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How important is vendor compliance? Imagine the following scenario: An apparel retailer's shipment of dresses for a catalog drop arrives late; in the meantime, hundreds of customer orders have gone on back order. Or how about this one: A hardware merchant finds that a shipment of tools has reached the distribution center - but the products are all the wrong sizes, because the factory failed to label them correctly.
These are the sorts of issues that vendor compliance policies seek to eliminate. Although it cannot eliminate every possible problem, a well-thought-out formal policy can protect you by specifying sanctions and charge-backs for vendors' mistakes.
While picking, packing, and shipping are the final steps in making sure customers get what they ordered, a truly efficient direct merchant will have planned to eliminate as many potential pitfalls as possible long before the merchandise is pulled off the shelf in the DC. At any significant scale of operation, the relationship between merchant and vendor has to run on more-structured and stringent guidelines than mutual trust. Companies without vendor compliance policies run a much greater risk of snafus than those that have spent the time it takes to develop detailed guidelines.
THE CHALLENGE
There's no doubt that rationalizing vendor relations poses a significant challenge to the retailer. All direct marketers receive goods from offshore and/or domestic vendors. Most merchants have to handle inbound consolidation of product from multiple vendors; multichannel merchants may need to cross-dock shipments directly to stores without opening, inspecting, or repackaging them. All merchants use reverse logistics to consolidate their inevitable returns, and many may also be faced with such complex, vendor-related logistics as warehouse-to-warehouse transfers, vendor-direct-to-store shipments, or merchandise shipped from a vendor to the closest warehouse that then must be allocated to other warehouses.
So it's easy to see why vendor compliance is at the heart of efficient supply chain management. Routing inbound shipments to reduce costs and scheduling inbound appointments can help speed product flow through the DC, significantly helping in turn to reduce inventory levels. Automating the supply chain through advanced shipping notifications (ASNs), RFID, and cross-docking to stores can go a long way to reducing costs, but these measures are not a substitute for a comprehensive vendor compliance policy.
Considering...