The Value of Compliance Data
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Vendor Compliance: From a 3PL Perspective
By Scott Weiss, Weber Logistics
Retailer chargeback fines for non-compliant shipments are a profit-draining reality for many consumer goods manufacturers - but they don't have to be.
Some vendors spend more time, energy and money attempting to negotiate their way out of whatever chargebacks they were assessed rather than simply spending a small fraction of their time and money on the front side preventing these problems from happening in the first place. Success requires creating a vendor compliance capability - either internally or through a partnership with a third party logistics provider (3PL) experienced in retail distribution.
We continue our series of 7 Steps to Reduce Chargebacks in Your Vendor Compliance Program.
Step 1 - Quantify the financial impact of chargebacks
Step 2 - Utilize an advanced warehouse management system (WMS)
Step 3 - Get EDI right
Step 4 - Make compliance someone's full time job
Who owns vendor compliance within your organization? Logistics? Sales? Accounts receivable? With no clear owner, there is no clear plan. With no clear plan, compliance deteriorates into a cycle of repeated violations and finger-pointing.
The responsibilities of a dedicated compliance resource are clear - all activities related to creating, implementing, and enforcing procedures required to meet retail routing guide requirements.
Third party logistics providers that manage distribution for consumer product companies can also play a critical role in ensuring compliance. In fact, consumer goods companies with limited resources to invest in a compliance program can lean on a 3PL to take on much of this burden.
Regardless of whether you handle your distribution in-house or outsource it to a 3PL, vendor compliance must be a strategic priority within your organization. The problem for vendors, particularly ones that ship to dozens of different retailers, is that it is difficult to keep track of all the different guides because they are dynamic documents that change all the time.
You cannot wait for your customers to tell you what to do in the area of compliance. It is a full time job to stay informed while at the same time keeping your organization abreast of retailers' changing compliance requirements.
Here are some key attributes of what makes a successful compliance person:
- Detailed and organized
- Exceptional relationship, negotiation, and influencing skills
- Strong analytical abilities
- Great communication skills
- Operational knowledge
The following are some examples of proactive roles and responsibilities that a full time compliance person can perform - either in-house or at a 3PL:
Create and administer a vendor compliance intranet site: The site would be a routing guide "cheat sheet" and include all major routing, shipping and labeling requirements for each retailer. An intranet site administered by one primary point of contact takes all the guesswork and interpretation out of the routing guides and makes sure all employees across the organization are interpreting the routing guide the same way.
Detailed process documentation: Create written SOP's for all packing and shipping processes to incorporate compliance requirements.
Foolproof label placement guidelines: Work with your information services team to program the warehouse management system to output an actual diagram of proper label placement at the same time shipping labels are printed.
Training sessions with warehouse employees: Provide employee training sessions on the retailers' guides, focusing only on the applicable pages or paragraphs that apply to the warehouse. This should not be just a talking session, but rather an interactive training session that reviews the intranet site, the labels, and the visual aids that you have created specific to the retailer.
Training session with cross-functional teams: Every single department in your organization has to be communicated with. If a sales person writes a purchase order to accounts receivable, they have to understand the routing guide implications of the order.
Refute Chargebacks: Not all chargebacks are valid. Others that are valid can be reduced with the right approach. A talented vendor compliance point person that has created a dynamic vendor compliance program is armed with the right skills and tools to go back to the retailer with the right documentation and get the chargeback reversed or reduced.
Maintain relationships with retailer traffic departments: At the end of the day, the logistics industry is a people and relationship business. A retailer such as Walmart has over 60,000 suppliers that ship to their stores. Having that one-on-one relationship with a retailer's logistics team, networking at Retail Value Chain Federation events, or reviewing scorecards in person on a regular basis allows a retailer to put a face with a name - this separates your company from the 59,999 other suppliers and pays big dividends.
So, as you can see, there are plenty of proactive action items that warrant making vendor compliance a full time job. By dedicating resources on the front side, you will see fewer service failures, have a more educated organization, create goodwill with your customer, and ultimately achieve higher sales and revenue for your company.
Scott Weiss is an expert on the Southern California logistics market and has been in the 3PL industry for over 15 years. He is Vice-President of Client Solutions for Weber Logistics. Weber operates 17 distribution centers across the western U.S. and works with many consumer product companies to ensure compliance with retailers' delivery requirements. Scott may be reached at email@example.com.