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Compliance Is an Opportunity, Not a Problem

Posted By Administration, Thursday, November 17, 2016
Updated: Wednesday, November 16, 2016


According to a new report from Moody's, slow supply chains are making it difficult for department stores to stay competitive. Because today's customers are more inclined to prioritize value and convenience, and they have the ability to compare prices in a matter of seconds, department stores are already losing business to discount retailers and online channels. As a result, department stores are facing an 11 percent drop in aggregate operating income this year.

Slow supply chains have been their biggest Achilles' heel, according to Moody's. The resulting inventory backlogs and markdowns make the end consumer less willing to pay full price for merchandise. Department stores in particular have been slow to make supply chain improvements because they've always had the cover of a huge customer base and exclusive brands that didn't sell to discount retailers.

That's no longer the case. Customers can now find many of these brands at lower prices from online channels, mass merchants and discounters. Department stores are now under pressure to tighten up their supply chains while trying to figure out how to stop the bleeding.

Although the Moody's report focused on department stores, the entire industry is in an intense battle to maintain and build sales and customer loyalty. In some cases, it's battle for survival.

To accelerate time to shelf, retailers need suppliers that are willing and able to move merchandise quickly through the supply chain. Every time merchandise is diverted from stores to the distribution center so the retailer can perform tasks that the supplier was supposed to handle, cost and time are added to the supply chain, and excess inventory and markdowns rear their ugly heads.

This is why retailers are demanding more from suppliers, and compliance requirements are getting tougher. Suppliers would be well-served to be proactive in helping retailers combat the slow supply chain. That begins with doing everything possible to adhere to retailer requirements.

Use the RVCF Compliance Clearinghouse to stay on top of updates. Implement changes as quickly as possible. If there's a problem, address it right away. Be honest and forthcoming about your capabilities. If a retailer has a requirement that you can't meet, offer a solution instead of a sob story. Suggest an alternative or a compromise that works for both sides, including a timeline for implementation.

Most importantly, collaborate with your retailer counterparts. Build and nurture a mutually beneficial relationship. Schedule regular meetings, either in person or via video. Tour each other's facilities and familiarize yourself with each other's operations. Partner with retailers on initiatives for improving speed to shelf and enhancing the customer experience. Attend RVCF conferences and schedule One-on-One meetings with as many of your retailer customers as possible.

This will show retailers that you're going the extra mile to overcome supply chain issues, achieve high marks on scorecards, and become a best-in-class supplier. You're investing in the relationship. On the other hand, if you're just tolerating retailer compliance programs, you can't prosper – and you may not survive. Doing the bare minimum might buy you more time, but it doesn't change the outcome.

Best-in-class suppliers view compliance as a path to success. That's because compliance isn't just about reducing chargebacks. First and foremost, compliance is about speed to shelf, improving in-stocks, capturing the sale at full price, increasing profits, and delighting the customer.

But compliance also gives the retailer the confidence and motivation to reward the supplier with more assortment, more sales, more promotion, more advertising, and possibly a seat at the table to have a voice in the product category. More and more retailers are turning to their highest performing suppliers to take a leadership role in the overall category – not just the supplier's products, but all products in the category – as a way to optimize sales.

However, you can't get to that point if you drop the ball with compliance and contribute to a slow, costly supply chain. You can only ask for more from the retailer when you've proven yourself as a truly committed, best-in-class supplier. That's the "trading" in trading partner.

Supply chain improvements are critical for not only department stores, but for all retailers and merchandise suppliers. Retailers are depending on suppliers to raise their game and adhere to stricter requirements. Suppliers that embrace this challenge and view compliance as an opportunity will find rewards that extend far beyond a reduction in chargebacks.

CLICK HERE to return to the NOVEMBER 2016 RVCF LINK

Tags:  Collaboration  Slow Supply Chain  Supply Chain Disruptions 

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