumulated 10 years above of experience, the dimensions of

development are innovation, turn over new and innovation continuously to satisfy the

demand of market, accelerating the new product development , reach the better

competitive advantage, overall, the plan of the development of the new product is as

follows: The vehicle-use digital satellite broadcasts live the television flat surface

antenna system, the digital wireless broadband communication network multimedia to

deliver system, digital multi-media applied system, TV/DVD/PF/MONITOR combine

the DVD, digital frame...etc. of household-use LCD television, 8-10"the spa SPA wall

faces the TV, IN-DASH DVD/MONITOR, digital compass, wireless to link the

vehicle-use audio-visual system.

4.2 Industry general situation

4.2.1 The industry current conditions and development

Along with the evolution of the mobile communication technique and the

development of the information product, plus the consumer pay more attention to

the leisure activity, the automobile equipment towards combine the

communication and amusement, provide the action service of the user

diversification, the Telemetric is the automobile electronics system product that

from here emerge with the tide of the times, mainly can be divided into the

hardware and serve this two greatest markets.

Action group the vehicle-use television, vehicle-use display that sell the

manufacturing combines the multi-media equipment of the DVD Player etc. of the

vehicle-use audio-visual product is to belong to the hardware market, showing by the

research data of the Telemetric Research Group, in 2002 the global Telemetric

hardware market scale for USD 1,580,000,000, would grow up to USD 2,190,000,000

in 2003, growth rate for 38.60%, went to the market scale to will amount to USD

16,447,000,000 in 2010, the compound growth rate amounted to 34.02%, the

development potential that show the Telemetric market.

In addition, in vehicle-use audio-visual equipment, the display is necessary of

one of the important materials, gradually popularize along with the TFT-LCD price,

in the future an automobile inside, will not only be limited by a display. Show

according to the covariance data of the professional think factory Display search, the

global vehicle-use display took delivery of goods the amount of money as USD

536,000,000 in 2002, estimating 2003 as USD 628,000,000, the growth rate also

amounted to 17.16%.

4.2.2 Industries in the connection of the downstream

The Action group is mainly the display manufacturing for the center,

matching with the multi-media equipments, such as DVD Player and the game

machine...etc. it sale with, be placed in the industry belonged to in swim, upper

stream is the related components and material, in order to respond each market

need, downstream sale object much is car factory, distributor or thoroughfare

business.

4.3 Ducting CPFR

4.3.1 Ducting purposes

The manager of the Action group has the forward-looking viewpoint and more

modern leadership style about the market, therefore through ducting CPFR to reach

the following purpose:

a. By the development of this strategy, make the company have the first place in the

market, and offensive of strategy does work.

b. Increase the service and the cooperative relation toward the customer and the

supplier.

c. Reduce the cost and the increment time limited efficacy.

d. The data can be obtained through single Windows, is also the portal website

(Portal) of the enterprise.

e. Help the strategy planning and establishment.

f. For the market it expanding and having help, and can promote the city to have

the rate.

4.3.2 Process and the content of the ducting

The Action group regards the homework of the logistics section as principle

first while ducting into. As the carrying, invoice document etc. of the goods; The

second stage is the communication, the purchase programming...etc. that aims at

the supplier; The end is the cooperative relation that strengthens through the

system with the of customer and supplier.

4.3.3 face the dilemma

a. The top executive objection

Because the early and general information system promotes of condition homology,

the cost and energy's putting into the increment, and duct into the results and

benefiting of back can't effectively evaluate to turn with quantity, ducting into the

difficulty of period and problem will continuously appear, therefore, cause the parts of

top executive objection.

b. The companionate objection of the cooperation

It has to put into a great funds while ducting into, therefore, many cooperation

partners don't approve this project, thinking the original operation mode is very good,

don't need to spend again the funds to improve.

4.3.4 Solutions

The Action group lets cooperate the partner to realize with top executive first

in regard to the industry value chain standpoint of now, CPFR for increase the

service of the product value. And does the understanding cooperate the partner to

hope with top executive to acquire which values through the CPFR? Connect

down, then communicate whether the value that CPFR increase match to

cooperate the partner and the need of the top executive and the value of the

enterprise or not. The point of this stage is moderate how will claim of ducting

benefit, as: Increases to predict the accuracy, the inventory turnover increase, the

order period time shortens to reduce with the logistics homework cost etc. the

homework benefit, making to cooperate the partner and top executive can realize

its result. The partner's main foundation of the cooperation is a mutual trust, and

operation of the results can strengthen the mutual trust, making both parties be in

conjunction with the commitment of the cooperation to immediately raise.

5. CONCLUSION

According to the above-mentioned cultural heritage study and the individual

cases interview, this study would be induced the following conclusion:

Currently the Action group is personal successful of duct the CPFR into the

supply chain management of the company, become the competitive advantage of

the Action group supply chain management. Among them, the competitive

advantage is as follows:

a. Fast consultation integration

Currently personal was been close to 100 systems by successful ducting

inside of up and down swim the partner, they are each from of applied system all

mutually on-line, succeed of make the order estimate responded quickly, even

stabilized the follow-up of production planning and control, logistics, and

replenishment , make the Action group and up and down swim the partner

relation more close.

b. The supply chain process optimization

Through the optimization of the supply chain process, reduce the operation

cost of the whole individual department, then increase the speed and ability that

responds to the market, the competitive advantage of the whole supply chain

management of the increase Action group.

After this study thorough to the Action group interview and study, induce

following and at all point, offer some suggestions for the companies that is going

to duct into the CPFR in the future:

a. Organize explicit target inside the system:

The main purpose of The CPFR is want to build up and provide the partner with

a benefit and the information share of value chain system; Therefore, establish

the value chain system inside explicit of target, can let each member in the

supply chain system, clearly know to also together join force toward target to

move forward.

b. With the whole business strategy, the integration degree of management and

system:

If the CPFR is only to request of the passive concert bargain colleague or only

for the sake of ducting and ducting, not with the whole business, manage and

homework come carry on integrate, so the CPFR will become an alone and isolated

system, completely can't develop and reach its original benefit; Relatively, because its

benefit can't show, even can't make it smoothly promote. Therefore, if can carry on

the integration with the whole business strategy, management and system, not only at

organize inside or enterprise can smoothly promote, but also can make its benefit

double.c. Observe and cautious valuation F duct into the industry the demonstration the

result:The industry that have already had already duct into the CPFR currently all is the

bigger manufacturer of the scale, the big factory leads off the reason of the ducting to mainly lie in oneself to be placed in the industry leadership position, or in order to fight for more source orders, plus the subsidy of the government policy demonstration and guide, so it will not emphasize the problem of the consideration cost burden. Nevertheless, the future of CPFR’s development is still the indetermination containing mostly, everything does try out the stage in the first step, and its result still needs the operator and government to come to common valuation.

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