Building block #5: Compliance

Welcome back to our series, where we’re providing an overview of the key supply chain building blocks critical to successfully growing your business. If you missed any of the previous articles, we invite you to check them out here. Today’s building block focuses on compliance, which can be a huge drain on any company’s bottom line. Let’s discuss more to help you avoid potential compliance pitfalls.

You’ve worked so hard to get your product on a store shelf or online at a large retailer, and just when you think it can’t get much better, you open the 87 page routing guide and the wind is taken out of your sails. How are you ever going to find the time to read this guide, much less actually ensure you’re following every compliance guideline??  We’ve been there and know the feeling. It can be a daunting task to ensure your company is in compliance with your retailers, but it's incredibly important. While there is no published data on the amount of vendor chargebacks as a result of non-compliance, it’s estimated at 1% of total sales. We’re talking billions of dollars a year!  The good news is that this is all manageable when you have the proper procedures and partners in place. 

Let’s first take a look at some of the most common compliance violations that you need to be aware of:

While this is not an exhaustive list, more than 90% of the violations issued by retailers will fall within one of these six categories. Every retailer is different in terms of the metrics used to measure performance, and also in the performance functions they actually track.

All this can sound pretty scary. You may even be re-thinking your decision to sell your product to certain retailers. You shouldn’t feel that way because there’s good news!  With proper planning, process implementation, and partner selection, you can significantly mitigate your risk of retail compliance chargebacks. We believe there are three key steps, and to be honest, they’re pretty simple, yet many companies make the mistake of overlooking them. 

The first step is picking up the routing guide and actually giving it a read. Yes, it’s long, but you’ve got to take the time to digest the information so you know what your retailer expects. We suggest building a matrix to better organize the routing guide of each of the retailers you ship to. The more organized and thorough you are, the better chance you have to meet all the requirements of servicing your customer. 

Once you’ve built your knowledge of your retailer expectations, you’re going to need to develop processes to ensure you meet those expectations. Processes should be documented and gain buy-in from all stakeholders involved. A big mistake companies make is creating processes that are so complex that they inevitably aren’t followed. Our advice: keep it simple so it can be repeated time and time again.

Finally, and maybe the most important step, is to identify a great partner to help you. As a growing business, you have so much on your plate, and vendor compliance can be a huge distraction. We recommend partnering with a great 3PL or logistics provider that has expertise in this area and can guide you to success. You’re not in this alone!

Although vendor compliance can be a drain on your company’s profitability and time, it doesn’t have to be. With proper planning, execution, and partner selection, you will see your business thrive, and won’t skip a beat, as you add new retailers to your customer base. 

Thank you for reading, and keep an eye out for Building Block #6:  Accounting. Don’t forget to sign up below to receive these articles directly to your inbox!