WHITE PAPER - wsinc.com

1 WHITE PAPERI mproving vendor compliance with retailer requirementsW1 WHITE PAPERith major retailers continually squeezing costs out of their supply chains, many are demanding that suppliers reduce order turn-around times and decrease the amount of time they have to spend handling and stor-ing merchandise at the DC and store level. Those vendors who don t comply with these new requirements face chargebacks and deduc-tions that can quickly drain profit and negative-ly impact the supplier-retailer the next few pages, we will look more closely at the ever-changing compliance requirements being imposed on suppliers, discuss the role that logistics services provid-ers can play in helping shippers meet these requirements, and show how one North American shipper is successfully overcoming the challenge by partnering with its third party logistics provider (3PL) to ensure com-pliance across the supply chain. Chargebacks, fines, and penaltiesTo maintain a competitive advantage and improve profit margins, retailers are using a number of strategies that can negatively impact a supplier s bottom line.

2 Many retail-ers are asking for store-specific distribution, where suppliers pick, pack, and ship orders for specific stores thus reducing the amount of handling needed on the receiving the wrong merchandise is distributed, or when incorrect quantities are shipped, retailers impose chargebacks to ensure compliance and to compensate them for their added costs. In some cases, suppliers fail to properly comply with retailers order fulfillment rules around requirements such as bar-coding, custom shipping documenta-tion, meeting strict shipping schedules and arrive-by dates, and using correct pallet and packaging specifications. When these rules are broken, the retailer will charge a deduc-tion against the vendor s and other sanctions can quickly erode shipper profitability and put consumer goods manufacturers and distributors in compromising positions. All of the major retailers print or publish multi-hundred page manuals that their suppliers have to follow when shipping goods, says Rob Kriewaldt, director of client solutions at Appleton, Warehouse Specialists, Inc.

3 (WSI), a logistics services provider. To avoid chargebacks and fines, shippers have to know how to configure cases, which labels to use, where to position those labels, which shipment methods to use, and the list goes on, Kriewaldt continues. Failure to fol-low those procedures can subject the shipper to various fines and other penalties. Walmart, for example, uses vendor score-cards to track compliance on a monthly or quarterly basis. On the scorecards, supplier performance and compliance are taken into account and should the score fall below a certain level the shipper could face asso-ciated penalties. It s critical that vendors follow Walmart s guidelines, says Emily Guttenberg, WSI s retail compliance expert, noting that many shippers may lack the in-house capability to keep up with these ever-changing requirements. Improving vendor compliance with retailer requirementsHow logistics services providers can help shippers comply with retailers increasingly stringent compliance WHITE PAPERIMPROVING VENDOR COMPLIANCE WITH RETAILER REQUIREMENTSP artnering for successTwo years ago, CCT Global Sourcing, Inc.

4 , a division of axcess World, realized that it fell into the category that Guttenberg is describ-ing. As a manufacturer and distributor of fur-niture, outdoor living products, home d cor, moulding, millwork, and building solutions, the company ships about 35 million units to retailers annually and receives anywhere from 250 to 300 orders daily. On a Monday, Jalpa Parikh, e-commerce di-rector at CCT, says that number rises to 1,000+ orders. Up until two years ago, the company used a manual system of receiving, tracking, and shipping orders. This order-level fluctua-tion, combined with the sheer volume of PAPER being passed around the company, made order management and vendor compliance extremely challenging. We had five people handling the manual entry of invoices into our accounting system, says Parikh. With four different warehouses ship-ping goods through-out North America, CCT started out as a business that was run by a handful of company partners. By 2012, the company had grown to the point where manual man-agement of shipments was no longer viable.

5 We started out receiving about 25 orders a day from customers through outlets like Amazon and Overstock, says Parikh, and before long we were up to 200+ orders a day. As CCT grew, so did its client base, which to-day includes large retailers like Home Depot, Target, and Walmart, among others. Naturally, along with that additional growth came new compliance requirements and man-dates. As part of an associated electronic data interchange (EDI) implementation, CCT went in search of a warehouse management system (WMS) and a third-party logistics provider (3PL) that could accommodate the company s frequent order spikes and need for customized documents and same-day shipping. The president of our company did an Internet search and learned that WSI was a major 3PL whose technology infrastructure supported EDI, recalls Parikh. After meeting with WSI to discuss the opportunity, CCT se-lected the company as a partner. Today, CCT receives purchase orders complete with order information, ship-from address, and ship-to address from its retailers and then automatically sends those orders out to WSI for picking and packing.

