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Retail Vendor Performance Management News Round Up for October, 2019


Compliance Expert Says Many Retailers Shooting Themselves in Foot; Gartner Says Retailers Need to Partner with Vendors to Go "Circular"; Amazon Changes Stance on Shipping Low Cost Items

October 28, 2019

by SCDigest Editorial Staff


Compliance Expert Says Many Retailers Shooting Themselves in Foot

Consultant Normal Katz is perhaps the most recognized authority on vendor compliance, not only in retail but in other sectors as well. A few years ago, Katz authored the book "Successful Supply Chain Vendor Compliance."

Katz is in favor of vendor compliance programs – but often criticizes retailers for compliance programs he views as too often inefficient or overly punitive.


Supply Chain Digest Says...

At H&M, circular initiatives have already gained significant traction, Gartner says.

He picks that theme up again in a recent article in the academic Journal of Supply Chain Management, Logistics and Procurement.

There, he argues the stakes have never been higher in getting compliance programs right, given the challenge retailers face and the pressures of omnichannel commerce.

For example, in the article Katz writes that often vendors are late shipping to retailers because compliance requirements are unclear and/or vendors cannot get quick and accurate answers to their compliance questions.

If requirements were crystal clear, he says, "Vendors can self-correct," improving compliance and reducing the staff needed to support compliance programs at retailers. Katz is especially critical of standards relative to EDI communications, where he says retailers often push issues with limitations of their own internal systems on to vendors.

Interestingly, Katz cites research finding consumers want "better products" at physical stores to get them to frequently visit. Katz says those new or innovative products will often come from smaller vendors – but those companies often struggle operationally and financially from overly complex or unclear requirements that cause relatively high chargebacks and frustration.

Retailers "can do better and create a winning strategy," Katz says – starting with taking a good look in the mirror."

We’ve barely scratched the surface of all that’s in this article, some of which we suspect retailers will take issue with – but should read anyway.

The Journal itself requires a subscription to access, but a copy can be obtained from Katz at normank@katzscan.com.



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Gartner Says Retailers Need to Partner with Vendors to Go "Circular"

Earlier this year, the analysts at Gartner released as always its top 25 supply chains list, and then later, its top 25 retail supply chains rankings as well.

The top supply chains are based on a formula that includes the financial metrics of sale growth, return on assets and inventory turns; rankings from about 40 Gartner analysts and a "peer group" of about 150 supply chain professionals; and a score for Corporate Social Responsibility.

One ramification from that formula is that only public companies are considered, in order to have access to the financial numbers. Gartner also has a minimum revenue threshold of $10 billion, so only very large companies are considered.

The retail top 10 supply chains for 2019 include:

Amazon – in a special "Masters" category

1. Inditex, parent company of the Zara and other banners
2. Starbucks
3. Alibaba
4. Walmart
5. H&M
6. Home Depot
7. Gap
8. Best Buy
9. Target
10. Kroger

As part of the discussion accompanying the list, Gartner cites "leveraging partner ecosystems" as a key theme across retail top 25 companies.

This is especially true for pursuing "circular economy" strategies, Gartner says, referring to the emerging practice of focusing on recycling and re-use of the materials and components in products sold to consumers.

Vendors almost by definition have to participate in retailer circular strategies. Gartner cites the example of Gap and H&M, along with Burberry, HSBC, Nike and Stella McCartney, which have signed on as core partners to the "Make Fashion Circular" initiative. This was established by the Ellen MacArthur Foundation in an effort to get the fashion industry to radically redesign its operating model and become more circular.

At H&M, circular initiatives have already gained significant traction, Gartner says. One of the most successful is its garment collection program that focuses on keeping products and materials in use for an extended period. This works by incentivizing consumers; for example, in the US shoppers receive a 15% discount off their next in-store purchase if they drop off used garments from any brand at an H&M store. In 2018, this led to the equivalent of over 100 million used T-shirts being provided to H&M by consumers. These items are then being resold as secondhand goods, converted into other products such as cleaning rags, or broken down and recycled as new textile fibers.

Amazon Changes Stance on Shipping Low Cost Items

In a recent change, Amazon is now making available its free Amazon Prime one-day shipping for items costing as low as one dollar. In general, items costing less than $5.00 or even $10.00, even with the previous two-day shipping, would only ship for free on Amazon if customers ordered so-called "add-on" items to bring the total sale to a higher number.

But Amazon has now essentially removed those restrictions, and is also starting to place wholesale orders from vendors for resale for cheap items it had started turning away due to profitability concerns. Analysts at Edgewater Research wrote in a September that Amazon has "essentially turned off its add-on program in recent months." The category of products likely to be most impacted by the changes? Consumer packaged goods, which encompass everything from deodorant to toothpaste to shampoo.

How can Amazon afford this free shopping for items where the shipping might cost more than the product? Who knows. But some pundits are saying Amazon is looking to take sales away from retail rivals such as Walmart, Target and CVS that sell lots of such low priced CPG items.


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