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.

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.  

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.