Brands Make Vendor Compliance an Investment, Not a Cost

Editor’s Note: Norman Katz, president of supply chain consultancy Katzscan Inc., writes a monthly column for Supply Chain Management Review. Katz’s column appears on the third Monday of each month.

Supply chain vendor compliance rules of engagement imposed by retailers – and buying enterprises in other industries – upon their vendors provide for a uniform means of business conduct. To try and operate any other way would be pandemonium and completely unfeasible. Vendor compliance requirements cover both the technical (e.g., electronic data interchange and barcode labeling) and the operational (e.g., floor versus pallet loading, which carrier to use for which kinds of shipments).

There are certainly costs to comply with technologies to implement like EDI and barcode labeling for cartons and pallets, and improved operational procedures to ensure that the correct carriers are selected, and data is well managed.

Traditionally, vendors viewed vendor compliance as a burdensome cost. Truthfully, it is to a certain extent. But it also can be an investment that can be turned internally and used to benefit the vendor company widely.

Here are some of the ways vendor compliance can, and should, be used for the betterment of a brand:

1. If your company doesn’t have internal performance metrics and is struggling to develop some, look no farther than the metrics your retail trading partners use to judge your company’s performance. Vendor compliance metrics—how retailers judge their vendors—are very applicable for use as internal performance metrics for a vendor to use for itself.

2. If you’re not fully using barcoding for inventory management (e.g., counting) and pick-and-pack, vendor compliance makes a great business case to do so. Your products will all need to be barcoded with a UPC/GTIN-12, so why not use that barcode for internal benefits as well? And you can use the UCC-128 carton and pallet barcodes to audit your shipments before they leave your facility (if you have your own warehouse or distribution center) to ensure that all cartons or pallets were included in the shipment before the truck departs.

3. Get a real understanding and better control of your item data. From item inception to disposition, who in your company is in charge of what attributes to collect of an item? Who in the product lifecycle communicates what information to share with your retail and distribution partners, and when?

4. Integrate EDI and ERP to reduce if not eliminate manual data entry and errors. This is also an opportunity to elevate your employees’ job functions from data entry to data analysis and data management, not just of items, but of customers (retailers) and their ship-to locations, whether they be distribution centers, stores, or customer-designated addresses (e.g., homes, offices).

5. Avail yourself of the free training provided by retailers who offer it. Some retailers offer impressive curriculums of training courses that go beyond just how to use their portals or understand their different systems; some retailers offer training courses on general retail industry concepts that are simply great information for a person in the retail industry to know. And these courses are FREE to the employees of the retailer’s vendors!

In a commoditized world, execution is the new competitive edge. Don’t be the wrong kind of disruptive vendor and cause supply chain chaos to your retail trading partners. Be the right kind of disruptor and bring new and exciting products to market before your competitors do. Retailers just don’t want to work with vendors who cannot, or will not, comply with vendor compliance requirements, because negative disruption is just too costly, and can eventually become customer facing which makes the retailer look bad.

Being a brand means selling into retail. These requirements are really nothing new: they have foundationally stayed the same since I started in retail vendor compliance in 1993. So, my message to brands is: these are the rules of the game. They can be difficult, and there are plenty of times when they are lopsided. But if brands view vendor compliance as an investment and not as a cost, the benefits to your company can help you improve your execution and be a better retail product competitor.

SC
MR