Each company in a supply chain has an effect on all the others. If your company surprises one of your suppliers with a big order, that order is likely to create problems — and cost the supplier money. But if your supplier has a pretty good idea of what you're going to buy and when you're going to buy it, the supplier can plan in such a way to meet your needs while keeping its own inventory and transportation costs low. In other words, everyone wins when supply chain partners collaborate and share information.
One way for supply chain partners to help each other is through a process called collaborative planning, forecasting, and replenishment (CPFR). In the CPFR process, companies share information about how much they expect their customers to buy and how much inventory they have on hand so that they can help each other achieve high service levels with lower amounts of inventory. You can download a very good overview of CPFR from GS-1.
CPFR is a registered trademark of GS-1, a not-for-profit association that maintains supply chain communication standards.
