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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. He is responsible for strengthening executive-level relationships with customers and key prospects. Richard has over 25 years of sales and marketing experience in the supply chain software industry and currently resides in Weston Florida 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

December 19, 2013



Vendor Compliance vs. Vendor Performance: What’s the Difference?

The Key Question is "What Metric Defines Success for Your Vendor Performance Objectives?"


Wilhjelm Says:

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While the maximization of chargebacks is appealing in the short term, the relentless pursuit I see leading retailers focused on, is identifying the purchase order lifecycle and ultimately reducing it.
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Or is there a difference? In my travels I hear the terms used synonymously to describe a common desired outcome, “make my vendors better” or “change vendor behavior”. Though the desired outcomes may be similar for both terms, I believe the approaches are significantly different. In my last post before the holiday break; let us discuss the differences, shall we?


By Definition

Let us first take a look at the formal definitions for both and see how they compare and contrast. Both definitions come to us courtesy of businessdictionary.com and have been edited for the sake of brevity.

 

Compliance – Certification or confirmation that the doer of an action or the manufacturer or supplier of a product meets the requirements of accepted practices or the terms of a contract.


That is fairly straight forward definition. In layman’s term I believe it to mean simply, “ship me as I asked you to”.  Now let us look at performance.  

 

Performance – The accomplishment of a given task measured against preset known standards of accuracy, completeness, cost and speed.


After reviewing both definitions I can certainly see why the terms are used synonymously. Both have a ring of “just get the job done”. But upon closer inspection, performance implies the difference between accomplished vs. expected while compliance is focused on did we accomplish the expected. See the difference?  While similar in nature, I believe the mindset the retail enterprise takes has a profound impact on their income statement. And contained within the definition of performance is the key component every senior supply chain executive I know of is looking for – speed.

Enterprise Mindset

I truly believe how the retail enterprise values the compliance vs. performance debate will determine the profitability of their supply chain and ultimately that of the retail enterprise.  Do they view the process to be tactical or strategic?  In my humble opinion compliance is somewhat tactical in nature as it looks backwards. Did the vendor use the right label, carton, and carrier and ship the right product at the right time? If not here comes your chargeback.  The retailer waits for the next purchase order and begins the review process all over again. This process gives the retailer an element of control in their supply chain. Performance on the other hand is more strategic in nature as it uses all available information to look forward.  It takes a holistic view of the overall purchase order lifecycle and relentlessly looks for opportunities to shrink it. Once one opportunity is attained, it’s off to look for the next one and so on.  Does the retailer with the performance mindset still utilize chargebacks? By all means yes, as it is an extremely effective lever for retail profitability. In addition to compliance, the performance mindset gives the retailer and additional element, visibility and control.

How does your organization look at the compliance vs. performance debate? When I do opportunity assessments for enterprises here are some of the key questions I like to ask.


  1. Is vendor performance part of the company overall strategic plan or is it ”handled”’ by a room full of people adjacent to the freight office?

  2. What level of management in the enterprise is directly responsible for vendor performance? CEO, COO, SVP, VP, Director or Manager?
  3. Who has access to performance data? Supply chain only? Or is it shared with merchants and heaven forbid, vendors?
  4. What is your IT commitment to vendor performance? Are significant resources devoted to it or is it ‘handled’ in Access or Excel? Was it a strategic project for IT or did the supply chain folks create their own in order to get the job done?
  5. What is the level of partnership with your strategic vendors? Does your vendor performance team continually interact with your vendors to identify opportunities to reduce supply chain days and waste or is it centered on chargeback resolution? And by the way, what did you name your department that manages your vendors, vendor compliance or vendor performance?

Key Metrics

Finally, the key question I like to ask is what metric defines success for your vendor performance objectives. Is it the maximization of chargebacks or the reduction in supply chain days? Where is your focus in this critical matter? Leading retail companies that I have worked with are focused on the latter vs. the former. While the maximization of chargebacks is appealing in the short term, the relentless pursuit I see leading retailers focused on, is identifying the purchase order lifecycle and ultimately reducing it for reasons we outlined in a previous post.


Summary

And there you have it, my thoughts on the compliance vs. performance debate. Thank you for allowing me to share with you my views and wishing everyone a prosperous and safe holiday season.


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