Why We All Need to Watch Out for Our Bottom Line
From the Desk of Kim Zablocky
Why we all need to watch out for our bottom line:
Both, retailers and their merchandise suppliers have one thing in common, and that’s to remain profitable. Between tariffs, supply chain disruption, unsigned trade deals, and of course fierce competition in the retail marketplace.
This leads me to write a hopefully compelling message as to why these two groups need to join RVCF.
First, merchandise suppliers; margins are tight as ever, so every dollar’s important. RVCF has always focused on reducing or even eliminating Retail compliance deduction’s for close to 25 years, these types of charges have averaged 0.25%-1.25% off invoice, the average is 0.4% to 0.8% so let’s say your business does $300mil a year in gross sales, let’s take the average of 0.6, that’s $1,800,000 in charges that need to be reconciled, disputed or written off. All of which is costly, requiring resources and labor. If you think it's only the majors assessing these charges, the regionals are also developing their own supplier performance management programs. Oh, by the way, did I mention that the average charge/deduction is $250-300. This monetary dilution of your sales can easily eat away at your bottom line. Sadly, some suppliers still look at these charges as the cost of doing business, that mindset doesn’t hold water.
A final thought, as retailer’s rollout On-Time In-Full programs, delivery windows will continue to tighten (and charges will become more expensive), not to mention “speed to serve” E-Com sales. If you think synchronized dancing is hard, wait. So, what’s a merchandise supplier to do, as we have stated for years, work with your peer group to better understand a common retailer requirement. Collaborate with your retail customers to build a working relationship across your enterprise, don’t just leave it up to sales. Build cross-functional teams, they should meet a minimum of twice a month. Included should be representatives of; Sales Operations, EDI/IT, DC Managers, Vendor Compliance and Supply Chain.
Now for retailers; Inventory is either their first or second largest asset. Late shipments, miss labeled, ASN errors, substitutions, partial shipments, damaged goods, miss-packed all leading to disruption in the retailer’s supply chain. Retailers today face many challenges, carrying costs, cost of safety stock, loss from out of stocks, limited visibility of inventory, and not to mention the additional cost of serving the consumer via multi-channel platforms.
These shipments errors by suppliers, slows the process, reducing speed to market, adding costs by increasing days in inventory, all of which erodes the retailer’s margins, plus the supplier’s goods are delayed from getting to the selling floor.
Years ago, shipment issues were viewed by senior management as tactical, not anymore. Most retailers are deploying new supplier performance platforms, they need to speed the onboarding of new supplier process, require product images, attributes and DIM measurement, develop new inventory flow strategies, new configured packaging requirements to meet multi-channel objectives, and finally, improve inventory visibility.
How does one drive business process improvement? Audit, measure, use standard practices, work with peers to bring alignment to processes and more importantly, be careful of your nomenclature when communicating with your suppliers, thus a glossary of your terms should be defined. If retailers as a whole measure, manage & communicate to their suppliers in a similar fashion, it would make those suppliers more efficient, more aligned to those common goals.
How can we help? RVCF facilitates many of these opportunities. Membership does not require a huge investment Heck, most everything we offer can be construed as self-funded or pays for itself.
Next year we will enter our twentieth year of existence. I believe, over that period, we have changed the dynamic on how retailers’ partner with their merchandise suppliers.
Charles Darwin’s theory of evolution was that it wasn’t a creature’s strength, or cunning that prevented it from extinction, it was its ability to adapt over time to its environment. So, our message here is to build a better, smarter relationship with your trading partner.