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How Walmart Enhances Supply Chain Management With CPFR

Initiatives:
an extension research to the previous journal entitled
How RFID Technology Boosts Walmarts Supply Chain Management by the same Author.

Alexander Harsono
STMIK Pontianak
Sponsored by IT Consulting firm PT. Metadata IT BizSolutions and CV. Omah IT Yogyakarta Indonesia
alex189@ymail.com;metadata89@gmail.com

Abstract The role of collaborative planning, forecasting, philosophies focused on supply chain synchronization.
and replenishment (CPFR) in supply chain management As illustrated in Fig. 1 to 6, CPFR is the maturation of
have gained significant interest in researchers and efforts such as quick response, vendor managed
academics in recent years. Yet, very few studies conducted inventory (VMI), and efficient customer response and can
on how CPFR software could boost supply chain
management (SCM). So this study was to scrutinize how
be thought of as the perfect joining of ERP and CRM in
Walmart harnessed CPFR to enhance supply chain an Internet-driven supply chain environment dedicated to
management. Exploratory research approach was adopted the integration and synchronization of the entirety of
to obtain an in-depth understanding of CPFR and supply channel demand while reducing total network inventories
chains through related textbooks, journals and literatures. and costs.
Then the research was conducted in the form of case CPFR is a set of data-driven business processes
studies on CPFR and SCM, and the benefits Walmart and designed to improve the ability to predict and coordinate
P&G could gain from CPFR and SCM practices. In general, with supply chain partners. CPFR is considered superior
the research is more descriptive and interpretive in nature. to the earlier electronic data interchange (EDI)-based
Findings showed that CPFR played an important role in
SCM to better control inventory, reduce stockouts, bullwhip
SCM practices since it is based on much broader
effect, reduction in manual orders resulting in a reduction cooperative arrangement where retailers and suppliers
of excess inventory, and improved service levels. The jointly develop forecast by sharing point-of-sales (POS),
paper is original that provides empirical support to CPFR inventory, promotions, strategy and production
and SCM implementation, and creates value for retail stores information. With CPFR, suppliers and retailers
and their suppliers on managing inventory. collaborate in planning and demand forecasting in order
to ensure that members of the supply chain will have the
KeywordsCPFR, EDI, RFID, VMI right amount of raw materials and finished goods when
---------- they need them.
This research paper is an extension research to the previous journal In VMI situation, Procter & Gambler (P&G) manages
research on RFID role in SCM entitled How RFID Technology Boosts the inventory of its customers, eliminating the need for
Walmart SCM by a single author discussing further on how integrated
IT-enabler powerfull tools such as RFID, VMI, EDI, etc. enhanced SCM. customers to send purchase orders.The advantage to the
vendor is having more advanced notice of product
I. INTRODUCTION demand.The advantage to the retailer or distributor is
The complexity of todays supply chain requires minimizing inventory costs. Having the correct item in
manufacturers and distributors to search for new methods stock when the end customer needs it benefits all
to reduce costs, increase efficiencies, reinvent channel partners.
models, engineer collaborative relationships, and span One of P&Gs first collaborations was with Walmart.
functional, cultural, and personal boundaries. The most P&G continuously replenished Pampers baby diapers at
common solution to supply chain uncertainties is to build Walmart stores. Continuous replenishment is a supply
inventories, or safety stock, as insurance. High levels of chain relationship in which P&G continuously monitors the
safety stock increase the costs of holding inventory. High inventory of Walmart or distributor and automatically
inventories at multiple points in the supply chain can result replenishes its inventory when levels hit the reorder point.
in the bullwhip effect. Low inventory levels increase the Walmart knows that continued market dominance will
risk of stockouts or insufficient supply and lost revenues go to those who know how to harness the evolutionary
when demand is high or delivery is slow. In either event, process taking place within their supply chains. Therefore,
the total costincluding the cost of holding inventories, the topic How Walmart harnesses SCM with CPFR
the cost of lost sales opportunities, and bad reputation initiatives becomes an interesting issue to discuss.
can be very high. While advance planning and scheduling For further an in-depth exploration of collaboration
(APS) and SCM applications provide for the optimization between Walmart store and its one of suppliers P&G, this
of the supply chain, CPFR seeks to act as a key enabler case study focused on firstly, understanding the concept
for the realization of synchronized supply chain of CPFR, How it works, secondly, identifying the major
forecasting and replenishment. CPFR is the latest elements of Walmarts CPFR success, and analyze the
generation in a train of channel management
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benefits of the CPFR implementation for both Walmart possible to synchronize buyer needs with supplier
and P&G. production plans, thus ensuring efficient replenishment.
The jointly managed forecasts can be adjusted in the
II. LITERATURE SURVEY event that demand or promotions have changed, thus
