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Beyond Chargebacks:
The Value of Compliance Data

2/26/2013
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3/7/2013
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5/10/2013
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6/2-4/2013
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11/3-6/2013
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Vendor Compliance Data as a Strategic Asset (Part II)
By Sonia Parekh, PRGX

Last month's article talked about how vendor compliance data can be leveraged and used as a strategic asset - helping to drive collaboration between retailers and vendors so that they can jointly focus on minimizing lost sales. By using robust analytics to focus compliance conversations on the impact to sales, rather than on penalties and costs, retailers and vendors will align on something that really matters. It's a win for everyone - retailers, vendors and the customer.

However, as with other Big Data initiatives, running the complex analytics starts with aggregating and organizing the data to make it actionable. On its own, most transaction-level vendor compliance data has little value, but when combined properly with other sources, it can create knowledge that supports better decision making. In addition, ensuring that the organization understands how and when to use the analysis is critical to its long-term adoption. Successful data initiatives must include a plan to address organizational change. All of this may sound like a tall order, but there are a few tips that can help keep things on track.

Take the time to identify all of the source systems. Compliance data is typically housed across multiple disparate systems. The data may also have different structures and may be built on different technology solutions. Some data may even be on manually managed spreadsheets. And compliance issues are often managed by multiple people - the receiving team, quality assurance, and transportation, to name just a few. Be thorough and talk to everyone involved in the processes affected by compliance to make sure you identify all the source systems and capture all the right data before you think about integrating it.

Ensure data quality. Once you have identified the source systems for all of the data, take a look at how that data is created. Whether it is manually entered and tracked or based on a completely automated process, make sure the processes are tightened up to ensure data integrity and consistency. Employing some basic data governance principles will help as well. Scrub the data, establish a baseline and metadata (data dictionaries), and perform periodic and ongoing measurements of the data quality. With this initiative as with all other Big Data initiatives, managing data quality is essential to the results.

Establish a data model that meets all needs. Besides the merchants, many other key functional groups within a retailer can benefit from vendor compliance analytics. For example, warehouse management teams may establish different QA procedures for different vendors based on their past track records. Logistics teams can use the reports as an input when forecasting receiving and processing costs, and finance teams may look at the analysis to estimate expected revenue from chargebacks. Involving all key parties when designing the data model will help make certain that it meets everyone's needs. In addition, integrating the data at the line-item level by assigning and matching compliance issues and charges to each item and PO will enable significant reporting flexibility. Pulling together data at the lowest level of detail will provide users the ability to "slice and dice" the data at multiple levels in the hierarchy - by item, by category, by vendor and more.

Formalize the use of analytics in key buying processes. Analysis is valuable only if it is used - and merchants stand to benefit the most from vendor compliance analytics, if they use it effectively. Formalizing the use of the data by defining some standing reports that become mandatory inputs for vendor management can help guarantee that the merchants adopt the initiative. For example, a report that compares the vendor's compliance record to the category average should be included in all vendor performance review meetings. Similarly, the same report should be reviewed before making a decision to feature any vendor in a special display, print campaign, or even on a landing page on the web to ensure merchants and marketers consider any risks posed by compliance issues.

Retailers today face a world of tough competition and demanding customers. Successful companies will use data to build competitive advantages wherever possible. Leveraging vendor compliance data to collaborate with vendors and address operational issues is an easy way to make an immediate bottom line impact - real cost savings by reducing time and effort required to get the merchandise to the floor. And of course, getting the right merchandise on the floor at the right time drives top line sales. Big Data can sound daunting. Start with an initiative like vendor compliance, which is less complex than price or assortment optimization but can drive immediate and significant results. You will soon be well on your way to winning.


Sonia Parekh
Sonia Parekh is a Principal in PRGX's Business Analytics and Advisory Services Division. She has an extensive retail background that includes merchandising experience in the department store, specialty and discount sectors of retailing. She has also managed merchandise categories for leading brick and mortar, catalog and online retailers. Sonia has consulted with many clients to improve profitability by taking a customer-centric point of view and leveraging data for strategic decision making. She has a deep understanding of how to drive vendor-retailer relationships that are a win for the end consumer. Sonia has a B.S. in Economics from the Wharton School of Business and an MBA from the University of Michigan.

 

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