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Retail Value Chain 101: What is the Value of a Retail Scorecard?

Posted By Administration, Thursday, August 10, 2017
Updated: Tuesday, August 8, 2017


by RVCF


Retailer scorecarding of supplier performance across a wide range of key performance indicators (KPIs) is a proven tool for both measuring order performance and driving compliance improvement. Back in 2014, RVCF partnered with Supply Chain Insights to better understand the current role of scorecards in improving relationships and corporate performance.

The central focus behind the development of scorecards has been supply chain performance, with the greatest emphasis on activities related to on-time, accurate and complete shipments preceded by an ASN (Advance Shipment Notice, the EDI 856). With input from 34 retailers and 31 manufacturers/suppliers, the survey provided us with an overview of the current and potential value proposition for scorecarding across various elements of the relationship, a contrast of importance and performance of retail scorecards across a number of activities as shown here:

This graph was the combination of two questions we asked both retailers and suppliers. First, when you think about your current primary relationship, how important is each of these elements? Second, how would you rate your primary relationship in each of these areas?

Both retailers and suppliers responded that traditional supply chain focus areas (accurate shipments, on-time, properly labeled, with ASN) were the highest in both importance and performance. But other areas such as exciting assortments, promotions, lowest total cost and corporate social responsibility (CSR) impact were all aspects of the relationship for which scorecards had little value or impact.

Looking at this data in a slightly different way, as shown above, Supply Chain Insights concluded, "The focus of the scorecard activity changes slightly by type of trading partner. While both retailer and supplier are aligned on the importance of scorecards to improve the perfect order, they are not aligned on the other dimensions of scorecard performance. The work to date is the tip of the iceberg. There is much more to be done. The key to success is alignment. For example, the retailer is more interested in improving assortment and the supplier is more focused on the management of deductions. Since scorecards have not been made a part of buying decisions, progress is slow. If scorecards were more of a carrot than a stick, the progress would be faster."

The study continued to look at how suppliers use scorecards internally, how often they were reviewed, and to what degree they were shared cross functionally inside the supplier organization. For retailers, we asked what types of data was shared, how often this data was provided, and how data was provided or accessed (spreadsheets, portals, etc.).

Supply Chain Insights concluded, "While the retailer has more power in the channel than the supplier, they are behind the supplier in sharing of data and building effective value networks. It is also ironic that the most common data shared by the retailer is often the least useful, i.e., the forecast error of the retailer is just too high for forecast data sharing to be meaningful. A greater value for the supplier occurs when the retailer shares actual take-away from the store via point of sale purchases. The second most valuable data element is warehouse perpetual inventory (PI) levels. The lack of a good, and more widespread, capability for perpetual inventory is a barrier to retailer and supplier collaboration."

Finally, after drilling down into how retailers reward or penalize suppliers based on performance, and identifying the most common carrots and sticks retailer use, the study provided recommendations for both retailers and for suppliers to consider.

For Retailers:

  • Share data timely and openly through a private network. Private networks are more effective for data sharing and collaboration than portals.
  • Focus on clean data. An accurate perpetual inventory signal that reflects real time changes, as well as accurate forecasts, are critical.
  • Take your hand out of the supplier's pocket. Deductions should be a tool for driving performance improvements, not a revenue stream.

For Suppliers:

  • Use retailer data. This data can help you get a better sense of demand and improve replenishment.
  • Give retailers a reason to share clean data. Use retailer data to uncover new opportunities that add value to the relationship.
  • Pay for performance. Closely monitor deductions and types, and tie promotion performance to incentives when possible.

If you would like to read the study "What Is the Value of a Retail Scorecard?" in its entirety, click here.


CLICK HERE to return to the AUGUST 2017 RVCF LINK

Tags:  Scorecard  Scorecarding 

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How Enhanced Scorecarding Provides a More Valuable, Holistic View of the Retailer-Supplier Relationship, Part 2

Posted By Administration, Thursday, May 12, 2016
Updated: Wednesday, May 11, 2016


by RVCF


In Part 1 of this article, published in the April issue of RVCF Link, we discussed how retailers should go beyond managing supply chain performance and instead manage suppliers more holistically. This requires the retailer to gain a higher-level perspective over its relationships, which begins by gaining a deeper understanding of their suppliers' roles. This enhanced perspective can be used to improve the speed of supplier negotiations and produce more positive outcomes, including optimal resource utilization, an improved customer experience, increased sales and higher margins.

