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A way of overcoming these challenges and establishing advantages has been through optimization of the supply chain. Initially, these improvement efforts were limited to areas within the organization, such as inventory, quality, or the manufacturing process itself. In the early nineties, however, when the American retail and consumer goods industry was experiencing stagnating revenues and, at the same time, rising costs, an increase in productivity was hardly to be realized. At that time, aggressive pricing policies were seen as the only approach to gain market share, but the consequences, mainly a negative impact on margins and profits, made it an unsustainable business practice (Seifert, 2003). This led the retail industry to recognize that real gains could only be realized through open cooperative partnerships between retailers and manufacturers.
As the supply chain improvement initiatives progressed, they began to include collaboration between the manufacturer, its suppliers, and clients. Although collaboration between trading partners was known as an efficient method for improving forecast accuracy, increasing service, and reducing costs, it was not until then that supply chain partners systematically devised processes that would move the information to where it could add value and, thereby, facilitate supply chain coordination. Since then, collaboration has been referred to as the driving force behind effective supply chain management (Horvath, 2001).
One of the latest trends in supply chain management, CPFR is advertized by many authors, consultants, and software vendors as one of the most promising practices of collaboration so far (Ireland & Crum, 2005). The purpose of this paper is to examine the validity of this statement. In doing so, it will analyze the success potential associated with CPFR and, based on pilot results, evaluate the benefits and challenges that arise with its implementation.