6 Using WSI s technology, CCT is able to comply with vendor agreements without having to hire an in-house compliance team or other employ-ees to handle this growing requirement. Meet-ing tight shipping timelines, for example, is eas-ier now that orders are streamed through WSI s system and directly into CCT s EDI system. Consumers want orders shipped within 24 hours and 48 hours, says Parikh. We no longer have those 3-day to 7-day time frames that we used to have especially when working with online retailers. Meeting those shrinking time frames would have been im-possible with CCT s previous manual system. We can handle everything with just a few clicks, which means we can receive orders at 8 and have them out the door by 10 , says Parikh, who adds that warehouse dispatching has also improved, thus enhanc-ing CCT s ability to get orders out the door on or even ahead of schedule. Finally, Parikh says being able to quickly view item numbers, SKUs, and/or UPC codes in the WSI WMS helps ward off incorrect ship-ments that could result in compliance-relat-ed fines from the company s major custom-ers.

7 We re at a point where issues like poor vendor performance or compliance-related fees have been minimized, she says, thanks to the technology platform that we re using. In the right condition and within the right timeframe Whether shipping their own products or distrib-uting goods made by other firms, today s ship-pers face a litany of challenges when it comes to working with the world s largest retailers. We can handle everything with just a few clicks, which means we can receive orders at 8 and have them out the door by 10 Jalpa Parikh, e-commerce director, CCTWHITE PAPERIMPROVING VENDOR COMPLIANCE WITH RETAILER REQUIREMENTSW ithout a robust, in-house compliance de-partment in place to help navigate these obstacles, shippers may get hit with fines and other profit-eroding penalties. The good news is that logistics services providers can help fill in those gaps and keep shippers in com-pliance and on good terms with their valued customers. Third-party logistics firms have the technol-ogy resources and the knowledge base to help make sure the shipper s product arrives at the retailer in the right condition, within the right timeframe, and based on the retailer s speci-fications, says Kriewaldt, who has witnessed a high volume of manufacturers and distrib-utors participating in Walmart s Buy American Campaign.

8 Through this ini-tiative, the retailer plans to source an additional $50 billion in domestically man-ufactured goods over the next 10 many cases, however, those new shippers aren t well equipped to manage the fine de-tails of the large retailer s compliance program. Walmart is expanding its number of vendors fairly significantly to get new, American-made products on its shelves, Kriewaldt says. By working with a 3PL like WSI, those companies can gain access to the information, data, tech-nology, and support that they need to be able to effectively comply with Walmart s requirements. According to Guttenberg, what shippers don t know is usually what gets them into trouble with their retail customers. That s where a 3PL can make a significant difference for ship-pers like CCT, that need to know which set of rules to follow when working via the web, direct-to-consumer, or via distribution center. Just because you re shipping to Walmart doesn t mean that if you know one set of rules, you know all of the rules, says Guttenberg.

9 Every shipping method comes with its own parameters that shippers have to adhere to. Easy setup and orchestration The transition from handling retail compliance in-house to outsourcing it to a 3PL needn t be challenging or cumbersome. According to Gut-tenberg, the next step following 3PL selection is a review of all of the current forms that are in use as well as the compliance manuals of the retailers the vendor sells to. Forms and documents to be reviewed include shipping labels, packing lists and bills of lading. This helps the logistics provid-er assemble a foundation for can then recreate the customized documents in our system. These are then tested and sent to the retailer for approval. Addi-tionally EDI, or Electronic Data Interchange files will be created and tested. The provider also enables a WMS platform that tracks all shipments, routing information, pick-up times, weights, and related the vendor works with additional retailers, Guttenberg says the easiest point of entry for WSI is usually during the onboarding process between vendor and retailer, which allows the 3PL to get the retailer s requirements, develop documentation around those requirements, and then design that documentation based on the retailer s requirements.

10 When necessary, shippers can easily access this information and use it to dispute those dread-ed, profit-stealing chargebacks, deductions and penalties. This is a big resource when fighting added charges, says Kriewaldt, that can really eat away at a shipper s bottom line. and routing issues, such as incorrect carrier, incorrect ship-to location, and multiple same-day or late in advance shipment noti cation (ASN) or electronic data interchange (EDI)Ticketing and labeling issues Source: Attain Consulting Group, Credit Research FoundationThe top ve compliance-related chargebacks