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Keys to Vendor Compliance Success

September 27, 2018

Dan Gilmore

Editor

Supply Chain Digest

Several years ago, SCDigest developed a report on “The 13 Steps to a Successful Retail Vendor Compliance Program.” Whether you are considering starting a compliance program for the first time, or have one in place and are looking to improve, it’s worth reviewing those recommendations once again, which we will do here and again in next month’s edition.

Supply Chain Digest Says...

Too often compliance programs are initiated in one area, say distribution, with a vision and scope that does not adequately accommodate the opportunity for these other functions (transportation, finance, merchandising, etc.)

 


SCDigest believes that vendor compliance programs run the right way can be identified by several key attributes:

• A focus on improving supply chain and logistics performance, not generating chargeback revenue

• Programs and penalty regimens that are easy to understand, with prompt and clear communication of errors and penalties when they occur

• Chargeback levels that accurately reflect the cost to the retailer from the error

Gough Grubbs, former senior VP of logistics and distribution at Stage Stores, offered this wise perspective on a videocast on our Supply Chain Television Channel several years ago: “I just put it to vendors this way: We have a contract that details what and how you are going to deliver. When you deviate from that contract, when you don’t deliver what you promised, we incur some costs that need to be recovered.”

With that introduction, below are summaries from the first four keys to success from the report:

No. 1 - Start with the End in Mind: It may sound obvious, but it is critical that there is a clear vision about the role and results from a vendor compliance program at the outset of the effort. And that vision needs to be developed across several functions within the company: distribution, transportation, finance, merchandising, etc.

Too often compliance programs are initiated in one area, say distribution, with a vision and scope that does not adequately accommodate the opportunity for these other functions. Or, it comes from a sort of knee-jerk reaction to some pressing issue – e.g., reducing the number of “problem” shipments – and thus does not take a broader view of all the potential benefits of a successful program.

No. 2 - Assemble the Team: A basic and obvious step, forming the team that will drive the program needs to be tackled early on, and per the discussion above needs to be truly cross functional: distribution, transportation, IT, finance, merchandising/sourcing, etc. Many retailers of course have a “vendor relations” group, and this is the natural place from which the vendor compliance effort should be led. But there is a big difference between having such a group leading the process and receiving input from other areas and actually forming the type of cross-functional team discussed above.



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No. 3 - Benchmark Other Compliance Programs: Since hundreds of retailers have gone down this path, why not learn from their efforts and mistakes?

Retailers are at times reluctant it seems to reach out to their peers for such insight, even though such benchmarking efforts can save a company looking at a compliance program much effort and help them benefit from the “lessons learned” of these established programs.

No. 4 - Define Success Metrics & Requirements: How will the company know in the end if its program is a success? The team must define what metrics will be used to judge the program, and what level of achievement is expected over what time horizons.

We’ll be back with the rest next month. The full report is available at www.scdigest.com/retail_vendor_performance.php

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