We typically hear two uniquely framed sets of feedback from both retailers and their merchandise suppliers regarding scorecards. From the retailers' perspective, we hear that the purpose is to improve shipment accuracy by communicating with their suppliers what they're doing right and what they're doing wrong. Retailers' strive to accomplish this with KPI's usually comprised of 5 or 6 metrics for on-time delivery, completeness, damage free, fill rate, expectations to physical order received, and the like. In turn, suppliers would argue that shipment accuracy must also reflect what is happening between retailers' buyers and the suppliers' sales departments. Supplier are also quick to point out that many scorecards fail to take into account what may be happening to their orders while in-transit and at the time of receipt, prior to inbound scanning against their ASN's.
So, let's take a look at a number of issues that need to be explored, before we can improve those scorecards:
Purchase orders, on average, change 4.4 times before an ASN is sent. Often times, PO changes are blocked by the retailers' merchandising systems after an ASN is sent. The five top reasons for PO changes:
Buyer request to change month of receipt
PO changes negative can negatively impact both sides of the aisle. If the supplier doesn't the part or all of the changes prior to shipment, the order is already out of compliance; as such, delays are created as the retailer must correct the inaccurate shipment or refuse receipt. Retail supply chain teams should understand the dynamic of how these changes affect supplier performance. In turn, suppliers should not accept these changes if the requests cannot be met with accuracy and in a timely manner.
A common complaint from suppliers is fill rate requirements. Suppliers hate to cancel the order because they can't ship complete. Many times a supplier's sales department will push for shipping what is currently in stock – the old "fill and kill." But, suppliers need to address these issues with great care. PO's should not be accepted if fill rate requirements cannot be met. Instead of shipping partial orders, the PO should be cancelled and rewritten/resent to reflect what can actually be shipped (or what is on hand). More importantly, suppliers should not substitute or "smart pick" as this practice only leads to more financial loss. Conversely, retailers need to partner with their suppliers to review inventory levels and sell-through.
Here's another challenge that affects both sides of the trading partner relationship – at all levels of the respective enterprises – common vocabulary. I can't stress enough that all of this "order management lingo" emerged from different ivory towers. Years back at one of our first round table discussions with a group of retailers, we asked what they call certain processes, definitions and terms. We found one's lexicon can mean something very different in comparison to that of their peers. One example is the definition of "on-time" – I'll leave it at that. In any event, the confusion created for suppliers due to lack of common vocabulary can create chaos.
Training and Collaboration
If, you're a retailer, how do you improve your processes that drive your scorecard? If, you don't share data and collaborate with your suppliers, so much information can be lost. Your suppliers can sometimes determine from their side if your scorecard is accurate; if it's not, you lose credibility. And if they don't understand your scorecard, it becomes useless. We suggest that you pilot a "scorecard accuracy test" with 5-10 diverse suppliers. Run your scorecard through the vigors and share results with those participating suppliers. Understand the business processes outside of the key metrics of your scorecard. Cancelled orders, PO changes, and special deals can wreak havoc on how a supplier is measured – and unfairly we might add.
Metrics and Reversals
We have listened for years that merchandise suppliers feel it's unfair that one UPC or one missing ASN can mean disaster to their scorecard. There's a valid argument that metrics should be "weighted" to reflect statistically a Six Sigma failure rate. I was once told that the on-time percentage best practice was (whether true or not) 64%. Another argument from suppliers is simply that metrics included on certain scorecards simply don't make sense. Retailer should certainly be looking at the potential missing pieces of the scorecard puzzle that could give their suppliers more insight into their needs.
As for scorecard reversals (for errors made on behalf of a retailer's personnel or systems), there should be a time limit for when reversals should appear and a way to reflect them on future scorecards. I'm told many reasons why retailers can't, which I get, but there should be an ongoing effort to find a way to improve this process.
Call to Action
In our 15 years, we have seen great gains. The retail industry is continuing to build the tools, processes and systems necessary to weed out the error-prone supply chain. We want to not only keep the conversation going, but start making strides toward the end goal – accurate scorecards that suppliers understand and can act upon.
The point is, we still have a long way to go. Let RVCF join you on the journey.
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