The keystone of SCM is the willingness of supply avoiding costly corrections after the fact.
network partners to engage in and constantly enhance On the surface, when decisions are made with
collaborative relationships with each other. Unified incomplete, one-sided information, it may appear that
channel collaboration makes it easier to ensure companies have optimized their internal processes
connectivity of all channel nodes, availability of the proper when, in reality, inventory has merely shifted along the
technology tools for information visibility and real-time supply chain. Without supply chain trading partners
transfer, acceptance of common performance metrics collaborating and exchanging information, the supply
and benefits, and access to demand patterns and chain will always be suboptimal, resulting in less-than-
expectations as they stream across the supply chain. maximum supply chain profits.
Collaboration is one of the key foundations of SCM and Using CPFR, companies are working together to
is recognized as a high-corporate priority, the path to develop mutually agreeable plans and are taking
successful collaboration is blocked by many barriers. responsibility for their actions. The collaborative effort
Despite that fact that such numbers indicate that truly leads to benefits that are greater than if each partner were
cohesive and collaborative supply chain teams are the to go at it independently. According to VICS, the CPFR
exception and not the rule, todays advanced supply chain concept is consumer driven without losing focus on best
leaders P&G and Wal-Mart are winning and outdistancing practices within the supply chain. Setting common goals
the competition because they understand their success for organizations pulls individual efforts together into a
rests on seeing themselves as the drivers of value chain cohesive plan, supports better execution of the plan and
collaboration [1]. invites improved planning in the next business planning
According to the Voluntary Inter-industry Commerce exercise. The improved planning drives sales gains
Standards (VICS) Association [2], CPFR is a set of through to the consumer and lowers costs throughout the
business processes that entities in a supply chain can use supply chain [4]. Besides P&G and Walmart, other
for collaboration on a number of retailer/manufacturer companies using CPFR initiatives include Eastman
functions towards overall efficiency in the supply chain. Kodak, Federated Department Stores, Hewlett-Packard,
CPFR is a registered trademark of the VICS Association. JC Penney, Kimberly Clark, Kmart, Nabisco, Procter &
The Council of Supply Chain Management Professionals Gamble, Target, Walmart and Warner-Lambert. The
(CSCMP) describes CPFR as: a concept that aims to industries that are most involved with CPFR are
enhance supply chain integration by supporting and consumer products and food & beverage.
assisting joint practices. CPFR seeks cooperative
A. EDI and Supply Chain Management
management of inventory through joint visibility and
replenishment of products throughout the supply chain. SCM needs technology-based drivers to make it
Information shared between suppliers and retailers aids working. Technology is the driver of SCM, and technology
in planning and satisfying customer demands through a tools enable companies to automate supply chain
supportive system of shared information. This allows for functions to remove redundancies and cost, generate
continuous updating of inventory and upcoming information and assists supply chain activities. The
requirements, essentially making the end-to-end supply earliest technology is electronic data processing (EDI)
chain process more efficient. Efficiency is also created where companies can exchange simple and similar
through the decreased expenditures for merchandising, information within and across-organizations.
inventory, logistics, and transportation across all trading EDI is computer-to-computer exchange of routine
partners [3]. business documents, using an approved, standard
The objective of CPFR is to optimize the supply chain format, without human intervention. These documents
by improving demand forecast accuracy, delivering the include things like purchase orders, shipment updates,
right product at the right time to the right location, reducing invoices and others [5]. The process of data exchange is
inventories across the supply chain, avoiding out-of- straightforward, beginning with a trading partners
stocks and improving customer service. This can be business system, traveling through the internet, and
achieved only if the trading partners are working closely arriving securely to your system. EDI has the capacity to
together and willing to share information and risk through transmit data in the exact way it was received. Because
a common set of processes. of its accuracy, errors occurring while re-keying are no
The real value of CPFR comes from an exchange of longer a concern. As a direct result, costs involved with
forecasting information rather than from more mailing and postage are virtually eliminated, lead times
sophisticated forecasting algorithms to improve and inventory carrying costs are drastically reduced, and
forecasting accuracy. The fact is that forecasts developed customer service and loyalty are significantly improved.
solely by the firm tend to be inaccurate. When both the EDI uses a common language that is shared amongst
buyer and seller collaborate to develop a single forecast, businesses, allowing for companies with dissimilar
incorporating knowledge of base sales, promotions, store computer-based systems to communicate with each
openings or closings and new product introductions, it is other. Although the language must initially be translated,

