If you are a supplier to large retailers, it is likely that you have incurred some form of chargeback due to a non-compliance event, such as an incorrect ASN. Perhaps this is a recurring problem for your business that is driving down your margins and negatively impacting your scorecard performance with your most strategic accounts.
You know that you must improve to keep your existing customers happy and to grow your business; however, it is no small task. Although it may be of little comfort, you are not alone. This is an area where most suppliers struggle to be consistently successful.
This second in two best practices tips were developed specifically for small to medium sized companies that are new to supplying national retailers, as well as for suppliers that are struggling with consistently meeting compliance requirements within their retail customer community.
6. Measure, Measure, Measure:
Measure Compliance Effectiveness
It is a familiar adage: you cannot improve what you do not measure. Suppliers can be certain that retailers will be measuring their performance, so it only makes sense that suppliers perform their own measurements of their compliance programs. Having this information will enable them to respond to potential issues before they become visible to customers.
Here again, best-of-breed EDI platforms and warehouse management systems will provide tools that enable suppliers to create their own internal scorecards for evaluating performance. Most retailers will provide a performance scorecard to the supplier when requested and suppliers should make comparisons between the two to make sure that what is important to the retailer is also tracked internally. It also provides the opportunity to verify that there are no inconsistencies in the measures that may lead to incorrect compliance charges or inaccurate performance ratings.
As with any measurement program, to be most effective, accountability and reward mechanisms should be in place. Each departmental leader should be held accountable to their team’s results and the appropriate reward structures should be put in place. Companies might consider tying a portion of variable compensation to the performance goals that are established.
As a further tool for success, the scorecards (both retailer and internal) should be socialized with the broader teams during regular staff meetings. Just as a supplier needs to understand how the retailer is measuring them, individual team members need similar feedback to achieve success. Measuring a key performance indicator and communicating the results to those responsible will lead to performance improvements. This will also foster competitiveness with other teams and a continuous improvement environment.
7. Learn from the best:
Embrace institutionalized retail business practices
Take a page from the retailer community and seek efficiencies from all extended supply chain partners. This goes above and beyond seeking operational improvements within the four walls of the supplier’s business, but also involves socializing compliance challenges and requirements with all supply chain partners in order to find opportunities to improve compliance with the retail community. This will include third party logistics (3PL) providers, vendors, and carriers with which a supplier interacts
Working with these other parties in the ecosystem can help to identify opportunities for improvement and cost reduction. For example, carriers may be able to offer consolidation opportunities or other means of reducing cost even while adhering to more aggressive delivery windows.
Carriers may also have insight into specific retailers that may aid the supplier in working more effectively with that retailer. Just as a supplier’s retail customer holds them accountable to things like case and pallet configurations, suppliers can hold their vendors
accountable to the same requirements. It is easiest to meet such requirements at the ultimate source when the products are initially packaged and configured for shipping.
For suppliers that work with 3PLs for the fulfillment of retailer orders, it will be in their best interest to established concrete requirements that ensure retail compliance is built into the process. By selecting 3PLs that commonly work with retail customers, much of the groundwork will already be in place. These 3PLs will also be accustomed to the unpredictability of this environment and will be much more prepared to onboard new requirements and customers.
8. Use technology that actually works:
Implement business systems that are up to the challenge
The systems that are used to conduct business with retail partners are critical to the success of the program. These systems include trading partner integration (EDI), warehouse management, and shipping systems. Suppliers must evaluate the capabilities of these systems to ensure that they have the flexibility to manage evolving retail compliance requirements.
The systems that are best placed to meet these challenges are ones that are fully integrated with the company’s ERP system. This means that the business systems have certified integrations to the ERP and that the providers have a long-standing relationship that has been proven effective in the field.
Suppliers should implement systems that enable them to create “flat” business processes (e.g. the core process is consistent for all customers), yet allow them to configure retailer specific requirements at the appropriate points in the process. This will not only help to conform to requirements, but will also flatten the learning curve for personnel performing the processes.
Finally, the systems should be embedded with alerting, reporting, and dash boarding tools that enable proactive management of the overall process. This helps the supplier to address problems before they create compliance issues with customers and lead to chargebacks.
9. Stay in touch:
Establish regular communication with retail partners
Suppliers cannot be afraid to approach their retail partners to discuss a plan for improvement when non-compliance issues have surfaced. Retailers will appreciate suppliers that are proactively seeking solutions to reduce issues.
However, it is essential that the supplier give thought to the issues at hand before approaching the retailer. They should have an action plan developed and be prepared to inform the retailer about what steps the organization is taking to resolve the issue. It will also be an opportunity for the supplier to reassure the retailer that they are committed to shared business success and are making the appropriate investments in training and tools to eliminate issues.
Retailers understand that compliance is not easy for suppliers and that issues will surface occasionally. Generally, if the organization does not have a continued history of non-compliance issues, retailers are understanding and will work with the business partner on jointly solving problems.
10. Invest in your team:
Educate the sales team
While it is true that operations are at the heart of retail compliance initiatives, it is also important that everyone in the organization has a thorough awareness of the impacts to your business and distribution capabilities. Often an overlooked opportunity by companies, educating the sales team in this area can produce great dividends.
As the operational team successfully executes their retail compliance strategies, equipping the sales team with an understanding of the company’s capabilities will give them a very useful tool as they seek new business. By highlighting the strong distribution capabilities of the company, the sales team will be able to get more products, to more channels, with more retailers; thus growing your business.
Retail compliance programs have been around for a long time, as have the associated chargebacks. Adding to the challenge is the fact that end customers are becoming more demanding; they are looking for greater product variety, shorter lead times, and more options for taking possession of the purchased goods. This means that retailers have to adapt their processes to accommodate these demands.
To be successful, retailers need suppliers that can help them to meet the challenges. A common business practice is to scorecard suppliers based on their performance against compliance programs. High marks for a particular supplier on the scorecard will be an indicator that they are easy to work with and the risk of supply chain disruptions will be greatly reduced. It only makes sense that these are the suppliers that are rewarded with new business.
Suppliers cannot risk losing mindshare with the retailer or end customer due to poor compliance results. By following this best practices guide and implementing the right systems to support the necessary business processes, suppliers can master retail compliance and establish themselves as a leader in the industry.
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