Using EDI to Manage Vendor Compliance and a Case Study of an Inbound Management System - Part 2: The State of the Marketplace

Although supply chain automation technologies have been with us for almost half a century, we still find a very large part of supply chains within today’s businesses to not be vendor compliant. Having taken a look at the need for vendor compliance, we can see that this is due to the lack of proper automation and integration both on the part of both an retailers and its vendors.

The solutions offered by most technology vendors are very costly and lack the robust automation needed to handle organizations of different sizes and their trading needs.  Moreover, they often do not provide the necessary level of automation and integration in order to allow vendors to provide accurate and timely information to retailers .

In previous posts we have stated the merits and benefits derived from EDI implementations in terms of providing a supply chain with automation, integration and collaboration. Similarly, EDI is one of the most robust and best-in-class ways of achieving good vendor compliance.

The Benefits of a Well-Executed Vendor Compliance Program:

In order for a retailer and its vendor community to have a best-in-class vendor compliance program, the complete order-to-cash supply chain process has to be looked at and streamlined.

This may seem simple and straightforward. However, to achieve this requires that the entire lifecycle of the order-to-cash process be properly automated. That is, the complete process, from the issuance of a purchase order to the sale of the item, must be fully automated and integrated all the way down the line.

There are organizations that have hundreds of millions of dollars invested in supporting an operation that provides for a properly functioning fulfillment process. If vendor compliance in not properly planned across all the members of the supply chain, the resultant outcome will be that of a poor supply chain that ultimately brings financial losses to the retailer and its vendor community. This is certainly to be avoided.

The goal is to develop a well-planned and implemented vendor compliance program that will result in a highly compliant supply chain operation for both the retailer and the vendor, which is free of fines or fees associated with non-compliance. The following outlines the lifecycle of vendor compliance which works to this end.

Review and analyze the above 5 stages to ensure that all the vendor compliance criteria have been met.

If any of the compliance criteria was not met, then improvements and corrections have to be made in order to fix the broken part of the vendor compliance process.

Without the proper level of automation and integration of the seven above vendor compliance life-cycle events, vendor compliance is not possible. This will result in problems for the retailer and/or the vendor community. These problems could also sometimes spell the demise of a business.

In our next post, we’ll take a look at a case study of a large retailer that is using EDI to create a best-in-class, fully integrated, automated vendor compliance process.

Using EDI to Manage Vendor Compliance and a Case Study of an Inbound Management System - Part 1: The Need for Compliance

Introduction:

Over the past few months we have been discussing EDI in some detail, starting with the history and ongoing usefulness of EDI and more recently the importance of integration planning in B2B EDI projects. Today, we’re starting a series discussing the benefits of using EDI to manage vendor compliance. To complement this discussion, in a subsequent post, we will be presenting a case study of a Tier 1 Canadian retailer that realized substantial benefits through an automated and integrated vendor compliance program, known specifically as an Inbound Management System. 

Essentially, vendor compliance allows businesses to collaborate with their various vendor communities of trading partners to obtain end-to-end visibility, with a highly responsive and accurate supply chain operation. An automated and integrated vendor compliance program eliminates all of the non-compliant aspects of a supply chain and helps to achieve a highly vendor compliant operation both for the retailer and its trading communities. This results in millions of dollars being saved by the vendor communities through the avoidance of compliance fee charges levied by the retailer. In addition to the huge financial benefits, a highly vendor compliant operation also increases the speed and accuracy in the entire order-to-cash process.

The Need for Compliance:

Bottom Line: Organizations that implement good merchandise compliance programs benefit from having a very responsive, timely, accurate and satisfied relationship with their vendors. Vendor –compliant trading environments help the vendor community in eliminating compliance fees and other penalties. If this community can reduce and/or eliminate the problems of incorrect and untimely merchandise shipments, everyone wins.

A compliant trading environment helps the retailer sustain profitability and remain in business as a result of a compliant supply chain. One which is responsive to the need of its customers and can provide its customers with customer service that is responsive to customer needs.

With the proper use of EDI and other non-EDI automation technology implementation for vendor compliance, the retailer and its vendor community will benefit from the following;

These are only some of the benefits; there are literally endless benefits that a well implemented vendor compliance program can provide.

The best-in-class companies are those that have the most successful vendor compliance programs that substantially reduce errors and problems in the supply chain. The errors and problems that a good vendor compliant program eliminate are;

Any one of these problems can make a good company lose money, reputation and market share. 

This is why Best-In-Class companies are reaping the benefits of well thought out vendor compliance programs. Next time we will take a look at the state of the vendor compliance market place and assess the benefits of a well-executed vendor compliance program, an Inbound Management System, in more detail.