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About the Author

Richard Wilhjelm

VP, Sales & Business Development
Compliance Networks


Richard Wilhjelm currently serves as VP, Sales & Business Development for Compliance Networks, a supply chain performance improvement solution provider. Richard has over 25 years of sales and marketing experience in the supply chain software industry. His skills in sales management and field operations have yielded tangible results within recognized companies such as Logility, Inc., JD Edwards World Solutions Company and Prophet 21, Inc. Richard received his Bachelor of Science degree in Finance from the University of Florida and currently resides in Weston, FL with his wife and three daughters.

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


Supply Chain Comment

By Richard Wilhjelm, VP Sales & Business Development, Compliance Networks

August 29, 2013



Retail Margin Risk: 5 Critical Supply Chain Steps to Ensure Merchandise Plan Execution

Step 5: "Over-Communicate" With Your Vendor Trading Partners


Wilhjelm Says:

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Creating a consistent, well-documented set of expectations and communicating them to your trading partners is the first step in a consistent, predictable and profitable supply chain.
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In my previous article dated August 1st, 2013, we discussed the value of monitoring transportation performance to ensure on-time deliveries, thus minimizing profit-draining out-of-stocks. We concluded the value was not only in cost reduction and populating the purchase order lifecycle, but also identifying bottlenecks to ultimately reduce supply chain days. These are all key steps to mitigating the margin risks retailers’ face on a daily basis. In this article I touched on the importance of over communicating not only your expectations to your vendor community, but their performance results as well. In part five of our five part series on mitigating retail margin risks, we will examine the importance of over communicating to your vendor partners and some best practices leading retailers are utilizing today to collaborate with their vendors.  

“Communication IS Leadership”

One of the best perks of my job isn’t 5 star Hotels, lavish dinners, private jet travel, or the throngs of admiring fans; it is spending time with highly-successful people at highly-successful companies. One insightful visit was to The Container Store in Coppell, Texas. If you have ever had the privilege of listening to Chairman & CEO Kip Tindell speak at a conference as I have, you know The Container Store takes a culture-first approach to doing business. One of their Foundation Principles listed on their website is ”Communication IS Leadership”. An excerpt from their site is as follows:

“Unlike other companies, we don’t work on a “need to know” basis, but rather we ask ourselves, who will benefit from having this information? Who needs this communication to help them do their job better and to help them be the best employee, the best leader, the best person they can be?”

How powerful is that? How many companies do you know who provide information to their employees, their vendors and even their customers on a “need to know basis”? From my vantage point, too many retailers fall into this category, particularly as it pertains to their vendors. By not communicating their expectations to their vendor partners and following up by communicating vendors’ performance results, retailers run the risk of an inconsistent and bloated supply chain. With this inconsistency comes retail margin risk.  While many retailers are lax in this area, some are excellent. Let me share with you some of the best practices I have observed over the years starting with the crucial first step, the plan for mutual profitability.

The Plan for Mutual Profitability

I wish more retailers would use this term rather than “routing guide” or “vendor expectations manual” as I believe it’s more descriptive and collaborative in nature. After all, both the retailer and the vendor benefit from a fast, highly responsive supply chain.  But whatever the name, creating a consistent, well-documented set of expectations and communicating them to your trading partners is the first step in a consistent, predictable and profitable supply chain. I have seen both extremes of this equation; some retailers who are vague in their expectations while others are clear in their expectations, but change them on a monthly basis. Both can be detrimental to overall supply chain performance. A clear, consistent, and realistic path to mutual profitability that changes on an annual basis is best for all parties involved. Once performance guidelines are established, there are additional best practices leading retailers employ take to over-communicate to their vendor partners.

  1.

Supply Chain Alerts – As the old adage goes, “bad news does not get better with time”. Alert your vendors immediately to supply chain failures. Alert them by email, by text, by carrier pigeon, whatever it takes to ensure the problem is corrected. Immediate action can prevent failures spreading to other DCs or future problems. If pictures are available, by all means send them.

  2. Vendor Scorecards - Provide scorecards to your vendors on a monthly basis. And, not just to your salesmen, but to everyone who can effect change. One retailer has an effective coding system using the green-amber-red cadence on their vendor scorecards. This is a simple but effective approach to highlighting key areas of performance concerns.
  3. On-Line portals – Provide vendors 24/7 access to their performance information. Why make them wait or provide this information on a “need to know” basis. Why spend valuable time and resources providing information manually when the valuable information can be deployed in an automated format.
  4. Distribution Center Visits – When was the last time a vendor came to visit your distribution center to see the impact of their shipment had on your supply chain operations. If a picture is worth 1,000 words, what is a visit worth? Invite them; let them see for themselves the impact. And while you are handing out invitations, invite your merchant to tag along as well. Some retailers refer to these visits as “boot camps”, but there is no need to yell.
  5. Flow Training – On of my all time favorites. One leading retailer holds monthly training sessions on how to flow merchandise from point A to point B most effectively. If that form of communication is not leadership, I am not sure what is. Shame on the vendor who does not attend these types of high-value sessions.
  6. Vendor Summits – After completing steps, 1-5, bring your vendors in on an annual basis. Share with them the mutual successes you have had the previous year and roll out the initiatives for the upcoming year. But most important, over-communicate your expectations so there is no ambiguity for the upcoming year

Achieving a high level of vendor performance is an iterative process and does not happen overnight. But a consentient message of vendor expectations followed a continuous stream of performance results will go along away to meeting your objectives. It has been my experience that majority of vendors are hungry for any type performance information they can get their hands on to change internal behavior. They after all are in the business of improving profitability as well.


Summary

This concludes our five part series titled, Retail Margin Risk: 5 Critical Supply Chain Steps to Ensure Merchandise Plan Execution. (For previous columns, links can be found at:  Part 1, Part 2, Part 3, and Part 4). It is my hope that you enjoyed the series and found it to be informative. Should you have any questions or would like to see some examples of supply chain alerts or vendor scorecards then drop me a line at richard.wilhjelm@compliancenetworks.com.


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