We also touched on the value of supplier segmentation. Obviously, not all suppliers have the same value to the retailer organization. As a result, suppliers are managed differently, treated differently, and scorecarded somewhat differently. When you understand the role and value of each supplier and segment them accordingly, you can better manage your expectations as a retailer and their performance as a supplier.

This is also a valuable internal exercise for the retailer that makes it possible for everyone to wrap their collective head around who they want to work with, why, and how. Once you have that internal alignment, you'll spend less time on initiatives that don't yield a return on your investment. Instead, you can use supplier segmentation to identify and leverage brand enhancement relationships in which both the retailer and supplier collaborate to strengthen the market positions of both parties.

The most valuable, brand-building opportunities are often reserved for the largest, most powerful suppliers that can leverage high brand awareness and value to generate excitement among consumers. On the other hand, fewer resources are typically dedicated to smaller suppliers that don't have the capabilities or brand equity of large suppliers. In most cases, the retailer wants to manage this supplier segment as simply and efficiently as possible.

A prime example of a collaborative, brand-building relationship is the store-within-a-store concept. The supplier benefits by essentially owning a prime piece of real estate within the retail store, while the retailer benefits from being perceived as the place to shop for a highly sought-after brand. Both benefit by offering a unique shopping experience with a distinct look and feel. We're seeing this in home electronics, sports apparel, luxury brands and other categories. These are opportunities that you would identify and pursue after you've gained a thorough understand of your suppliers and executed a segmentation plan.

These strategies can be tied to scorecards. The key is to take your supply chain scorecards and make them more than that. Create scorecards that factor in these larger issues. Who are my strategic suppliers? Why are they strategic suppliers? How do I identify opportunities with suppliers who are capable of and willing to collaborate on these brand-building initiatives?

At the same time, retailers are dealing with a new omni-channel reality in which a good portion of sales don't go through the store. Purchases are made on computers and mobile devices. Merchandise can be shipped directly to the consumer from the supplier. The omni-channel concept requires scorecards and performance measurement that go beyond the data you can capture in a retail store or distribution center.

How do you scorecard a supplier when you weren't really involved in the transaction? The supplier received the order, packaged the merchandise, and shipped it to the customer. The only way to scorecard the events that occur between your supplier and your customer may be to solicit feedback from the customer. Was the product packaged well? Did it arrive on time? Did you get what you expected? Were you happy with the product? If you had to return or exchange the product, was the process simple and convenient?

You may have to look at social media data. How do consumers feel about the brand? How do they rate the brand? How do they engage with the brand? Social media data can be integrated with your scorecard. This can help you understand not only the strength and perception of the brand and supplier, but also the performance of the supplier in fulfilling an order that didn't come through you.

This type of analysis and scorecarding may be going on within the e-commerce group of some retailers, but the data rarely finds its way onto a holistic scorecard that is used by the entire organization. There is typically one scorecard for supply chain performance and another scorecard used exclusively by e-commerce.

If you have multiple scorecards inside your retail organization, various groups and departments will have their own perspectives and could be acting independently of one another based on their own silo of information. Omni-channel has created a need for a single, holistic view of one scorecard that integrates data from across the organization. Although it could be a major undertaking, there is significant value to be gained by merging disparate scorecards.

A unified scorecard will provide management with greater visibility into the retailer-supplier relationship. Complete, accurate data and end-to-end visibility lead to more informed decisions. This enhanced perspective that takes omni-channel into account will enable the retailer's investments to be targeted more strategically, resulting in improved performance, higher ROI from collaborative efforts, and more widespread support from across the supplier community.


CLICK HERE to return to the MAY 2016 RVCF LINK

Tags:  Scorecarding 

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How Enhanced Scorecarding Provides a More Valuable, Holistic View of the Retailer-Supplier Relationship, Part 1

Posted By Administration, Thursday, April 14, 2016
Updated: Tuesday, April 12, 2016


by RVCF

Today's leading retailers are constantly working to strengthen their supplier relationships and scorecards, which are an important part of understanding supplier performance. However, current scorecards often paint an incomplete picture of the retailer-supplier relationship. Most are structured around traditional supply chain metrics to track performance based on the retailer's expectations or "standards." As a result, the scorecard only reflects the retailer's relationship with the supplier as it relates to inventory availability and movement.

