Large retailers are constantly looking for new suppliers who have new and unique products that aren't carried by competitors. At the same time, young suppliers are eager to get their products into the stores of major retailers. Over the course of a year, large retailers, especially major department stores and apparel retailers, may onboard 100 or more suppliers.
These retailers typically have a robust supply chain operation, with dedicated supply chain teams, sophisticated software and infrastructure, and solid compliance programs and performance metrics. On the other hand, most of the suppliers being onboarded are relatively small and haven't yet made these investments.
In most cases, the retailer wants a supplier that's not quite ready for prime time. They send a glorified owner's manual to get the supplier up to speed and they say they'll work closely with the supplier at first to track and review orders. However, they simply don't have the manpower to parachute in and help every supplier.
Even though the supplier knows they're not ready for prime time, they want to be that retailer's trading partner. The supplier promises to do a good job and works hard, but their supply chain lacks the people, processes and systems required to meet retailer requirements.
The supplier ships orders, makes mistakes, and gets hit with chargebacks from the retailer. This becomes the less-than-ideal status quo. Despite the repeated chargebacks, supplier performance isn't improving significantly. The retailer isn't happy and the supplier isn't happy.
Of course, there's an ugly little reality out there in the supplier community.
The supplier looks at the complex requirements imposed upon them by retailers, who want packing, ticketing, labeling and other details handled in ways that aren't standard for the supplier. The supplier determines it's not worth it to change their shipping processes. When they're hit with a chargeback, they decide to just pay the fee and work that cost into their P&L in such a way that makes it manageable.
Does this story sound familiar?
There is no single solution to improving supplier performance. But if retailers are onboarding 100 or suppliers the same way every year and not seeing significant improvements in supply chain performance, retailers need to reevaluate their approach to onboarding.
We believe retailers need to get tougher and more supportive at the same time.
They can get tougher by recognizing that not all suppliers are equally valuable. That's just the cold, hard reality. Retailers need to focus their attention on the most valuable suppliers that have products that are truly unique and sell well.
Retailers can become more supportive by investing in the onboarding and supply chain performance of their most valuable suppliers. Instead of giving them a scorecard, complaining about performance, hitting them with chargebacks when they perform poorly, and wondering if they've built that cost into their cost of goods, they can get actively involved in the onboarding process. This may require retailers to hire a few people to take a more hands-on approach with new suppliers.
Visit that supplier. Go to their shipping floor. Talk to their shipping manager. Be a consultant and a teacher. Rather than giving suppliers 100 pages of text with a handful of diagrams, provide them with rich PowerPoint presentations and video instruction that are easier to understand and more accessible.
Chargebacks alone aren't bringing the kinds of improvement retailers need. Some retailers believe the only way to bring more focus and attention to their requirements is to be more punitive and raise their chargebacks. The retailers who are doing this have yet to confirm that this approach is effective.
Based on our conversations with retailers and comments during recent retailer only forums, retailers admit that they haven't invested enough in their onboarding process. Resources and budgets have been focused on compliance and scorecard programs, inventory management, e-commerce, omni-channel and other front burner issues. These are considered critical to remain competitive and deliver a seamless customer experience across all shopping channels. Although onboarding is a problem, it's not necessarily a priority.
Most retailers also don't have a sophisticated, web-based portal for quickly exchanging information with suppliers. In fact, while suppliers are waiting to find out what they did wrong and why they were penalized, they continue to make the same mistakes with future shipments and get hit with the same chargebacks. Deploying such a portal is major capital expense.
Generally speaking, retailers recognize the onboarding problem and how it relates to supplier performance, which is directly tied to two very important things – the financial performance of the retailer and the satisfaction of the consumer, who expects to get the product they want, where they want it, when they want it.
Retailers should look at their onboarding process and ask the following questions.
How sophisticated is your onboarding process in terms of people, process and systems?
Is your onboarding process as supportive as it could be?
Are your training materials as helpful as they could be?
Are you taking a one-size-fits all approach to onboarding all new suppliers?
What enhancements would improve onboarding and supplier performance?
Is it time to make onboarding a front burner issue?
We want to hear what you have to say. We invite retailers to participate in our next retailers only open forum conference call, a free monthly conference call modeled after the popular open forum sessions held at RVCF conferences. We also encourage you to share your inquiries and feedback on the RVCF forum boards regarding the challenges of onboarding and how it impacts supplier performance.
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