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once it has been completed, no further encoding must be B. Evolution of SCM or E-SCM Systems
done. Many companies have used EDI to send business Today supply managers expect powerful solutions to
information to suppliers and customers as illustrated in their business problems. However, organizations did not
Fig. 1 and Fig. 2 illustrated exchange of information always have sophisticated systems at their disposal.
through CPFR in SCM. TABLE 1 traces the evolution of e-SCM systems [8]. Early
uses of information systems were in the accounting and
Exchange of information in SCM through EDI & CPFR financial areas. However, beginning in the 1970s more IT
resources and software solutions were allocated to
purchasing, operations, and distribution. Organizations
installed systems such as material requirements planning
(MRP) and distribution requirements planning (DRP).
These systems were used to improve the planning and
Fig. 1. Information flows via EDI
control of inventory in manufacturing (MRP) and
distribution (DRP).
Because MRP and DRP systems were primarily
internal, an electronic linkage to suppliers and customers
was needed. Led by efforts of the railroad and retail
sectors, electronic data interchange was developed as a
solution to transfer customer and supplier information in
Fig. 2. Information flows via CPFR
the 1980s.
In most cases, this information was limited to orders, Although these early efforts provided efficiencies in the
quotations, invoices, and similar documents. In supply supply chain, intense competition in the final two decades
chain cooperation, information exchanged between the of the 20th century forced firms to re-engineer their
partners, or granted access to, is much more detailed and business processes to become even leaner. During this
often rather sensitive. It includes sales plans and period, almost every major Fortune 500 company went
forecasts, inventory levels, resource utilization, status of through some form of restructuring, as thousands of
orders, shipments, and more. Obviously, companies are workers and managers were shed in an effort to increase
concerned about this information. Disclosing it to other productivity and reduce costs. In conjunction with this
companies, be they partners in supply chain management change, organizations further increased their information
or not, is a sensitive matter. What if the partner uses systems to perform tasks previously done by these
internal information to the companys disadvantage? For workers. Thus enterprise resource planning (ERP)
example, if the customer sees that the suppliers inventory systems became the rage of the 1990s and they continue
level is too high, they might use this information to today. The goal of ERP systems is to integrate all
negotiate a price reduction that the supplier otherwise business function planning and processing, and to avoid
would not have given. Despite the risk of making internal data interruption in order to make better business
information available, an increasing number of companies decisions and run the business more effectively and
perceive the advantages they derive from exchanging efficiently. Ideally, all the different functions in the
information with their supply chain partners. They realize organization have access to and are working with the
that the benefits they receive from effective supply chains same data. Supply managers were at the center of this
outweigh the potential disadvantages from disclosing trend and were challenged to develop accurate databases
information. Two prominent approaches that unleash the to improve their decision making.
benefits of information exchange between two partners
are vendor-managed inventory (VMI) and CPFR [6] TABLE 1. THE EVOLUTION OF E-SCM SYSTEMS
SCM is defined as the integrated, process-oriented
design, planning and control of goods, information, and Solution Time Focus Primary Use of System
Period
cash flows along the entire value chain from customer to Internal/ Inventory planning,
the raw-material supplier with the aims of improving MRP-DRP 1970s managin inventory control, and
customer orientation, synchronizing supply with demand, g distribution efficiencies
making the production more flexible and responsive to the inventory
Electronic transmission of
demand, and downsizing of the inventory along the value EDI 1980s External purchase orders
chain [7]. The better the supply chain member
collaborates, the better the supply chain works. And the Integration of all business
better the supply chain works, the stronger the partners ERP 1990s Internal functions for processing
and reporting
competitive position on the market. SCM seeks to develop Managing and controlling
the collaborative aspects of integrative information SRM &SCM 2000s External the interface between
technologies to better manage networked customers and buyers, suppliers, and
inventories. customers
CPFR systems permit
Collaboration 2001s External constant communication
-internal within the supply chain

