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Greg Holder on Vendor Compliance and eCommerce


EDI Transactions Monitoring is Critical to Maintaining Visibilty and Control

May 30, 2017

Dan Gilmore

Editor

Supply Chain Digest

Supply Chain Digest editor Dan Gilmore recently spent some time with Greg Holder, CEO of Compliance Networks, on issues related to vendor compliance and ecommerce. Highlight are below.

Gilmore: One of the key issues here I think is the vendor drop shipping that has become so prominent. What are the vendor compliance issues here?

Holder: There is really two things. First, if you think about the typical retailer you would normally shop at, many are pursuing what they call the "endless aisle," where they are offering things not carried in their stores or not even carried in their ecommerce fulfillment centers.

Supply Chain Digest Says...

Most retailers are managed by merchants, and many of them are leery of the chargeback process.

 

Greg Holder

CEO

Compliance Networks

The first thing a retailer is concerned about whendrop shipping from a vendor is the impact on their brand. An example of that is if something goes wrong, then it's likely it’s the retailer the consumer is going to be upset with, not the vendor.

The next thing from a retailer's perspective will be concerns about the timing of the shipment. With drop shipping the retailers is now blind, so they are losing control of that shipment and they need to be able to manage any exceptions that occur.

So when there is an ecommerce order that needs to be drop shipped, then an EDI 850 purchase order is sent to the vendor, awaiting a response with an EDI 855 transaction, which is the purchase order acknowledgement, generally in two to four hours.

Beyond that, within a day they want that product shipped, and that involves another EDI transaction, which is an 856 or what would typically be known as an ASN, but with some details that might be different than for a standard advanced ship notice sent to a distribution center, in this case asking for a tracking ID. You can think of it as like a FedEx or UPS tracking number.

And then finally there is the invoice, the retailer generally wants that within a day. So the cycle is a whole lot more compressed, and in any of those events they want to know about exceptions and if customer service needs to get involved.

So where we would normally see an inbound vendor compliance program at the retail DC, if it is being shipped by a supplier, the real controls are all those EDI transactions.

Gilmore: This is very interesting to me. I think you still might want to track something akin to fill rates here, maybe based on PO acceptance or when the order actually shipped or something like that. That's very different than measuring fill rate based on a full truck coming into a DC. I assume even though this is being handled by the vendor, you can still track and measure all this electronically?

Holder: Absolutely. So if you look at the 855 purchase order, that is at the item level, so if someone orders five and the vendor acknowledges they can only ship four, that's the first trigger as an exception and means they have to be on the phone on communicate with the customer about another unit or item to replace that.

Of course, we would expect the 855 and the ASN and the invoice all to match, but of course we know that isn't always the case, and we need to track that.


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Gilmore: OK, second topic: retailers have traditionally managed their own fulfillment, but with ecommerce it seems a growing number are using third-parties to manage this. How does vendor compliance work when a retailer uses a 3PL?

Holder: I am going to disagree with you a bit by saying I am seeing a trend of retailers moving away from third parties and managing their own efulfillment.

But beyond that, the process is pretty much the same. Even if the 3PL has its own WMS or other distribution systems, we make our compliance system available to the 3PLs over the Cloud, including tablets for shipment audits, and we tie into the EDI and other transactions in the same way.

 

Gilmore: Finally, it's challenging times for many retailers today, in part due to ecommerce, with much pressure on the bottom line. It also seems to me by having a robust vendor compliance program you can help that financial scenario in part by making sure you recover costs from vendor performance failures.

Holder: In general, you are correct, but most retailers are managed by merchants, and many of them are leery of the chargeback process. So we hear the same objections that we heard 20 years ago about the challenges of issuing chargebacks to offset a retailer's costs, and they will often say things like "We really need certain vendors, so we don't want to create issues by generating chargebacks."

But you still need to hold those vendors accountable for delivering what they agreed to in the purchase order. There are costs that a retailer incurs when something is not right about a shipment. Those costs need to be recovered, in a fair and objective way, and as you said that's more important than ever today given the financial environment. Vendor compliance systems enable that process for retailers.


Any comment on this article? Enter below.

Your Comments/Feedback

Srihari

Senior Consultant, Infosys
Posted on: May, 22 2016
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.

Mike O'Brien

Senior editor, Access Intelligence
Posted on: May, 26 2016
Surprised to see Home Depot fall off the list; thought they were winning with Sync?

Julie Leonard

Marketing Director, Inovity
Posted on: Jun, 27 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.

Carsten Baumann

Strategic Alliance Manager, Schneider Electric
Posted on: Aug, 19 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.

 

 

Jo Ann Tudtud-Navalta

Materials Management Manager, Chong Hua Hospital, Cebu City, Philippines
Posted on: Aug, 21 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".





Sandy Montalbano

Consultant, Reshoring Initiative
Posted on: Aug, 24 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

Robert

Transportation Manager, N/A
Posted on: Aug, 30 2016
 Good article!  I am sending this to my colleagues who work with me.  We have to keep this in mind.  Thanks!

Ian Jansen

Mr, NHLS
Posted on: Sep, 14 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.

Don Benson

Partner, Warehouse Coach
Posted on: Sep, 15 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 

Jade

Admin, Fulfillment Logistics UK Ltd
Posted on: Oct, 02 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.

Mike Dargis

President of asset-based carrier based in the Midwest, Zip Xpress Inc. (at ZipXpress.net)
Posted on: Oct, 03 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.

Blaine

Inventory Specialist, Syncron
Posted on: Nov, 16 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

Bob McIntyre

National Account Executive, DBK Concepts LLC
Posted on: Nov, 21 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. 

Kai Furmans

Professor, KIT
Posted on: May, 22 2017
I am referencing to the comment that leasing of warehousing equipment (beyond forklift trucks) is a vision for 2030.
Just recently in Europe, such a business model has started, see here: https://next-intralogistics.de/

I am following with a lot of interest, how the business develops.

 
 
 
 
 

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