From the Desk of Kim Zablocky: Managing Retail Compliance: So you think you know it all…
RVCF, now in its 19th year, has explored every facet of retail compliance. Manufacturers have long complained about compliance and the deductions that are assessed for failure to meet a retail customer's requirement. RVCF has estimated for years that vendor compliance charges equate to approximately $2 billion a year between US retailers and their merchandise suppliers. Low cost production has given CFO’s a breather when .5 to 2% of gross invoice dilutes due to these charges. Yet that can’t go on forever. Threats of and actual charges of tariffs have shaken the industry. In addition, foreign factories continue to increase their cost of production.
With that said, Retail Compliance is a necessity. Compliance makes suppliers more efficient. Retailers battle razor thin margins, competing with both brick and mortar competitors as well as Dot-Coms. On Time In Full, aka OTIF, has become the new Achilles heel for suppliers. Ship windows are getting tighter, charges can equate to a percentage of Purchase Order ... what’s supplier to do?
Educate! Merchandise suppliers simply can’t afford to go it alone. Cost cutting, downsizing etc., of people responsible in shipping orders, may offer companies relief to the bottom line, but their top line will suffer. Retailers know how their suppliers are performing. The supplier who is proactive, engaged and exceeding expectations, measured by a supplier performance scorecard, are the ones merchants are going to be more comfortable with when they’re open to buy. So, why not support your order management team by joining RVCF? We are the go-to solution for you team members to meet with their peers to hear best practice in order fulfillment by retailer, put them at the table with your largest retail customers to meet one on one at our conferences. Offer educational programs, keeping them abreast of new requirements, technologies, logistics and alike. Keep them informed daily with updates from the RVCF Clearinghouse, which alerts member companies of any logistical and vendor guide change the day before. Eliminating any opportunity to miss an important retail change that could cost you thousands of dollars caused by failure to comply.
I can continue this article by talking about cross functional teams, business process improvement, how to use and measure KPI’s, how to build orders to your retail customer requirements. But you need to be engaged. Your team needs a tool box that’s going to get the problem fixed. Just complaining isn’t going to make deductions go away.
So, I’ll leave you with the ten steps to reducing compliance deductions;
- Get Educated. Give your team training support, hire people with the proper skill sets.
- Acquire a copy of RVCF’s All About Retail Compliance.
- Deploy the right Warehouse Management System & Technology.
- Build a Cross Functional Team, have them meet a minimum of every two weeks.
- Avoid building your Supply Chain based only your biggest customers requirements; Be nimble.
- Learn to measure the important stuff. Build a scorecard you can compare with your trading partner.
- Meet with retail customers a minimum of once a year, and I’m talking the Order Management team.
- Learn from companies that do it right. They don’t have to be the biggest, just the smartest.
- Retailers-Stop chasing Amazon, they have a 10+ year head start. Do your own thing.
- Suppliers-Don’t put all your eggs in one basket. There’s no profit in shipping $7’s worth of something to be delivered to a consumer in two days.
Finally, someone in retail once told me that 25% of the cause for compliance deductions occur when the buyer and sales person consummate the deal, because sales people fail to ask important order fulfillment questions. Educate your sales force. Give them a check list of questions they should ask the buyer, so that you are not scrambling around when you find out you can’t comply with your retail customer’s requirements.