Final answer:
CPFR is an extension of the inventory management strategy known as Vendor Managed Inventory (VMI), enhancing collaboration in supply chain operations.
Step-by-step explanation:
According to the textbook, CPFR (Collaborative Planning, Forecasting, and Replenishment) is an extension of the inventory management strategy known as Vendor Managed Inventory (VMI). CPFR seeks to enhance the integration and coordination of supply chain operations by allowing multiple trading partners to have access to forecasting and inventory data to plan and fulfill demand more efficiently. Where VMI allows vendors to manage the inventory of their products at the customer's location, CPFR takes this collaboration further by involving other aspects of supply chain planning such as sales forecasting and production and purchasing planning.
With CPFR, companies aim to reduce inventory levels, increase inventory turns, improve in-stock percentages, and enhance overall supply chain performance. This is achieved by sharing information and collaborating on supply chain activities, enabling better decision-making and a more synchronized supply chain. CPFR is a strategic approach that involves joint business planning, sales forecasting, production and purchasing planning, demand management, and sharing of information among partners in the supply chain to enable a more efficient process from manufacturer to consumer.