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CFAR Form and Function
Nov 11, 1996 :: Michael Sippey

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:

  • Pervasiveness. Wal-Mart has obviously realized that the Internet is the most common-sense choice to link together stores, distribution nodes and suppliers across the country, and potentially around the world. When a new Wal-Mart goes up, it's going to be a lot easier to drop in an 128k ISDN connection to the Internet than a 56k leased line into a private VAN.

  • Scalability. If CFAR takes off as a standard, it potentially could be adopted by retailers and suppliers both small and large. A 28.8k line hooked into a laptop could be all the small retailer needs.

  • Piggy-backing on other players. Users of CFAR can take advantage of the tremendous amount of work that's going into Internet technologies. In the area of security, for example, you can bet that engineers at Netscape and Microsoft (not to mention a group of folks in Soda Hall) will continue to hammer on SSL and other forms of key cryptography.

While not required, the CFAR protocol calls out for a custom-written software application to manage the collaboration and communication process. Benchmarking Partners, the consulting firm who is working with Wal-Mart and Warner-Lambert to implement CFAR, has designed the CFAR Workbench as proof of concept. What's interesting about their decision to develop a piece of client software is that it speaks to the "dumbness" of the standard browser. Sure, Netscape Navigator may be fine for reading your favorite web zine or grabbbing a stock quote, but it falls short when faced with difficult business management tasks. I've said it before: some information isn't meant to be browsed, it's mean to be used.

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: