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Article
Compliance - Burden or Benefit

I recently spoke at the Vendor Compliance Federation's 10th Anniversary event and had a chance to talk to many retailers and suppliers.


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Staue of Liberty and Manhattan SkylineVendors and retailers get a mutual mirror on each other at the Vendor Compliance Federation which has both open forums and one on ones, where vendors and retailers can talk to each other and work out and improve their collaboration and compliance. This was the 10th anniversary of this organization and I was honored to be one of the speakers and enjoy the views of New York!

But I was not alone… Walmart also talked about their Supply Chain Reliability program and I got to chat with Rowland Whitsell who leads the program, (see Walmart tactical sea change – we will provide more on that next week), as well as Ron Ireland, ex-Walmart, now part of Oliver White, who is facilitating VICS new subcommittee on the S&OP initiative; the very inspiring Jessica Butler, from Attain Consulting, and  Inez  Blackburn from Marketing Techniques and Innovations;  as well as a ton of suppliers, retailers and tech companies.

Here are some interesting conclusions from various discussions:

Supplier-side:

  1. Suppliers are still not practicing ‘good’ what to say of ‘best practices’ in Supply Chain in many categories.  Are we falling behind or is the world moving too fast for us?
  2. Only a small percent are using POS or other data provided by the retailer.
  3. Many want more sales, but their fill rates are low, so just improving fill rates would give them more sales.
  4. Many rely on ‘wrong’ data sources or don’t reconcile data sources to get to the truth of disconnects in their supply chain, thus missing sales and margin opportunities right at their fingertips.
  5. ASNs!!!  Still an alarming percent of suppliers who don’t use them or have inaccuracy in these. This is quite sad considering this is one of the most cost-effective, inexpensive and required programs around!
  6. However, there were many suppliers who have improvement and accuracy programs – six sigma-like initiatives to go through their assumptions on everything from lead times, safety stock level, on-times, fill rates to first get data accuracy; and then use the data to fix the business. And they have been rewarded for it, becoming category leaders, and more…
  7. There are still low numbers of implementations of great software to assist in this process and modules that are still wrapped in the cellophane, unused.

Retailers:

  1. Though many retailers are ‘out of bounds’ in their treatment of suppliers, many are fairly collaborative. They pick the supplier’s product after a long evaluation or sales process, and they have a category to fill that is money makers, or they see you as a brand winner. They want the relationship to work.
  2. However, I heard some stories on odious terms and long contracts that had no scent of ‘partnership’ in the contract.  A divorce agreement is no way to start a relationship!
  3. Many have fairly poor compliance statistics and really want those on-time deliveries so both partners can have ‘full shelves’ and make money.
  4. Retailers are slowly but steadily adopting more analytics and learning about categories, and location-specific assortments.  Though adoption is low on merchandise and assortment technology, it is growing.
  5. However, the private label threat (and real action) looms. In almost every category, this becomes the big ultimate stick in the relationship. 

Technology continues to improve to support everything across product design through sales, the ticketing for floor level merchandise, to planning and Customer/Marketing Automation Software.  Yet the adoption rate is low.  Opportunities are there for tech companies to not only provide the software but also add process value in the relationship. These guys—especially the smaller firms—need help.

Regulations and Compliance increases….the Consumer Product Safety Act of 2008 as well as food safety regulations (we have written about recently) all require a lot more data collection and product safety methods.

One interesting speaker was Joseph Mohorovic, a Vice President from Intertek, who served for five years at the Consumer Products Safety Commission and as the Chairman of the International Consumer Product Safety Caucus, which is the sole forum for negotiations on international product safety issues.

Knowing what he is talking about, he highlighted many issues for companies and impending regulations that represent a sea-change in how companies assure product safety and compliance.  Besides providing some powerful insights on how the government thinks and the mandate from society on product safety, he concluded with some suggestions for right now:

  1. Suppler/ Retailer collaboration is not about contractual agreements only. You can’t think of, nor should you have, the minutiae of T&C's in your contracts. Develop a relationship so you can plan out how you can improve the visibility, and dialogue on how you will deal with risk and event response.
  2. Only shared platform, workflow, and data for managing governance and assuring compliance will probably work, since product creation, delivery and sales traverse multiple countries and enterprises.
  3. You will need a “defensible rationale to validate adequacy of process control.” This is not only documenting the process, but developing living procedures and standards, not an off-the-shelf manual, with change management procedures and rationale. New regulations require a dynamic approach.
  4. Supply Chain Visibility. Joe’s definition was not just supply chain-wide data but discovery tools to analyze the supply chain of events and compliance.
  5. Create/maintain the database/record keeping, tracing and tracking of goods, procedures, product tests, and other relevant data for product safety and compliance.

Conclusions…

I was fascinated by the whole event in a bizarre way. Advanced and ingénue companies blended and mixed and shared ideas, from the basic to the really leading-edge.

On one hand, it was overwhelming to see the amount of work necessary for the Retailers/Suppliers to manage their relationships and successfully fulfill a customer’s expectation. But, on the other, there are so many proven methods and technologies—a real market basket of cost-effective strategies.

But, users are falling behind. Their negative mantra is “we are too busy.” But that means even the status quo will be lost as more data is pumped into the enterprise to be reviewed and acted on, and more regulations pour out of all the major trading blocks. If we see them as a burden, just work, with no upside, I assure you there will never be any benefit from the work. Quality will be poor and the chance of the upside will never appear.

Many speakers showed very pragmatic ways to hike up the bottom line.  Data quality means many things, such as process and sales improvement, as well as improved cash cycle times. Simple accurate receiving, means the retailers acknowledge receipt of goods. That means you can invoice! With low compliance, not only does the cash not come in, but potentially you could lose that customer.  As Ron Ireland said, “This is about making money!”

During the Walmart talk, Rowland singled out one of the suppliers by name and mentioned how they had really improved their performance in the last few years and consequently Walmart had “increased their business” with them. Sounds like a benefit to me!


To view other articles from this issue of the brief, click here.




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