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About the Author

Greg Holder
CEO
Compliance Networks


Greg Holder is currently Chief Executive Officer and Chairman of the Board for Compliance Networks, a software and services company serving the retail supply chain. Mr. Holder has retail practitioner experience with Dillard’s Inc. and Stage Stores, Inc. where he spent many successful years in distribution, logistics and store operations at various distribution centers and corporate offices around the US. A majority of Mr. Holder’s work in retail has been focused on optimizing the flow of merchandise through the retail supply chain and implementing best-in-class vendor compliance solutions. Mr. Holder was a co-founder of Compliance Networks in 2000 and currently serves as Chief Executive Officer and Chairman of the Board. An engineer by training, Mr. Holder received his Bachelor of Science degree from the University of Oklahoma.

For more information, please visit www.compliancenetworks.com.


Supply Chain Comment

By Greg Holder, CEO, Compliance Networks

January 31, 2013



Five Steps To Profitable Vendor Performance Management

In the Retail Supply Chain there Should Be an Interdependent Relationship Between Retailer and Supplier



In March 1999 I was working for a retailer in Houston Texas as the Director of Logistics. Late one night I settled back down in my office to get caught up on some things and decided to quickly listen to my voicemails from the day. The very first voicemail I listened to was from an Asian man, presumably from one of our vendor partners. In broken English he rambled about a significant amount of deductions from his checks for reasons unknown to him. He did not leave his name, a call back number or even his company name. Obviously, what I did understand from his voicemail was that he had a significant number of shipping violations that he did not understand, did not want to understand but wanted them to go away. At the end of the rambling message he finished with, in very clear unbroken English "I hope you go out of business, click."

Holder Says:

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Change is a constant in all supply chains.
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Earlier in the year, we had begun a supply chain overhaul and a part of that project was a very aggressive program to identify failures in the supply chain and recover the unanticipated costs associated to those failures. It was obvious, based on not just this call but many others like it, that the deductions were getting the vendors attention but the message was unclear. For those not in the consumer goods to retail supply chain, retailers present to their suppliers typically what is called a vendor requirements document used to share with the suppliers the rules of engagement when shipping merchandise to the retailer. For the most part the rules are similar from retailer to retailer but the penalties vary based on many things from the maturity of supply chain operations to the corporate strategy of the retailer.

Our goal at this retailer was simple: Flow merchandise as efficiently as possible from vendor dock to store selling floor. Ship us what we ordered, when we ordered it and in the quantities on the purchase order. This obviously was not happening from many of our vendors. Since our program was relatively new, I figured we failed in many respects. One thing we did not fail at was getting their attention!! The rest of that night and the next week or so was spent learning from our failures. Here are a few areas to focus on when rolling out new programs for your suppliers:

 

  1. Clearly communicate expectations and consequences.  We had always had a vendor requirements document that outlined penalties for failing to follow the rules (chargebacks or expense offsets).   What we did not know was how many vendors were following those rules. 
  2. Inspect what you expect. We updated our audit program to focus on several key areas to have the biggest impact on achieving our goal.  We knew as those things were corrected, we would move to the next areas and gradually evolve.  What we did not know is how quickly we would see change.
  3. Communicate audit results.  If retailers do not tell suppliers they are failing, the suppliers will never change what they are doing.  This is where most retailers fail AND where we failed.  A one line item on a remittance advise report is not sufficient at explaining to a supplier what they did wrong.   An email explaining the problem including attached photos and other documentation can clearly explain the failure as well as justify the financial penalty associated to it.
  4. Automate the program.  There are a lot of repetitive tasks that can be automated both in the identification of the failures and in the email notifications.  Once a program is established look for these tasks to automate.
  5. Use the Internet.  Put the information in a secure portal to make the information available to your suppliers.  This self-serve environment will free up the retailers resources to manage the business rather than react to supplier requests for information.  The retailer and the suppliers will both benefit from this.


Final Thoughts

Change is a constant in all supply chains. In the retail supply chain there should be an interdependent relationship between retailer and supplier. The only way to experience successful change is to find a way to truly collaborate with the suppliers. It begins and ends with clear, timely communication. Communicate expectations, measure those expectations and tell suppliers how they are performing. Listen to the suppliers when they come back to you and educate them to help make them successful. Making the suppliers successful will help the retailer accomplish their goals and hopefully the next voicemail you get will be one thanking you for the solutions and the extra business.

Agree or Disagree with Our Expert's Perspective? Let Us Know Your Thoughts at the Feedback section below.

Recent Feedback

Great article. I am a little suprised not to see BNSF in the mix while I understand their financial mode/operation is a little different. 

That would only give a complete perspective with all the players in the pool.


Srihari
Senior Consultant
Infosys
May, 22 2016

Surprised to see Home Depot fall off the list; thought they were winning with Sync?


Mike O'Brien
Senior editor
Access Intelligence
May, 26 2016

Using the right tool for the right job has always been a best practice and one of the reasons, we feel, that RFID has never taken off in the DC as exponentially as pundits have been forecasting since 2006. While these results may seem surprising to those solely focused on barcode scanning, the adoption of multi-modal technologies in the DC makes perfect sense for greater worker efficiency and productivity.


