Decision Sciences Journal
Volume 30, Number 4
Fall 1999
Interorganizational Collaborative Forecasting and Replenishment
Systems and Supply Chain Implications
Srinivasan Raghunathan
Management Science and Information Systems Department, School
of Management, The University of Texas at Dallas, Richardson,
TX 75083, email: sraghu@utdallas.edu
Abstract. Collaborative Forecasting and Replenishment
(CFAR) is a new interorganizational system that enables retailers
and manufacturers to forecast demand and schedule production
jointly. The capabilities of CFAR exceed those of the traditional
EDI because CFAR allows exchange of complex decision support
models and manufacturer/retailer strategies. The proponents of
CFAR claim that the fastest way for retailers and manufacturers
to slash inventory costs and product shortages is by coordinating
their decisions. The impact of CFAR on the supply chain using
a model consisting of a manufacturer selling its product through
two independent identical retailers is analyzed. The model assumes
that the manufacturer doesn’t face capacity constraints,
the demand is stationary, and retailer prices are constant over
time; the shortages are backordered at the manufacturer and retailers
to isolate the effects of information sharing in CFAR. The most
significant findings relate to the increase in the cost incurred
by the nonparticipant in CFAR, the increase in the manufacturer’s
cost of serving the nonparticipant if the participant can obtain
delivery guarantees in return for demand information sharing,
and the incentives of the players to move towards universal retailer
participation in CFAR. The findings are explained using the risk
structure faced by the players in the supply chain. The managerial
implications of the impact of CFAR on the supply chain structure
are also discussed.
Subject Areas: Interorganizational Systems, Operations
Management, and Supply Chain Management. |