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From the Desk of Kim Zablocky:
"What is RVCF Good At?"

RVCF LogoRVCF Supplier Membership - what does it mean? I was just asked this morning, "What is RVCF good at?" I answered, "Getting retailers and their merchandise suppliers to communicate and collaborate."

Retailing in the U.S. is now nearing $4 trillion in annual sales - that's a whole lot of money! Let's assume, for instance, that the wholesale cost of goods that supports that $4 trillion number is $2.3 trillion. Imagine then that of the $2.3 trillion in goods shipped to retailers, as much as 3% of those goods were in error. Understanding the magnitude of this explains the vision and mission of RVCF. Think of the costs on both sides of the retail trading partner aisle that are attributed to wrong product, color, size, etc. Let's not forget transportation issues; early/late shipments; Customs delays; product delays; missed lead times; and, of course, shortages, both concealed and full carton, while in transit from supplier to shelf. Add product safety, sourcing, CPSIA, product testing, insurance, C-TPAT, and DC bypass delivery to the mix of an already complex supply chain and it's easy to see why we exist.

RVCF explores new and innovative technologies, identifies issues affecting product costs, and seeks strategies to improve production, speed delivery, and track products from factory to consumer. We focus on what's new, what drives ROI, and how best to utilize these services and products.

Then there's finance, chargebacks, receivable delusion, short-pays, cash application, non-compliance, allowances, advertising, and discounts, which lead to difficult payment reconciliation. I believe there are probably 40,000 people in the U.S. alone pushing paper back and forth between their trading partners, trying to reconcile accounts receivable/accounts payable issues. In 2012 RVCF joined the Federal Reserve Bank of Minneapolis' Remittance Coalition. Their purpose was to streamline the payment process electronically. We reduced the VICS 426 Adjustment Reason Codes, a set of over 700 credit/debit transactions codes, down to less than 80. The Federal Reserve Bank presented this work to both the X9 and X12 standard bodies for adoption and inclusion. Ultimately this will speed the payment process between B2B, leading to costs savings for all.

But, getting back to RVCF membership, no merchandise supplier, at least the folks that sell into "Big Box" retailers, should complain about any charges attributed for non-compliance if they're not already an RVCF member. If deductions represent a minimum of 4% of gross invoice, that's real money. At a 25% profit margin on a sale of $1,000.00, you'll need to sell another $160.00 to make up for the loss.

Now with cash application addressed, or at least putting an improved process in place, investing in a system aligned with objectives for deduction control and management can yield immediate and significant financial returns; such returns can come from a few areas of improvement. Companies can save time and resources dedicated to conducting research. To calculate the savings in this area, companies need to first measure what factors contribute to the costs. Using an example, if:

The average number of staff involved in resolving a deduction = A
The average time in hours each spends = B
The average hourly cost of their time = $C
Other costs (such as administration) incurred in the process = $D

Then, the total cost per deduction = (A x B x $C) + $D
.# of deductions

Estimates from various industry sources suggest that, with a deduction control and research system in place, the time to research a deduction can be lowered to 97 days, yet most suppliers have expressed a concern that they could not manage the workload and with backlog, they require at least 150 days. Keep in mind, some retailers offer suppliers only 15 days to dispute charges while the average is 60 days. It's apparent suppliers can't keep up with the workload.

In addition, merchandise suppliers usually consider the value of time in hard dollar terms, whereas they should consider who these people are and what they would be doing if they weren't spending time resolving deductions. While a large majority of deductions can be determined to be valid after research (we estimate 94%), without the proper tools to conduct such research, much time and resources will be wasted and RVCF explores those technologies.

The primary directive of RVCF is to prevent chargebacks in the first place, but when a non-compliance charge does occur, it should be communicated in a clear, concise way. Supporting document for the violation that occurred, including an image, should be provided allowing suppliers to identify the root cause and address any disconnects as soon as possible, while further ensuring the problem is not magnified. This also improves the working relationship between trading partners. In turn, the supplier needs to validate all purchase order data and, if something's wrong, they should not accept it, but rather contact their buyer for resolution.

Just the other day, a supplier contacted us with an inquiry regarding how to research and dispute invalid ASN claims when vague explanations for the violation and numerous possibilities for root cause exists. This process costs the supplier an unreasonable amount of time and labor to resolve an apparent issue, yet by the time they identify the problem, additional shipments may have gone out the door with the very same infraction present. RVCF diligently works with retailers to identify best-in-class supplier portals, scorecards, compliance policies, etc., assuring alignment throughout the retail industry, or at a minimum, our retail member base.

If you have a long-term plan on staying and prospering in the retail supply chain, thereby collecting every dollar that you invoice, then you need support a safety net sort of speaking that will allow you to understand best practices or at least a path of least resistance when shipping retailers. For more information on the services included with RVCF membership, please visit www.rvcf.com or call any of our team members - we'll be more than happy to have that conversation.