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via RFID and point of sale to ensure that members of the supply chain will have the
systems right amount of raw materials and finished goods when
Advanced 2010 & External- Sourcing analytics and
Sourcing Beyond internal computerized they need them. CPFR streamlines product flow from
Analytics negotiations manufacturing plants all the way to customers homes.
The Voluntary Interindustry Commerce Solutions
C. Collaboration (VICS) Association (vics.org) describes the structure of
Collaboration can be defined as an activity pursued CPFR activities and guidelines for implementing them.
jointly by two or more entities to achieve a common Since 1986, VICS Association has worked to improve the
objective. It can mean anything from exchanging raw data efficiency and effectiveness of supply chains. CPFR
by the most basic means, to the periodic sharing of comprises four main collaboration activities (see Fig. 4):
information through technology-based tools, to the
structuring of real-time architectures capable of 1. Strategy&planning: Setting the ground rules for the
leveraging highly interdependent infrastructures in the collaborative relationship and specifying the product mix
pursuit of complex, tightly integrated functions ensuring 2. Demand&supply management: Forecasting consumer
planning, execution, and information synchronization [9] demand and order and shipment requirements over the
as shown in Fig 3. planning horizon
The intensity of the collaborative content can vary as
3. Execution:Performing activities, such as placing orders,
depicted in Fig. 3 to 5. It can be internally driven and
shipping and delivery, receiving, stocking, tracking
focused on the achievement of local objectives. It could
seek to use technology to deepen inter-channel sales transactions, and making payments
operations linkages, drive shared processes and co- 4. Analysis: Monitoring outcomes of planning and
development, and even foster a common competitive execution, assessing results and key performance
vision for the whole channel. The value of collaboration is metrics, sharing insights with partners, and adjusting
gauged by how effectively firms are leveraging the plans to improve results.
competencies of the distributed knowledge of the channel
base, reducing redundant functions and wastes, sharing
a common vision of the supply chain, and constructing the 1
technical and social architectures, thereby enabling whole 4
channel networks to achieve marketplace leadership

3 2

Fig. 4. CPFR Model with Retails and Manufacturer Tasks Aligned


with Their Corresponding Collaboration Tasks [10]

CPFR is an approach for the collaboration of


manufacturers and retailers that starts with sales
Fig. 3. Span of collaboration [9] planning. Instead of planning separately, both sides
exchange their forecasts in the planning phase and
B. What is CPFR? discuss diverging estimates in order to come to a single
forecast. Later, when the sales processes are running,
Two prominent approaches that unleash the benefits both sides actively work together, allowing them to quickly
of information exchange between two partners are recognize and correct planning mistakes [11].
vendor-managed inventory (VMI) and CPFR. VMI is an CPFR was initiated in 1995 in a pilot project by
approach for close cooperation between a supplier and a Walmart, the worlds largest chain of department stores,
vendor based on trust. The concepts of continuous and one of their suppliers. In this project, the partners
replenishment, VMI, and collaboration evolved into the realized that further benefits from industry-trade
more comprehensive model known as CPFR. CPFR is a collaboration would require a standardization of business
set of data-driven business processes designed to processes. For this reason, Walmart initiated the CPFR
improve the ability to predict and coordinate with supply Committee of VICS. VICS is an inter-industry association,
chain partners. With CPFR, suppliers and retailers focusing on the improvement of the efficiency and
collaborate in planning and demand forecasting in order
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effectiveness of the entire supply chain and the processes based on the timely communication of
development of cross industry standards. Members of the forecasts and inventory replenishment data to support the
CPFR committee are well-known manufacturers and synchronization of activities necessary to effectively
retailers of consumer goods. respond to total supply chain demand. CPFR begins with
The mission of the CPFR committee is ...to develop the development of an agreement between trading
business guidelines and roadmaps for various partners to develop a consensus forecast that begins at
collaborative scenarios, which include upstream the retail level and makes it way all the way back to the
suppliers, suppliers of finished goods and retailers, which manufacturer. This plan of supply chain demand and
integrate demand and supply planning and execution replenishment describes what will be sold and when, how
[12]. By integrating processes on the sides of supply and it will be merchandized and promoted, in what
demand, CPFR aims to improve the efficiency, increase marketplaces, and during what time period. CPFR
revenue, lower tied-up capital, and reduce inventory interoperable technology permits this data to be freely
levels throughout the entire supply chain. transmitted up and down the supply channel so that
In order to achieve these goals, a reference model is planners at any node in the network can see demand and
provided, as shown in Fig. 4. This model defines eight adjust the plan within certain limits based on possible
major activities where the parties involved should exception conditions, such as promotions, store
cooperate. It includes important steps such as creating a openings, or capacity constraints that could impact
common sales forecast and how to handle exceptional delivery or sales performance anywhere in the channel.
situations, namely: Sales forecasting; Order Trading partners would then collaborate to resolve any
planning/forecasting; Order generation; Order fulfillment; potential bottlenecks, adjust demand and replenishment
Exception management; Performance assessment; plans, and then execute alternative courses of action. The
Collaboration arrangement; Joint business plan final step in the process, channel replenishment, occurs
During the execution phase, the forecasted after consensus on the final forecast.
requirements are automatically translated into delivery
orders, provided that no exceptions apply. If, however, a
situation is exceptional, the responsible employees on
both the retailers and manufacturers sides have to be
informed and work together to find a solution.
Today, software vendors offer solutions and support
for VMI and CPFR, although CPFR does not depend on
specific software. However, since CPFR partners
normally exchange information in electronic form, they
should employ common standards (e.g., XML-based
standards such as EAN.UCC or EDIFACT [13].
Large manufacturers of consumer goods, such P&G
has superb supply chains resulting from their use of
CPFR. As part of a pilot project, P&G shared strategic
plans, performance data, and market insights with
Walmart.The company realized that it could benefit from
Walmarts market knowledge, just as Walmart could
benefit from P&Gs product knowledge as illustrated in
Fig. 5 [14]
Fig. 6. Evolution of supply chain planning techniques

