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CFAR Form and Function
It's about time I start practicing what I preach. Enough writing about writing about writing. There are things actually getting done out there. Things that make an awful lot of sense. And it's high time I start writing about them.
In my previous life, I was responsible for investigating business opportunities relative to the Internet. The company I worked for delivered portfolio management and trading solutions to "buy side" investment management firms. It was hard core vertical market stuff -- about as far away from online publishing as you can get. We were selling things that people would pay for, for one.
The financial services market is very information intensive. Since 99% of all the actual physical shares traded on the exchanges are stored in a vault in lower Manhattan, the industry is almost entirely bit driven. And it has been for quite a while. So, when you talk about moving financial data over the Internet, people ask why. As in "why the Internet? We already have secure networks..."
It's a good question, actually. When some business people talk about how they're going to use the 'net, they're not thinking about vanity publishing or building community. They're talking about moving bits around, to and from customers, using a public network instead of a private one. And it becomes a question of Internet form matching business function.
A perfect example: CFAR, or Collaborative Forecasting and Replenishment. A joint project of Wal-Mart and Warner-Lambert (the makers of Listerine), CFAR is a proposed set of standards to enable retailers and suppliers to effectively manage inventory.
Imagine this scenario: Wal-Mart sells Listerine in its stores all across the country. They have some ideas about the historical demand of Listerine, and base their orders for Listerine based on their estimates of future sales. Meanwhile, Warner-Lambert sits on the other side, with its own set of demand information, and its own sales forecasts. And since Wal-Mart is, well, Wal-Mart, their orders most likely comprise a good chunk of Warner-Lambert's Listerine business.
As most folks know, holding too much excess inventory is an expensive proposition. As is the foregone profits from holding too little inventory. Retailers work incredibly hard to avoid carrying excess inventory -- they'd love to perfectly meet demand every month. Not to mention shelf-space, promotion and transportation issues. The goal is simple enough: have just enough Listerine on hand for every mouth that needs it, and is willing to pay for it. Now -- imagine that Wal-Mart and Warner-Lambert could collaborate on their forecasts, eliminating the risk of uncoordinated inventory management. That is the promise of CFAR.
CFAR goes beyond traditional EDI, by allowing suppliers and retailers to recursively collaborate on inventory projections. And it goes beyond traditional collaboration tools (like Lotus Notes and plain old email), by providing structured message layouts and defined procedures for publishing and revising inventory forecasts.
Technically, the CFAR concept could run on any network. But it gets the biggest form/function bang for the buck when it runs on the Internet. Here's why:
The good news in all of this, besides the fact that your local Wal-Mart will most likely never run out of Listerine again, is that here we have an example of how the Internet is being used for a specific, high benefit business activity. While CFAR may not have the name-recognition (or the Hendrixized television commercials) of a certain search engine, it is an illustration of how the Internet can not only help solve business problems, but also open up opportunities for third party application developers, technology consultants and (dare I say it), supply chain re-engineering.
Damn, it's not even been three months and I'm already spouting a new language.
Other pieces about ecommerce: