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Vendor Compliance: From a 3PL Perspective
Scott Weiss, Weber Logistics
We now conclude our series of 7 steps to reducing chargebacks:
- 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
- Step 5 - Develop a better audit process
- Step 6 - Challenge Chargebacks
- Step 7 - Build relationships with key retailer contacts
Chargebacks are certainly a contentious issue. But the bottom line is retailers want you to succeed. They document their requirements in painstaking detail, host workshops to review routing guide changes, and invest in dedicated resources to work with suppliers on compliance issues.
The key for suppliers then is to take advantage of these opportunities to collaborate with retailers. Here are just a few examples of what we have seen work to cultivate the relationship:
Visit a retailer's DC to tour the operation, see your product flow through the DC, and meet with a DC Manager. This tour will provide you with a better understanding of their operational processes in handling your product, why they have certain compliance requirements, and uncover any opportunities for you to improve the flow of your product through their DC's and/or reduce your costs. If using a 3PL, bringing a member of their team along is highly recommended. A high volume importer and manufacturer of cribs visited their biggest customer's DC's. Product was shipping out on pallets to the DC and the manufacturer was generating and placing a GS1 label on each carton. While visiting the retailer's DC, the manufacturer noticed that the DC was cross-docking their product in full pallet quantities. The manufacturer went back to the retailer's traffic team to ask if they could just generate pallet labels going forward and the retailer said yes. The manufacturer was able to reduce their labeling costs by $350,000 for the year.
Conduct quarterly conference calls and scorecard reviews internally and with the retailers. This is the best way to accurately gauge how your performance is measuring up in the eyes of your customer. A manufacturer of food internally ranked their performance as 99.50% only to find that their biggest retail customer had them ranked as 92.58%. The manufacturer discovered that they had failed to consider a number of key factors in their measurements that the retailer was rating them on.
Be a member and play an active role in industry organizations such as the Retail Value Chain Federation. Attending industry conferences and associations on a regular basis will allow you to stay on top of the most recent guidelines and exchange best practice ideas with your peers. A Director of Vendor Compliance decided to sit down for lunch at a random table during a compliance related conference. He introduced himself to the lady sitting down at table 3 and found out she was the Director of Logistics for a manufacturer of apparel whose biggest customer was the same as his. He had just received a $45,000 chargeback from the retailer and had no luck in getting any response to his challenges of the chargeback so he asked the lady for advice. The lady gave him the name and number of the compliance person at the retailer who was always helpful to her when she had compliance issues and even connected them on LinkedIn. The two talked and the chargeback was cut in half.
Cultivate a personal relationship with the retailer's compliance team. Technology and SOP's are all very important and key factors in reducing chargebacks. However, at the end of the day, logistics is and always will be a people business. Having a direct relationship with your customer's compliance team will separate you from the 60,000 other vendors that ship product to your customer. Simply put, it allows the retailer to put a face with a name. As complex as compliance can be, personal relationships can be the most powerful part of your compliance program. The Director of Compliance for a 3PL participated in a RVCF conference golf tournament. He was paired with a compliance director for a leading retailer. The two soon became friends and maintained contact throughout the years. One day, one of the 3PL's new customers received a $15,000 chargeback for late ASN's. The 3PL was able to reach out to the compliance director and review why the chargeback occurred and what steps the 3PL took to make sure it does not happen again. The compliance director agreed to a one time reversal of the chargeback.
Compliance = Profit
Non-compliant shipments impact profit in a big way, for both retailers and suppliers. So chargebacks will remain a necessary reality. Retailers have developed a large-scale, automated system for compliance enforcement. Their much smaller suppliers also have built compliance capabilities, but at a slower pace due to resource limitations. Some have leveraged 3PL's to kick-start efforts to become "Walmart compliant" or "Target compliant." Whichever route you take, the key is to get started. Mastering the compliance game drives dollars directly to your profit line and boosts revenue by improving your reputation with retail customers.
Scott Weiss is an expert on the West Coast logistics market and has been in the 3PL industry for over 16 years. He is Vice President of Client Solutions for Weber Logistics, The West Coast Logistics Leader. In business since 1924, Weber is a family owned third party logistics provider that operates twenty distribution centers and over six million square feet of warehouse space throughout the West Coast. Included in its services are a comprehensive in-house routing guide compliance program for order fulfillment to all major retailers and e-commerce fulfillment. Scott can be reached at email@example.com.