• 05-01-2022

Need for Vendor Compliance Program

Inbound shipments are vital to successfully managing supply chains. Usually, due to the absence of control and visibility, inbound shipments can consume up to 40 per cent of the overall freight costs.

Engaging your suppliers in a vendor compliance program is an adequate way to foster a trusted relationship with them and ensure superior performance from their side.

Do you know what is vendor compliance program?

Let's begin with a definition

The vendor compliance program is a series of rules and principles specified by a company to guarantee on-time deliveries and highly professional performance from its suppliers and vendors. Such a program aims to get the vendor charged in the case of delay or fulfilment issues.

In the dynamic supply chain industry, any disruptions can lead to frustrated customers and lost costs. Compliance programs reduce the probability of supply chain discrepancies. When the supplier fails the agreement, the company receives payments to cover its losses. This way, businesses secure themselves and enhance their vendor management.

Additionally, all parties are involved in defining and negotiating the process when setting a compliance agreement, including retailers, vendors, suppliers, and merchants. Inventory control and accounting personnel determine the policies.

Without a compliance program, a company risks dealing with the lack of organization, hidden costs, and failed vendor performance with little accountability. Which in turn, has implications on the overall business efficiency and affects customer satisfaction.

A vendor chargeback is a fee that the retailer assigns to the supplier for failing to meet the terms of the agreement. The retailers develop the percentage or amount of this charge individually from regional to huge players. In most cases, supplier issues mean lost sales or the need to manage backorder.

Every time this happens, the company loses money on customers and reverse logistics. Apart from costs, this also does significant damage to the company’s reputation and results in increased spending on customer support and retention. Another concern is inbound freight costs, which arise when shippers don’t follow pre-determined routes or when any delay occurs. Collectively, this can cut a large piece of a company’s budget.

If there is any disruption, this results in longer operational processes.