The bigger the retail industry becomes, the more complex regulations arise. Specifically, more retailers are now developing and deploying vendor compliance programs. The programs are for their suppliers to manage the business under pre-determined conditions.
While this makes retail companies more secure, it poses an additional challenge for shippers and vendors to meet the terms of the partnership. Apparently, retail compliance programs will soon be used by even small retailers, so it’s crucial to understand the goal of supplier management and how it works.
What is a vendor compliance program?
The vendor retail compliance program is a set of rules and regulations defined by a retail company for its vendors and suppliers. The program will deliver products strictly on-time and in compliance with other rules. The point of such a program is that the vendor has to pay a charge in case of delay or fulfillment error.
Why is vendor compliance important?
In the dynamic supply chains of the retail industry, any disruptions lead to frustrated customers and lost costs. Compliance programs reduce the probability of delays and receive payments to cover their losses in rare cases of errors. This way, retailers secure themselves and enhance their vendor management.
Who defines the terms of the retail compliance program?
All parties are involved in the defining and negotiating process when setting a compliance agreement. Everyone should have a seat at the table, including retailers, vendors, suppliers, and merchants. The policies should also be determined by inventory control and accounting personnel.
What is a vendor chargeback?
A vendor chargeback is a fee that the retailer assigns to the supplier for failing to meet the terms of the agreement. The percentage or amount of this charge is developed individually by the retailers, from regional to huge players. Because of this, it’s hard to state the range for the charges, but according to the Retail Value Chain Federation, the average charge can be $250-$300 per occurrence. Generally, you lose many things when suppliers are not compliant.
What is the cost of non-compliance?
In most cases, failed delivery means lost sales or the need to manage backorder. The company loses money on customers and reverse logistics every time this happens. Apart from costs, this also damages the company’s reputation and results in increased customer support and retention spending.
Increased inbound costs
Another concern is inbound freight costs that arise when shippers don’t follow pre-determined routes or when any delay occurs. Collectively, this can cut a large piece of a company’s budget.
Any disruption results in longer operational processes. For example, the need to produce more paperwork, add more manual force to fix the issues, etc. Inconsistency in operations leads to even more chaos, becoming long and inefficient. The retail industry depends on EDIs to manage their business, and non-compliant suppliers can cause great complications with document processing. Ultimately, adjusting to market trends and engaging in effective compliance programs is crucial. Then, both vendors and retailers will find it beneficial.