I am back from attending the RVCF Fall meeting in Scottsdale last week. It is an interesting group. It started out as the Retail Vendor Compliance Federation years go, serving mostly back then as a forum for consumer goods companies to vent about chargebacks/deductions from retailers.
RVCF founder Kim Zablocky later got the bright idea of bringing retailers into the mix and push a more collaborative agenda, and today the acronym stands for Retail Value Chain Federation, a combination of retailers and vendors.
So it was a good forum to discuss the results of SCDigest's new (and quite interesting) benchmark study on the state of retailer-vendor relationships in 2015. The results of the report were first unveiled at one of our Townhall Meetings last month, and now the full report is available. You can find it, the on-demand Townhall Meeting, and more at the report resources page: The State of Retailer-Vendor Supply Chain Relationships 2016
I did a retailers are from Venus, consumers goods companies from Mars piece a couple of years ago, based on results from a smaller scale survey back then that showed some very different ways of thinking about the supply chain between retailers and their consumer goods company "partners."
As I noted at RVCF, if one goes back through all the supply chain initiatives in this sector dating back to the 1980s (Efficient Consumer Response, Continuous Replenishment, Quick Response, CPFR, EPC RFID, the shelf-connected supply chain), the language used to describe the problems and opportunities as articulated by groups such as GS1 and VICS are virtually identical over all those many years.
That is, there is much to be gained by freely sharing information and operating a supply chain more like a single company would view the world than through disconnect supply chain planning and execution. The fact that the language never changes would suggest vision has failed to be realized.
There are some interesting examples of this more enlightened thinking. Unilever, for example, is bringing in retailers to its innovation lab in the US and using network design software to model how savings could be achieved if the supply chain was modelled as if it were a single company, not two.
A few years back, Kraft Foods was doing what it called "collaborative transportation engineering" with retailers, looking for logistics opportunities across the joint networks, especially with regards to backhauls/continuous moves. ( I am not sure what has happened with that program after all the corporate drama in recent years at Kraft, which of course is now Kraft Heinz.)
But the reality is that there are two different companies in a given relationship, with their own goals and strategies. That fact alone is complicated by a couple of other factors: (1) a given retailer can easily have hundreds of suppliers and perhaps thousands for the larger ones - just how much collaboration is really possible across that breadth? (2) to some extent, it is a zero sum game, meaning if one vendor gains share at a given retailer it is at its competitors' expense, and the total sales for the category at the retailer may not really change (though jointly removing costs could benefit both sides and not be zero sum.)
So with all that in mind, last summer we conducted a survey to get some handle on the state of the supply chain relationships between retailers and vendor after more than three decades of push for both sides to become more integrated and collaborative. In the end, we received responses from 50 retailers, about 200 manufacturers, and 80 "others" (consultants, academics, etc.) who also wanted to weigh in on the issues.
We can only summarize a small sample of the data here in this column. As you might expect, in most cases we asked almost identical questions to retailers and consumer goods companies to compare and contrast different views from each side.
All told, retailers and manufacturers rated the state of their supply chain relationships with the other side fairly strongly - both about 4.8 on average on a 1 to 7 scale, where 1 was the least strong and 7 the most, so well above the mid-point level of 3.5. But that might have been the most positive news from the survey results.
Naturally, the subject of chargebacks - always a hot button issue that never goes away - generated some very different perspectives. 51% of vendors said that the level of chargebacks they receive is rising, versus 36% of retailers who said their chargeback revenues were increasing.
Some comments from respondents on this issue were quite interesting.
One retailer, for example, commented that "Some vendors are improving, but technology is allowing us to find more [violations] to replace those improvements." Another retailer noted that "Vendors simply continue to struggle to deliver on time with the right labeling, documentation, etc."
On the vendor side, one manufacturer commented that "Retailers have largely increased their non-compliance fees. Further, the retailers have added many new compliance initiatives relative to e-commerce." Another noted that "Carrier capacity challenges are driving chargebacks with poor on time performance." That is an interesting point.
There was an especially large gap on the future of chargebacks. As seen in the graphic below, 52% of vendors believe that the level of chargebacks will grow over that period, versus just 33% of retailers that see things that way. Meanwhile, a solid 44% of retailers actually believe the level of chargebacks will decline over those 5 years, versus just 13% of vendors.
Here, we clearly have two very different perspectives. I believe it is probably something like this: retailers believe a combination process improvement and the pain of the chargebacks will eventually lead vendors to reduce their compliance violations. Vendors, on the other hand, believe retailers will get more aggressive in this area, and find new ways to trigger deductions.
The majority of retailers place their collaborative skills as just average (55%). 39% considered themselves above average, and interestingly, no retailer placed itself "near the top" of collaboration capabilities. Vendors scored themselves as possessing higher collaboration skills than do retailers. Here, a combined 53% scored themselves as either above average or near the top, with just 37% scoring themselves as average collaborators, as shown below.
There was a clear pattern in the survey data of vendors rating their collaborative skills higher and finding more value from collaboration than retailers. This could be for a number of reasons. First, many manufacturers have been at the true supply chain game for longer than merchandising-oriented retailers have been on average, at least until recently.
Second, it can be argued vendors have more to gain from collaborations that allow them to better optimize production schedules, a benefit the retailer obviously cannot receive. Indeed, some retailers that have done collaboration around time-phased order forecasting have complained they aren't receiving any benefits (read "lower prices") from helping their vendors improve their supply chains.
I have barely scratched the surface here and am already out of space. All told. I rated the state of the retailer-vendor relationships today based on the data just a B- grade - OK, but with much room for improvements.
If you are at all interested in the consumer goods to retail supply chain, you will want to check out this highly graphical report. Thanks to Compliance Networks, a provider of retail vendor performance management solutions, for commissioning this research.
How much progress have we really made in retail-vendor relationships over the past 30+ years? Any reaction to the data from the new report? What is your view of retail chargebacks? Let us know your thoughts at the Feedback button (email) or section (web form) below.