Top-down approaches to trading partnerships can have costly effects on a retailer’s bottom line. Retailers overly focused on compliance will find their orders deprioritized in fulfillment queues and end up paying more for inventory as suppliers recoup chargebacks. They’ll also receive a steady stream of dummy inventory data sent by trading partners trying to satisfy SLA requirements. All this will lead to higher opportunity costs, late and canceled shipments, and a lower quality customer experience.
Instead of being rigorous about enforcement, we recommend focusing on strengthening your trading partnerships. Here are a few suggestions:
- Don’t call them vendors: Instead, use the terms “supply partners” or “trading partners”. Switching to these partnership-oriented labels can be a powerful initiator for change.
- Improve communication: For example, that means asking supply partners to only provide inventory updates when their data is accurate, as well as setting up systems for sending and receiving data in real time (such as with an API).
- Focus on cooperation, not compliance: Instead of simply charging for SLA violations, reach out to non-compliant supply partners and figure out how you can help them improve their performance.
Strengthening trading partnerships will have a huge positive effect on your fulfillment operations. You’ll experience smoother exception management, easier returns processes, better inventory visibility, more assortment, cheaper inventory access, higher fill rates, and happier customers. One of our retail partners was able to save tens of millions of dollars by simply improving communications with their supply partners.
Here’s to going far together!
PS: I also highly recommend taking time to survey your partners about what you can do to improve your operations. Find out what your supply partners value. Discover what gets them excited to deliver. Then incorporate that information into your operations with more zeal than you ever did for your chargebacks. You’ll be surprised at how much more efficient–and profitable–your partnerships will become.