Walmart P&G
In the past, supply chain partners sought to utilize
channel inventory management tools such as CRP and
VMI to remove excess assets from the supply network
and smooth out demand irregularities. While effective,
these toolsets, however, lacked the ability to solve the
twin problems at the core of channel replenishment
management: forecast inaccuracies and the capability
to utilize exception messaging to notify network partners
of impending bumps in supply and demand. CPFR
provides answers to these two issues by providing for the
real-time sharing of sales promotions, point-of-sale (POS)
transactions, and total channel inventory positioning that
Fig. 5. Model of CPFR [13] postpones inventory replenishment by linking each level
in the supply network with the pull of actual demand. In
The mission of CPFR is for all partners in a supply addition, by systematizing the communication of critical
channel network to develop collaborative planning demand and supply data among trading partners, CPFR

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makes visible all plans and planning variances, thereby The next era in electronic commerce broadcast
assisting companies to improve their forecasting and different applications on the World Wide Web. Similar to
replenishment decisions to yield the best results. the events that occurred 20 years earlier, ERP systems
were primarily internal and lacked the linkage to suppliers
C. Vendor-Managed Inventory (VMI) and CPFR and customers. The Internet provided the bridge; because
of its low cost, lead software providers developed systems
In traditional inventory management, the customer that could link customers and suppliers into the ERP
places an order with the supplier when demand for the system. These systems are popularly termed supplier
goods is noticed. The order time and quantity are under relationship management (SRM) and customer
the control of the customer because the customer relationship management (CRM) systems.
monitors the inventory levels. It is worth noting the fact
that the suppliers total control of inventory management D. RFID Enhances VMI and Affects CPFR
does not change the ownership of the goods. The Continuous replenishment is a supply chain
customer still has to purchase the goods from the supplier relationship in which a vendor continuously monitors the
to become the owner, or if the goods have only been inventory of a retailer and distributor and automatically
commissioned, they remain the property of the supplier. replenishes their inventory when levels hit the re-order
VMI has advantages for both partners: Important demand point. In Walmarts case, P&G manages the inventory of
and sales information is available to both the retailer and its Walmart and eliminates the need for customers to send
the supplier, transmission errors are reduced, stockouts purchase orders [18]
are avoided, the service level is improved, etc. [15] Continuous replenishment is a supply chain
VMI is a process through which the supplier rather than relationship in which a vendor continuously monitors the
the customer manages the flow of product into the inventory of a retailer or distributor and automatically
customers operations. This flow is driven by frequent replenishes their inventory when levels hit the re-order
exchanges of information about the actual off-take or point. In this vendor managed inventory (VMI) situation,
usage of the product by the customer. With this P&G manages the inventory of its Walmart eliminating the
information the supplier is able to take account of current need for customers to send purchase orders. The
inventories at each level in the chain, as well as goods in advantage to the vendor is having more advanced notice
transit, when determining what quantity to ship and when of product demand. The advantage to the retailer or
to ship it. The supplier is in effect managing the distributor is minimizing inventory costs. Having the
customers inventory on the customers behalf. In a VMI correct item in stock when the end-customer needs it
environment there are no customer orders; instead the benefits all partners. A good example of logistics
supplier makes decisions on shipping quantities based partnership is the growing use of VMI. The underlying
upon the information it receives direct from the point-of- principle of VMI is that the supplier rather than the
use or the point-of-sale, or more usually from off-take data customer assumes responsibility for the flow of product
at the customers distribution center. The supplier can use into the customers operations [19].
this information to forecast future requirements and hence The concepts of continuous replenishment and
to utilize their own production and logistics capacity collaboration evolved into the more comprehensive model
better. This is what Walmart and P&G collaborate in known as collaborative planning, forecasting, and
managing their supply chain and inventory control. CPFR replenishment (CPFR). CPFR is a set of data-driven
is the name given to a partnership-based approach to business processes designed to improve the ability to
managing the buyer-supplier interfaces across the supply predict and coordinate with supply chain partners. With
chain. The idea is a development of VMI [16]. CPFR, suppliers and retailers collaborate in planning and
VMI is an approach for close cooperation between a demand forecasting in order to ensure that members of
supplier and a vendor, based on trust. The supplier takes the supply chain will have the right amount of raw
on the responsibility for the customers inventory, making materials and finished goods when they need them.
a commitment to act in the interest of the customer. In the Supply chain monitoring and control is implemented using
VMI approach, the supplier monitors and maintains the smart labels (such as passive RFID for tracking and active
customers inventory at an appropriate level [17]. This RFID for cold chains) and VMI [20]
requires the customer to allow the supplier to access their
E. CPFR Reduces Bullwhip Effect
inventory data and provide the supplier with up-to-date
point-of-sales data. The customer also entrusts the Bullwhip effect occurs as orders are placed from
supplier with creating the purchase orders. This means retailers, to wholesalers, to manufacturers, with
that the supplier is in control of the customers stock fluctuations increasing at each step in the sequence. The
