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Keys to Vendor Compliance Success Part 2

December 20, 2018

Dan Gilmore


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.

Last month, we reviewed keys number 1 to 4. (See Keys to Vendor Compliance Success.)

Supply Chain Digest Says...

Clearly, someone needs to take all this and develop a master plan for the program itself and its rollout.

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.

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.

3. Benchmark Other Compliance Programs:
Since hundreds of retailers have gone down this path, why not learn from their efforts and mistakes?

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.

This month, we take a look at keys number 5 through 8.


5. Develop Vendor Requirements: What specific vendor requirements are you going to monitor? Will they all be released at once, or phased in over time? Will the requirements apply to all vendors, or will different categories of merchandise have different requirements? Of course, this is an area where something like omnichannel adds some complexity, such as with drop shipping? Do not estimate time it will take to develop the requirements.

6. Build a Clear Technology Strategy:
It takes solid technology support to develop and maintain a vendor compliance program. Many retailers decide right upfront to use a third-party solution as the foundation of their programs. For others, it's a make or buy decision, and many have in fact opted for homegrown solutions, though we believe history has shown that retailers going the homegrown route often stall in their efforts.

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7. Think Through the Approach to Penalties & Scorecarding: Most but not all programs, it must be noted, involve chargebacks, though hybrid chargeback-scorecard programs are increasingly popular, especially among retailers looking to use compliance mostly to improve supply chain performance.

If there will be chargebacks, how will they be set, and at what level for each type of violation?

8. Develop the Master Plan: Clearly, someone needs to take all this and develop a master plan for the program itself and its rollout.

That means a formal document is needed that lays out all key elements: overall objectives; detailed goals; people, process and technology; time-phased plans and rollout dates; communication and education programs, etc.

SCDigest research has retailers often failed to really lay out a true multi-year plan beyond the initial program scope to look at how all this data can be further leveraged to improve both vendor and retailer performance.

We'll be back with the final set of keys next month. The full report is available at

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