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Shifting Strategies: How Noncompliance Is Hurting Your Business

By May 7, 2014Blog

By David Freschl, Account Executive at MAPADOC

noncompliance mapadoc edi sage erp

Are you unintentionally creating obstacles in your business’s path?

“If you think compliance is expensive, try noncompliance.”

– Former U.S. Deputy Attorney General Paul McNulty

Retail suppliers often feel as if they are the victims of an adversarial relationship.

They suspect that retailers cut each supplier’s revenue in order to decrease retail operation costs and boost profitability, but suspicious suppliers should take care not to overlook their own inefficiencies. Though there is little doubt that big name stores can enhance product recognition and vitalize sales numbers, the value you gain from placement on their shelves can only help your supply business if you stick to a strict set of rules. Let’s explore what this looks like for your supply business, and figure out how you can work with a retailer to maximize your profits.

If you are a supplier in the big-box retail world, it is likely that you have received some type of chargeback due to a noncompliance event.

This could mean that an error was made on an ASN, a purchase order went unacknowledged, goods took too long to arrive, or that the wrong goods were sent.

Chargebacks can be painful, especially when your sales team is doing well and adding new customers left and right. If you receive chargebacks from your new customers, you can damage your customer relationships before they even begin to develop. Here is some news: most retailers keep vendor score cards, and every time you get a chargeback, your score card suffers. Your score shrinks with each mistake you make, and when that happens, your retailers begin to question their buying relationship with you.

As a supplier, you know that keeping your existing customers happy and growing your business drives your profits, but you probably feel that your retailers’ high standards make this no small task. The truth is, however, your retailers are not the bad guys. Just as their requirements frustrate you, they are constantly being challenged by their own ever-more demanding customers.

Retailers also rest on extremely thin margins.

If a retailer wants to remain competitive, they must focus on balancing supply with demand, maintaining longer and more complex supply chains, and keeping prices down. Plus, they are under constant pressure to deliver your products to their customers as fast as possible.

Retailers have hundreds or thousands of suppliers just like you, and to them, that one little mistake you were charged for doesn’t seem all that little.

Establishing a symbiotic relationship with your retailer is possibly the only proven method to create a larger footprint in stores. High performers on the supply chain side are called upon to become frequent suppliers, and a high status reaps benefits such as new product categories, introductions to new sales channels, and prime shelf space.

So, how do you master retail compliance and get stressed-out retailers to notice your outstanding performance?

It’s easy: spend lots of money on fancy software!

Well, maybe not too much money.

In the small-to-medium business space, tech spending, though important, cannot break the bank. A key strategy for companies without huge budgets must be to very carefully review the needs of their customers. These companies must also immediately fix all the holes and issues in their supply chains, and the easiest way to fix holes is by making strong, ROI-provoking investments in technology.

The most successful companies learn from other successful companies.

Because of this, you should network with executives in your industry to find out what processes and tools they have in place to drive their growth and profits. Successful companies have strong supply-chain systems and good controls in place, and companies with good management, integrated EDI solutions, and dedicated resources for vendor compliance experience the highest levels of success.

Other methods you can use to build your business’ strength include: asking consultants to measure and maximize your warehouse and process effectiveness, establishing a coherent system of compliance by training your employees, and attending vendor compliance workshops to get the information you need.

Noncompliance is too expensive to create a sustainable long-term business model.

Getting your company on the path to compliance success will take care, attention, and an investment, but the benefits compliance offers you in terms of business stability are immeasurable. When you stand up and become fully accountable for your retailer relationships, your supply company will become more successful and more profitable.

David Freschl is an account executive with MAPADOC EDI, and he has assisted hundreds of customers in setting their companies on the path to true business success. As a supply-chain specialist, Freschl advises that companies seeking to build beneficial relationships should establish a clear compliance strategy using dedicated business technology.

SWK Technologies, Inc.