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Retail Value Chain 101: Retailers Need to Understand Compliance Management from the Supplier's Perspective

Posted By Administration, Thursday, June 8, 2017
Updated: Thursday, June 8, 2017


In the April 2017 issue of RVCF Link, we discussed the importance of having a high quality supplier onboarding process as part of a comprehensive supplier relationship management (SRM) program. Similar to customer relationship management (CRM), SRM is critical to maximizing the value of the trading partner relationship, and a properly managed onboarding process can put you on the path towards a successful, profitable relationship.

Building on this important first step, let's take a closer look at what we learned from the 2016 Merchandise Supplier Survey: Compliance Management. Based on feedback from 133 suppliers, RVCF published a white paper highlighting the survey's findings, which offer actionable insights that can assist retailers as they onboard and work with new suppliers. By better understanding the capability and resource issues faced by suppliers, retailers can better position themselves to fully manage and guide new supplier relationships, both internally and externally.

The white paper focused on five key areas:

  1. Compliance Requirement Management
  2. Deduction Management
  3. Retailer Onboarding Agreements
  4. Cross-Functional Teams
  5. Meetings with Retailers

Our objective was to learn, directly from suppliers, how they handle these five business processes and what factors they feel impact their performance. Suppliers were able to benchmark against others, identify challenges, and uncover best practices in all five areas. Suppliers gained practical knowledge that can be used to support their retailer compliance programs. As we said in the survey introduction, "Armed with this information, struggling suppliers can drive change where change is needed."

However, the survey responses also provide valuable insights that retailers can use to better understand their new supplier community. Let's examine a few interesting takeaways from a retailer's perspective.

First, you as a retailer are likely better positioned to help a supplier understand what they need to do to improve their performance than they are. Because a supplier's salesperson often reviews, negotiates and signs retailer compliance agreements, others within the supplier organization may lack visibility and input that would have added value. Ideally, the supplier's cross-functional team should be closely involved and consulted before closure. Once a supplier starts doing business with a new retailer, they frequently list "complexity of requirements and communication" as a primary challenge they face. Suppliers end up reacting to a compliance problem after the fact, which is not an ideal scenario for either trading partner.

Second, because many new suppliers' first impulse when facing a compliance requirement they cannot comply with is to ask their salesperson to go back to the buyer and seek an exception, you may want to consider taking a "head them off at the pass" attitude. Besides providing simple, easy-to-follow standards and supporting training materials, there is real value in inviting new suppliers to visit your distribution center and observe how their orders are received, handled and audited.

Ask suppliers to confirm, in advance of placing the first order, that they have internally reviewed your compliance requirements. and that each area of their company has confirmed their ability and readiness to comply. This could help catch suppliers that have overlooked this important step. You'll also want to be sure your merchandise buyers understand and respect the role they should and should not play in any compliance-related conversations with the supplier's sales team.

Finally, pre-deduction compliance notifications are now a best practice from the majority of retailers. Pre-deduction notifications provide more time for the supplier to dispute a pending violation. They may also represent the best opportunity for a retailer to "parachute in" to help a supplier identify the cause of a problem and quickly correct it to prevent future orders from being shipped incorrectly.

As a retailer, do you flag a new supplier's initial order so a member of your vendor relations/compliance team can quickly reach out in the event a pre-deduction notification is sent? In our survey, suppliers pointed out that they often don't feel they have adequate staffing in compliance to handle the complexity created from multiple retailer compliance programs.

To learn more about how suppliers are approaching compliance management and gain insights that can help retailers better understand the needs of suppliers, download the 2016 Merchandise Supplier Survey: Compliance Management from the RVCF Thought Leadership Store.

CLICK HERE to return to the JUNE 2017 RVCF LINK

Tags:  Compliance Management  Supplier Relationship Management 

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