It was in this area that initial efforts around order tracking and data capture allowed for accurate reporting and scorecarding initiatives to take hold. Most importantly, the availability and sharing of this data have enabled many suppliers and retailers to make significant improvements in their mutual inventory management objectives. The scorecards serve as a tool to reveal opportunities, focus the collaborative efforts of the two partners, and improve performance.

While scorecarding may have started out with a supply chain-centric focus, there is much broader scorecarding opportunity. With additional perspective, the collaborative efforts between retailers and suppliers can be much broader. Clearly, the retailer-supplier relationship extends far beyond the supply chain relationship. Enhanced scorecarding will not only allow retailers to better manage supply chain performance, it can also help retailers manage suppliers in a more holistic way, inform negotiations, and identify strategic growth opportunities.

This process begins with building a deeper, more holistic understanding of their suppliers' roles, which enables retailers to gain additional perspective into each relationship. There are various voices and measurements that can support a more complete and accurate assessment of both historic and current performance and opportunity. This is true across multiple touch points in the retailer organization, such as merchandising, marketing, risk management, accounting, and store operations.

Because so much of the supplier negotiation process is managed by the merchants, each retailer needs to understand the value that an enhanced supplier perspective can contribute to the negotiation process. Merchant-initiated projects that encompass product, price and promotion can be significant contributors to corporate performance and expense. As such, negotiations in this area can lead to significant, customer-facing contributions to the brand, driving share and loyalty.

The objective is simple. Improve the speed and outcome of supplier negotiations by getting to the right suppliers with requests that they are capable of and willing to support. The outcome is a more effective utilization of resources within retailer organizations, better customer experiences and, of course, higher sales and margin dollars than would have been realized without this perspective.

In order to develop this enhanced perspective, individuals within retailer organizations who interact with each supplier should work together to answer important questions, such as:

  • Is there a clear, accurate and shared understanding of supplier support and capability within our organization?
  • Which suppliers are capable of and willing to provide higher levels of support and resources?
  • Which suppliers, for whatever reason, are unable or unwilling to do more or provide additional support?
  • Which suppliers are interested in helping us grow our share in the marketplace?
  • Which suppliers are flexible and willing to try new activities and promotions, test new products, or develop new point-of-sale presentations?
  • Which suppliers have resources available to provide support and which do not?
  • Which suppliers are actively limiting the amount they sell through to us?
  • Which suppliers are looking for greater levels of partnership and which are already developing greater levels of partnership with others?

Without a clear perspective, the chance of success during negotiations is limited. On the other hand, a broader perspective enables the retailer to "roadmap" a path through their supplier relationships that delivers a higher degree of support and performance from suppliers that are most capable and willing to deliver it. The speed and degree of supplier-supported program improvement are enhanced and the retailer's ability to leverage strong partnerships and "risk manage" weak relationships is optimized.

There are different types or levels of suppliers. You have the major suppliers that have high brand awareness and value and offer the best strategic opportunities. On the other end of the spectrum, you have small, transactional suppliers that fill niches and play a complementary role in the store's assortment. There may be multiple levels of suppliers between the high and low end. The goal is to develop a multi-perspective view across the supplier community that allows for supplier segmentation. Retailers can segment or group suppliers according to their role and value, their current relationship alignment and support level, their willingness to partner and allocate resources, and their flexibility and speed to action.

Gaining the insights needed to capture a comprehensive perspective is a critical first step. Much of the data may be subjective, but it is relevant because the prevailing perception of the merchant community manages the sales relationship. The use of a questionnaire to capture input from across the supplier base in a uniform way assures an appropriate weighting of each voice and perspective. Internal training that supports understanding the corporate opportunity and is sensitive to the concerns and fears of the merchant leadership are important elements of gaining traction and cooperation.

The process may encounter challenges, and rankings or placements may need to be revisited and adjusted, but that's okay. This is a flexible and a fluid process, and change can occur quickly. Once suppliers are aware that the retailer is actively managing this perspective, many will take steps to improve their position, which benefits both the retailer and the supplier. This new perspective, once developed and added to the existing supply chain scorecarding capability, strengthens the overall relationship management process and acts as a base for developing a more strategic approach to supplier relationship development.

When these insights are incorporated into the negotiation process, the retailer can target its efforts and allocate resources to achieve the highest level of support from the supplier community. Management is better positioned to take a proactive approach to pursuing opportunities that yield the highest ROI. In the next post, we'll discuss how supplier segmentation can lead to collaborative, brand-building opportunities with suppliers, and the need to expand scorecarding to account for omni-channel requirements.


CLICK HERE to return to the APRIL 2016 RVCF LINK

Tags:  Scorecarding 

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From the Desk of Kim Zablocky: Retailer-Supplier Collaboration – The Journey

Posted By Administration, Thursday, June 11, 2015
Updated: Tuesday, June 9, 2015

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:

PO Changes
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:

  • Volume
  • Price
  • Late delivery
  • Buyer request to change month of receipt
  • Retail change

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.

Fill Rates
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.

Common Vocabulary
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.

Kim
kzablocky@rvcf.com
(646) 442-3473

CLICK HERE to return to the JUNE 2015 RVCF LINK

Tags:  Collaboration  KPI's  Metrics  Scorecarding 

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Phase 2 of the Trading Partner Interface of the Future Takes Shape

Posted By Administration, Thursday, April 9, 2015
Updated: Wednesday, April 8, 2015

by RVCF


In 2014, RVCF launched the Trading Partner Interface of the Future initiative with the goal of advancing the concept of a neutral, cloud-based platform in which data could flow between trading partners without human intervention. All stakeholders would have visibility into current, complete, accurate data through a configurable, next-generation portal. This would allow for the automation of product set-up, supplier onboarding, planning and forecasting, order management, replenishment, payment and reconciliation, returns, and end-of-product lifecycle.

RVCF is excited to announce TPI2, the next phase of the Trading Partner Interface of the Future initiative. TPI2 will be presented at the RVCF Annual Fall Conference, which is being held November 8-11 at the JW Marriott Scottsdale Camelback Inn Resort & Spa in Scottsdale, AZ. Please note that we have changed the venue due to unplanned construction at the previous location.

The first part of the initiative focused on the various components of the retail supply chain's functionality lifecycle, including high-level strategy, category management, merchandising, finance and accounts payable, operations, and supply chain. TPI2 is a six-month project that will explore ways to improve productivity, profitability and brand value by analyzing and developing the following attributes:

  • Predictive Analytics. Mining granular retail data will help trading partners identify and forecast trends and make data-driven decisions.
  • Lean Inventory Flow Management. Organizations can improve inventory flow through real time planning, forecasting and allocation collaboration. This attribute will include product data as well as demand, replenishment, fill rate, safety, and out-of-stock information, using dashboards with innovative metrics.
  • Lead Time, Supply Chain and Transportation Audit. Data errors that cause shrinkage, shipped not ordered, substitutions, and shortages can be eliminated by tying a PO and ASN to the actual order and improving real time visibility across the supply chain.
  • POS Data Sharing to Optimize Replenishment. By sharing data, retailers and suppliers can gain insights into consumer demand, improve customer service, and better align retailer and supplier sales data.
  • Scorecarding Supplier Performance. Supplier and merchandise set-up and onboarding processes as well as continuing education for new suppliers should be automated. By integrating scorecarding with previously mentioned attributes, suppliers can improve their performance ratings.

Sponsors for TPI2 are Compliance Networks and Retail Solutions, Inc. and RVCF will continue to look for additional service providers and partners who can help bring this exciting concept one step closer to reality. The overall goal of TPI2 is to meet trading partner needs for simplicity, integration and intuitiveness in data sharing and order fulfillment in order to reduce costs and improve operational efficiency. By eliminating data siloes between retailers and suppliers, and within organizations, stakeholders can find new ways to leverage existing data, produce new types of data, and use advanced tools and metrics to analyze that data and maximize its business value. With the Trading Partner Interface of the Future, data can be seamlessly accessed and shared to improve procurement speed and accuracy, increase sales and margins, reduce risk, ensure the best possible customer experience, and strengthen trading partner relationships.

Instead of having individual organizations build their own engines that eliminate the slow, error-prone process of pushing paper and e-mails back and forth, RVCF believes the future of retailer-supplier communications requires an independent, vendor-neutral engine that serves the retail industry as a whole.

We want to hear your thoughts on the Trading Partner Interface of the Future. What is needed to move the concept forward? What pain points are not being addressed? Contact Kim Zablocky at (646) 442-3473 with your suggestions. We also invite you to register for the RVCF Annual Fall Conference so you can learn more about TPI2.


CLICK HERE to return to the APRIL 2015 RVCF LINK

Tags:  Inventory Management  Predictive Analytics  Scorecarding  TPI  TPI2  Trading Partner Interface of the Future 

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