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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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Are You Prepared to Overcome Supply Chain Disruptions?

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


In last month's issue of RVCF Link, we discussed the labor dispute involving the major West Coast container ports and its effect on the retail industry. Although an agreement was reached, serious issues remain, and the disruptions caused by this close call with disaster have caused the retail industry to look at the impact of supply chain disruptions as a whole with renewed focus.

According to research from BSI Supply Chain Solutions and the Business Continuity Institute, 35 percent of manufacturers are "extremely concerned about potential supply chain disruption." 77 percent point to an increasingly complex supply chain as the most significant emerging threat to business continuity, far ahead of cybercrime and a stricter regulatory environment.1

This supply chain complexity is due in large part to global sourcing, which increases the risk of manmade disruptions like the West Coast port labor dispute and political unrest as well as natural disasters and the inability of some countries to effectively deal with such events. The BSI-BCI study found that the apparel sector, which has a high percentage of manufacturing taking place in unstable regions of the world, is exposed to the greatest risk of a natural disaster at 85.6 percent, followed by the automotive (53 percent) and aerospace (51 percent) sectors.

Additional data shows that supply chain concerns have reached the C-suite. The 18th Annual Global CEO Survey from PwC found that 55 percent of industrial manufacturing CEOs are "somewhat or very concerned" about supply chain disruptions, and with good reason.2 Without supply, you have no product. Without product, you have no fulfillment. Without fulfillment, you have no revenue.

As a result, the retail industry is looking for ways to better understand and reduce the risks associated with supply chain disruptions. Unfortunately, the pressure to reduce costs and operate a lean, efficient supply chain often creates vulnerabilities that make the supply chain less resilient. When these vulnerabilities break down, customer expectations aren't met, revenue is lost, and brand reputation suffers. Many companies first need to determine if their cost-reduction initiatives are increasing risk beyond an acceptable level.

Areas of vulnerability need to be identified by gaining visibility across the entire supply chain, not just the final few links. Instead of simply tracking product, work to gain insight into the origins of raw materials. What are the weakest in links the supply chain? What are the upstream and downstream effects of a disruption at each of these stages? How much would a disruption cost in terms of both dollars and brand equity? What parts of your supply chain operations are being outsourced and what are the risks related to those vendors?

What suppliers operate in regions that could be impacted by political instability and severe weather events? How technologically and financially resilient are each of these suppliers? Do they have redundant systems and robust business continuity plans in place? What shipping routes have similar risks? By reducing dependence on a single supplier or a small number of suppliers and developing secondary shipping routes and transportation channels, organizations can mitigate the risk of a disruption.

The key is to take a holistic view of the supply chain. Quantify and prioritize each risk through analysis, use your analytics to uncover hidden risks, and proactively develop a plan for minimizing the cost and impact of disruption. The goal needs to shift from cost-reduction to gaining the flexibility to maintain the flow of goods and meet customer demand regardless of the situation. The ability to have the right product at the right price in the right place at the right time requires a supply chain that is resilient to disruption. Critical to this resiliency are end-to-end visibility and accuracy of supply chain data, collaboration between trading partners that encourages sharing of that data, and the agility to respond quickly and effectively to disruptions.

What is your company doing to mitigate the risk of supply chain disruptions? What challenges are you facing? What supply chain vulnerabilities present the highest risk and what can be done to address those vulnerabilities? Please visit the RVCF forum boards and share your thoughts, ideas and frustrations about supply chain disruptions and what can be done to minimize their impact.


CLICK HERE to return to the APRIL 2015 RVCF LINK

Tags:  Supply Chain Disruptions  West Coast Strike 

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