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  DECEMBER 2013
 

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From the Desk of Kim Zablocky:
The Price of Non-Compliance


I was talking with a credit manager the other day who used to work at a sizable apparel manufacturer that was previously a member of RVCF. This person stated that when they arrived at the job, there was over a million dollars in chargebacks sitting on the books, of which most could be "written off" as uncollectible. The person stated that the previous credit manager was an RVCF member, but couldn't travel to the events and was unable to get their order management team involved. The person would discuss chargebacks with the distribution team and the distribution team would make comments stating they were unaware of retail changes; that sales never documented the "the type of deal (e.g., closeouts)" properly; they never asked for buyers to extend waivers on such "special deals," resulting in chargebacks for mistakes, since the retailer treated the receipt of those goods as "first goods/orders"... Done right, there should not have been any charges at all or, if there were, they could easily have been disputed.

The person further explained that management believed that since they were a member of RVCF and deductions continued to grow in magnitude, membership was obviously a waste of money. As you could expect, this conversation was killing me. This person mentioned all the retailers for which they were "having issues." Of course, I heard that this vendor would print GS1-128 labels at the headquarters and take the labels over to the DC to affix them to the shipment - YIKES! I know many of these retailers and I know they're tough on suppliers for non-compliance, but I also know they're fair.

But, let's get back to the close to 1.3 million dollars in chargebacks. That's a huge number for a business doing less than $500 million in sales; write off 90% of 1.3m and that's $1.17 million in lost revenues. The cost of RVCF membership? PRICELESS. I find it hard to believe that amongst the myriad of services RVCF offers - the Compliance Clearinghouse (alerting you to retail changes each business day), monthly Supplier Open Forum Calls (over 50+ suppliers discussing how to successfully ship to retailers), our Site Materials, Supplier Network of over 400 "tier one" suppliers, the ability to meet One-on-One with retail customers at Conferences, etc., etc. - and let's place the cost of membership for this company at $3,900.00 annually - that there wasn't an ROI here???

 
 

Our observations are that retailers continue to grow they're private label businesses. To be successful at selling to retailers you need a strong brand, competitive pricing, to be on-time with your shipments, to deliver what you promise (quality), and, most importantly, you need to be able to outperform that retailer's private label business - because any product can be replicated.

In a trading partner relationship, there's a strong need for collaboration - to have a trusted partnership and to ensure that both sides make a profit. You simply can't "wish away" deductions or try to settle them for 50 cents on the dollar and achieve collaboration.

Do retailers treat RVCF vendor members differently? I think not, but I can tell you this - retailers want their suppliers engaged, proactive and, if there's a issue, willing to make the necessary fixes. If there is no immediate fix, offer a timeline and stick with it, but don't bleed to death because of deductions and say there is no solution. Here's a link to a white paper we wrote in 2010, titled, "The State of U.S. Retailer-Supplier Collaboration." Its story is as true today as it was four years ago. A good read for any merchandise supplier.

A quick example of ROI (one of many):
When speaking with a longtime RVCF member at the conference, he exclaimed that after years of being a member, meeting all of his retail customers once or twice a year had gotten him out of many troubling situations. Having those close relationships has allowed him to reach out on the phone or via e-mail and resolve potential non-compliance charges before those charges find their way to the A/P department. He estimated he has prevented or resolved tens of thousands of dollars that would have otherwise been lost.

In closing, RVCF isn't pro-retailer or pro-manufacturer - we're pro-"good business process." An accurate forecasting and planning initiative, error free shipping, speed to market; when the flow of inventory is delayed, the cost of committed capital increases and both sides of the aisle lose.

2014 is knocking at the door. RVCF will be sending a survey to our supplier members asking them to identify key issues that are preventing them from fully executing successful shipments globally or domestically, successfully communicating with their trading partners, and receiving payment and reconciling payments... stay tuned.

Wishing you all a Safe and Festive Holiday!

Kim Zablocky
E: kzablocky@rvcf.com

 
 
 
 
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