Vendor Compliance Programs Means $ to the Bottom-line

Do you feel that shipments are being delayed into your warehouse due to mistakes being made, which causes a delay with a ripple effect?  This then impacts your other shipments and at times it feels like your “problem/quarantine area” is getting packed with more issues than you wish to manage.  In extreme situations, it takes many days or weeks to “receive” shipments into your inventory management systems and send the merchandise along.   Here’s the simple math:  if you deal with 500 merchandise vendors and each vendor causes one “exception” a year that requires manual intervention that costs you $2,000 (delays, labour costs, missed sales, etc) you lost $1 million from your bottom line.  Managing supply chain flow efficiency is just as important as managing purchasing, sales and margins.

Developing a vendor compliance program and having Standard Operating Procedures for your merchandise vendors to follow is critical in order to keep the complex flow of merchandise moving, with as little manual work, error and delay as possible.  Once you have defined what the “standards” are you then need to ensure that vendors will comply with these standards.  Having this vendor compliance program in place will improve your inbound and outbound distribution operations, as all shipments coming in the door will be what you ordered, they are palletized and labelled as you expect and you will have the correct EDI data to flow the shipment through your network efficiently.  Implementing and managing such a program gives you the correct product, in the correct amount with quality standards in place meeting all Standard Operating Procedures.  This program will deliver the most efficient supply chain, as demonstrated with the lowest cost-per-case for end-to-end supply chain (from source to shelf).

The most effective vendor compliance programs are backed by substantial non-compliance charges.  The implementation of such programs require senior level support, particularly for smaller retailers who may believe that they do not have “clout” with their suppliers).  Such programs are in place with many major North American retailers and wholesalers, while smaller (but competitive) organizations are also aggressively pushing these through their supply chains.  The rise in Omni-channel retail is placing additional pressures on running a perfect end-to-end supply chain with reduced appetite from executives for profit-sucking exceptions and manual intervention.   Vendors who ship to customers who have a compliance program in place ensure they meet as many, if not all of what their customers expect.  Vendors know if they do not comply they will receive chargebacks for their mistakes. Receiving chargebacks brings executive-attention at the vendor organization to the problem very quickly.  The key is that your Vendor partners take those chargeback seriously and quickly address the issues they are having internally.

Developing and managing an effective vendor compliance program (that is taken seriously by vendors) is essential to supply chain success.  Its creation and management requires serious executive support, careful consideration and an end-to-end (source-to-shelf) view of the supply chain & its various stakeholders.