Julie Leonard
Marketing Director
Inovity
Jun, 27 2016

The IoT Platform in this year's (2016) Hype Cycle is on the ascending side, entering the "Peak of Inflated Expectation" area. How does this compare to the IoT positions of the previous years, which have already peaked in 2015? Isn't this contradicting in itself?

Editor's Note: 

You are right, Internet of Things (IoT) was at the top of the Garter new technology hype curve not long ago. As you noted, however, this time the placement was for “IoT Platforms,” a category of software tools from a good number of vendors to manage connectivity, data communications and more with IoT-enabled devices in the field.

So, this is different fro IoT generally, though a company deploying connected things obviously needs some kind of platform – hoe grown or acquired – to manage those functions.

Why IoT generically is not on the curve this year I wondered myself.

 

 


Carsten Baumann
Strategic Alliance Manager
Schneider Electric
Aug, 19 2016

I agree totally with Mr. Schneider.

I have always lived by "put it in writing" all my work life.  I am a firm believer of the many benefits of putting everything in writing and I try to teach it to as many people as I can.

This "putting in writing" can also be used for almost anything else.  Here are some general benefits (only some) of "putting in writing":

1. Everything is better understood between parties involved.  There are lots of people types who need something visual to improve their understanding.
2. Everyone can read to review and correct anything misunderstood.  This will ensure that all parties concerned confirm the details of the agreements as correct.  This is further enhanced by having all parties involved sign off on a hard copy or confirm via reply email.
3. Everything has a proof.  Not to belittle the element of trust among parties involved, it is always safest to have tangible proof of what was agreed on.
4. There will be a document to refer to at any time by any one who needs clarification.
5. The documentation can be useful historical data for any future endeavor.  It provides inputs for better decisions on related situations in the future.
6. This can also be compiled and used to teach future new team members.  "Learn from the past" it is said.

There are many more benefits.  Mr. Schneider is very correct about his call to "put it in writing".






Jo Ann Tudtud-Navalta
Materials Management Manager
Chong Hua Hospital, Cebu City, Philippines
Aug, 21 2016

U.S. companies are reshoring and foreign companies are investing in U.S. locations to be in close proximity to the U.S. market for customer responsiveness, flexibility, quality control, and for the positive branding of "Made in USA".

Reshoring including FDI balanced offshoring in 2015 as it did in 2014. In comparison, in 2000-2007 the U.S. lost net about 200,000 manufacturing jobs per year to offshoring. That is huge progress to celebrate!

The Reshoring Initiative Can Help. In order to help companies decide objectively to reshore manufacturing back to the U.S. or offshore, the nonprofit Reshoring Initiative's free Total Cost of Ownership Estimator can help corporations calculate the real P&L impact of reshoring or offshoring. http://www.reshorenow.org/TCO_Estimator.cfm


Sandy Montalbano
Consultant
Reshoring Initiative
Aug, 24 2016

 Good article!  I am sending this to my colleagues who work with me.  We have to keep this in mind.  Thanks!


Robert
Transportation Manager
N/A
Aug, 30 2016

SCM is all about getting the order delivered to the Customer on date/ time requested because happy Customers = Revenue. Using the right tools to do the right job is important and SCM is heavily dependent on sophisticated ERP systems to get right real data info ASP.

I've worked in a DC with more than 400,000 line items and measured the Productivity of Pickers by how many "picks" per day.

I've learned that one doesn't have to remind Germany about your EDI orders.


Ian Jansen
Mr
NHLS
Sep, 14 2016

Challenge - to build and sustain effective relationships at the level of the organizations that are responsible for effectively coordinating and colaborating in an otherwise highly competitive environment 


Don Benson
Partner
Warehouse Coach
Sep, 15 2016

Of course we all need to up our game. We need to move with the times, and always be one step ahead of what the future will bring.


Jade
Admin
Fulfillment Logistics UK Ltd
Oct, 02 2016

Thanks for the article, but I know there's a lot more to this issue than just the pay rates. Please check out my blogs on the subject at www.zipxpress.net.


Mike Dargis
President of asset-based carrier based in the Midwest
Zip Xpress Inc. (at ZipXpress.net)
Oct, 03 2016

Lora, great article! I agree that companies choose the 'safe' solution more often than not. My solution is a bolt-on for legacy ERP's and we even face challeneges of customer adoption. Most like to play it safe and choose an ERP upgrade, which is more costly, time consuming, and has lower ROI across the board. Would love to learn more about your company, we are always looking for partnerships.

Blaine
blaine.schultz@syncron.com


Blaine
Inventory Specialist
Syncron
Nov, 16 2016

This is a game changer in GE's production and prototyping.  It also has huge implications across the GE global supply chain with regard to the management of their support and spare parts network. 


Bob McIntyre
National Account Executive
DBK Concepts LLC
Nov, 21 2016
 
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