How can an organization reduce its own costs and that of other organizations by sharing information within the value chain?

For many companies their focus on cost reduction has been limited to the costs of their internal activi-ties. This internal focus has resulted in companies adopting JIT practices and outsourcing in order to reduce costs. The implementing of JIT practices in many cases only shifted costs elsewhere in the supply chain by forcing suppliers or customers to carry that inventory. In these companies the major-ity of their costs can be determined outside the business. If the majority of an organization’s costs lie outside the business then it follows that the biggest opportunities for improvement in their cost position will also be found by focusing on the wider supply chain. This requires companies within the supply chain to share information.
According to an article written by Christopher and Gattorna (2005) published in Marketing Management there is now a growing recognition of the importance of shared information in the sup-ply chain in consumer goods distribution involving the adoption of collaborative planning forecasting and replenishment (CPFR). CPFR involves the joint determination of forecasts through pooled knowledge and information. Based on this agreed view of demand over the forecast horizon, the supplier takes responsibility for the replenishment of supplies based upon the actual rate of sale or usage. Significant inventory reductions have been reported in numerous pilot applications along with simultaneous improvement in sales revenue as a result of improved availability.