quantities, the replenishment time, and delivery of the bullwhip fluctuations in the supply chain increase the
goods to the customer. costs associated with inventory, transportation, shipping,
Coordination tools focus on supply event management and receiving while decreasing customer service and
and performance management whereas collaboration profitability. Bullwhip effect is the increasing in orders that
tools focus on sharing information to achieve supply goals often occurs as orders move through the supply chain [21].
through CPFR, support for VMI, and support for Supplier P&G found that although the use of pampers diapers was
Managed Inventory (SMI).
steady and the retail-store orders had little fluctuation, as
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orders moved through the supply chain, fluctuation issue could generate nearly $2.5 billion in very profitable
increased. By the time orders were initiated for raw sales.
materials, the variability was substantial. Walmart
succeeded in adopting CPFR together with RFID to boost IV. RESULTS AND ANALYSIS
its supply chain has caused reducing the bullwhip effect
Walmart and P&G had initiated its plan to employ
and improving opportunities in the supply chain. CPFR technology in its supply chain in 1995.
III. RESEARCH METHODOLOGY Subsequently Walmart reinforced its plans and actively
asserted on defining the CPFR standards it would be
Exploratory research was conducted to explore the implementing.
CPFR technology and the supply chain through related By means of CFPR, P&G logistics executives could
case studies; literatures and textbooks survey related to easily examine the order patterns for one of their best-
CPFR, VMI, EDI and supply chain management. The selling products pampers diapers at any minute at
literatures and books used in this paper were based on a Walmart shelves to real-time inventory monitoring. At
wide range of online industry sources including P&G and retail stores, Pampers sales were fluctuating, but the
Walmarts official Web sites, and whitepaper and press variability was not excessive. However, as they examined
releases. The online sources were complemented by orders of distributors, the executives were surprised by
hardcopy documentation including academic papers such the higher degree of variability. When they looked at
articles and research journals. The relevant material was P&Gs orders of materialsthe manufacturing levelto
gathered, categorized and sorted into like themes which its suppliers such as 3M, they discovered that the
formed the basis for analyzing how CPFR and related variability in the size of orders were even greater.
technology boosts and enhances supply chain Economists call it a bullwhip because even small
management. Second, descriptive research was increases in demand can cause a big increase in the need
conducted to describe characteristics of CPFR for parts and materials further down the supply chain. The
technology and supply chain management that have been bullwhip has broad implications as companies rush to fill
implemented in Walmart giant store. Lastly, the aim of this orders while also restocking warehouse shelves.
research is to delve deeply into how the CPFR boosts and CPFR has transformed the way Walmart ran its
enhances Walmarts supply chain management, and retail store. The movement of goods along the supply chain
analyze the objective. was reflected by corresponding movements of information
As the previous research journal How RFID boosts
sent by RFID reader, and then proceeded to P&G for
Walmarts SCM suggested that this survey covered
managing the inventory. Walmart's collaboration with P&G
potential benefits of RFID technologies in supply chains;
meant that P&G would assume more responsibility for
cost reduction and value creation, particularly related to
inventory management, something retailers had
inventory inaccuracy and the bullwhip effect which RFID
traditionally done on their own. When P&G's products ran
technologies can provide several advantages in supply
low at the distribution centers, the system sent an
chain management through better traceability and
automatic alert to P&G to ship more products. In some
improved visibility of products and processes all along the
cases, the system went all the way to the individual
chains. Increase of efficiency and speed of processes,
Walmart store. It let P&G monitor the shelves through real-
improvement on information accuracy, reduction of
time satellite link-ups that sent messages to the factory
inventory losses are some of these advantages. There
whenever a P&G item swooped past a scanner at the
have been important implementations conducted by
counter and register. With this kind of minute-to-minute
pioneer companies such as Wal-Mart and Procter &
information, P&G knew when to make, ship and display
Gamble. However, real applications of RFID technologies
more products at the Walmart stores. It did not need to
are still limited because the costs of RFID are still often
keep products piled up in warehouses awaiting Walmart's
much larger than the costs of current identification
call. Invoicing and payments happened automatically too.
technologies.
The system saved P&G so much in time, reduced
The primary method of data collection in this case
inventory and lowered order processing costs that it could
study were based on secondary data sources such as
articles, journals, etc. related to the research purpose. afford to give Walmart "low, everyday prices" without
Most of the data required through internet and Web putting itself out of business.
browsing (www.walmart.com). Walmart Stores, Inc., P&G used EDI and CPFR for keeping Walmarts
based in Bentonville, Arkansas founded by Sam Walton shelves stocked. Its supply chains worked smoothly when
in 1962. Walmart was the worlds largest retailer with sales were ready, but often broke down when confronted
more than 6,500 stores worldwide, including stores in all by a sudden surged in demand, especially when Walmart
50 states. Its sales volume reached $ 312, 4 billion in campaigned a special promotion that caused its shoppers
2006. One of Walmarts major suppliers in this CPFR is snapped up all the promotional items. The RFID tags that
P&G. With Walmart selling over $245 billion worth of supported CPFR could change that by providing real-time
goods in fiscal year 2003, a 1% improvement in stockouts information about what was happening on store shelves.

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7
Heres in Fig. 7 below shows as an example how the readers. Regional managers can reroute trucks to fill
system works for P&Gs pampers: urgent needs.
In Fig. 7 Box 5: P&G logistics executives examined
the order patterns for one of their best-selling products,
Pampers diapers. P&Gs suppliers also use RFID tags
and readers on their raw materials, giving P&G visibility
several tiers down the supply chain, and giving the
2 3 suppliers the ability to accurately forecast demand and
1
production.
Walmart and P&G have successfully implemented
5 CPFR where is an approach that addresses the
4 requirements for good demand management. Walmart
has harvested the benefits of CPFR include the following:
Fig. 7. P&G uses CPFR &RFID to manage inventory 1. Strengthens partner relationships with its suppliers
In Fig.7. Box 1: When P&G's products run low at the P&G where a common forecast of customer demand
distribution centers, the system sends an automatic alert guides the activities of both partners
to P&G to ship more products. In some cases, the system 2. Collaboration is coordinated, from establishing a
goes all the way to the individual Walmart store. It lets common forecast to finding common solutions for
P&G monitor the shelves through real-time satellite link- operative problems and provides analysis of sales and
ups that send messages to the factory whenever a P&G order forecasts
item swoops past a scanner at the register. For instant, 3. Uses point-of-sale data, seasonal activity, promotions,
each box of Pampers has an RFID tags. Shelf-mounted new product introductions and store openings or
scanners alert the stockroom of urgent need for restock.
closings to improve forecast accuracy
In Fig. 7 Box 2: This shows how vendor-managed
inventory (VMI) works. Continuous replenishment is a 4. Manages the demand chain and proactively eliminates
supply chain relationship in which a vendor continuously problems before they appear, and allows collaboration
monitors the inventory of Wal-Mart or P&G and on future requirements and plans
automatically replenishes their inventory when levels hit 5. Companies are enabled to operate proactively, with
the re-order point. In this vendor managed inventory (VMI) respect to customer requests, as opposed to reacting to
situation, P&G manages the inventory of its customers problems when they occur
eliminating the need for customers to send purchase 6. Integrates planning, forecasting and logistics activities
orders. The advantage P&G is having more advanced where P&G receive guaranteed orders from retailers,
notice of product demand. The advantage to Wal-Mart or while retailers can rely on guaranteed deliveries by the
distributor is minimizing inventory costs. Having the manufacturers because both parties operate on the
correct item in stock when the end-customer needs it basis of a common forecast.
benefits all partners. Wal-Marts inventory management
7. Provides efficient category management and
system tracks and links its in-store stock and its
understanding of consumer purchasing patterns
warehouse stock, prompting quicker replenishment and
providing accurate real-time data. Here, three main 8. Provides analysis of key performance metrics (e.g.,
problems of supply chain management that can be forecast accuracy, forecast exceptions, product lead
improved through RFID; inventory inaccuracy, the times, inventory turnover, percentage out-of-stocks) to
bullwhip effect and replenishment policies. reduce supply chain inefficiencies, improve customer
In Fig. 7 Box 3: RFID has transformed the way Wal- service and increase revenues and profitability.
Mart runs its retail store. The movement of goods along Walmart has grown to be the worlds largest retailer by
the supply chain is reflected by corresponding seeking every opportunity to streamline its supply chain
movements of information sent by RFID reader. This and cut costs in order to live up to its promise of everyday
information is captured via a bar code reader and can low pricing. Getting there entails more than
then be read immediately anywhere in the distribution merchandising, however. Walmart also is a leader in
chain. Wal-Mart systems are linked to the P&G supply pioneering technologies to achieve operational
chain management system. Demand spikes reported by efficiencies that ultimately bring savings for its customers.
RFID tags are immediately visible throughout the supply
chain. V. CONCLUSION AND PERSPECTIVE
In Fig. 7 Box 4: After the deployment of RFID
The inception of EDI, had made Walmart and P&G
technologies, Procter & Gamble and Wal-Mart
using EDI-enabled to leverage existing technology
simultaneously reduced inventory levels by 70%,
investments to quickly launch CPFR initiatives. By the end
improved service levels from 96% to 99%. They also
of the 1990s, however, the high cost of EDI technologies
reduced administration costs by re-engineering their
and the ubiquitous deployment of the Internet enabled
supply chains. P&Gs logistics software tracks its trucks
even the smallest retailer and manufacturer to leverage
with GPS locators, and tracks their contents with RFID tag
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8
the collaborative power of CPFR. In addition, Web-based The real challenge to widespread adoption of CPFR is
applications provided business partners to escape from that it requires a fundamental change in the way buyers
the one-way transmission of data in favor of an and sellers work together. Companies must ensure that
interoperable toolset enabling open two-way conversation their information technology systems, organizational
in real-time supported by formal standards. structures, business processes and internal data are
Nevertheless, VMI has failed to become widely conducive to implementing CPFR. For instance, many
implemented. This is due to several reasons where on organizations are hampered by legacy systems that will
one hand, no one can decide on appropriate inventory have to be replaced, lack of executive management
levels as well as the customers themselves. And on the support and an unwillingness to share sensitive
information.
other hand, disruptions in the information flow may occur.
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price largely in part because it is able to control its costs. Chopra, S. and Meindl, P., Supply Chain Management: Strategy,
The cost of its products, however, is not only a function of Planning, and Operation, 5th edition, 2013, Pearson; pp. 5-15
its efficiency or lack of it but also the efficiency/inefficiency
of its suppliers. Because of the volume of products sold Wisner, Joel, T., Tan, Keah, Choon, and Leong G., Keong, Principles of
Supply Chain Management: A Balanced Approach, 3rd edition, 2012,
by Walmart, it has a great influence over its suppliers and Cengage; pp. 10-25
often pressures its suppliers to find ways to lower costs.
Sharing benefits and costs in, instead of mandating the Andreas, Meier and Stormer, Hendrik, e-Business and e-Commerce:
use of technology implementations is an effective way for Managing the Digital Value Chain, 1st edition, 2009, Springer
Walmart to cultivate a mutually beneficial relationship with Adolfo, Crespo, Mrquez, Dynamic Modelling for Supply Chain
P&G. Management Dealing with Front-end, Back-end and Integration Issues,
1st edition, 2010, Springer

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Brown, V., Carol, DeHayes, W., Daniel, Hoffer, A., Jeffrey, Martin, Harrison, Alan, and Van, Hoek, Remko, Logistics Management and
Wainright E., and Perkins, C., William, Managing Information Strategy: Competing through the supply chain, 3rd edition, 2008,
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--------------------, The Intimate With Supply Chain: Leveraging the Supply
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David Simchi-Levi, David, Kaminsky, Philip, Simchi-Levi, Edith,


Managing the Supply Chain: The Definitive Guide for the Business
Professional, 2004, Mcgraw-Hill

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