Improving Profitability through Vendor Compliance

Transcription

1 Improving Profitability through Vendor Compliance Optimization Victor Engesser, Circuit City David Schneider, David K. Schneider & Co. Richard Wilhjelm, Compliance Networks

2 Agenda Introductions Vendor Compliance Optimization Background Key Retail Trends Profitability Impact Case Study Circuit City Case Study Automotive Retailer Questions & Answers

3 Vendor Compliance Optimization Background Definition - Aligning the Vendor Community with The Profit Objectives of the Retail Enterprise Merchandise Plan Execution Key Issues Fill Rate, On-Time Delivery, Packaging, g, Labeling, ASN Performance & Transportation Combination of Process & Software Best in Class Retailers Communicate Expectations Measure Performance Reward Behavior

4 Retail Trends Declining Top Line Growth Declining Margins Due to Rising Inbound Expenses Flow Environment Requirement Speed Mitigates Risk Fashion Margin Sales Information Leverage Carbon Footprint Reduction

5 Profitability Impact Perfect Order Index On-Time Complete Damage Free Correct Invoice Profitability Impact AMR Research Earnings Per Share Additional 10 % Points resulted in $.50 Increase Return on Assets Additional 5 % Correlates to 2.5% better ROA Profit Margin Additional 3% Correlates to a 1% Margin Increase

6 Profitability Impact continued AMR Research Supply Chain Top 25 (2007) 17.89% Return 6.43% Dow Jones Industrial Average 3.53% S&P 500

7 Case Study Circuit City Victor Engesser VP Vendor Relations

8 Case Study Circuit City Internal Alignment & Structure Matters- Part of a larger Vendor Relationship Management framework Supply Chain Performance & Compliance is an important part of a larger picture Define Objectives & Value Proposition- Training, what does good look like & why does it matter? Keep it Focused, Simple and Achievable Allocate Resources to Role & Opportunity - Partnering for improvement is important but so is migrating to Partnering for improvement is important but so is migrating to proven performance

9 Case Study Circuit City Score Card, Report and Trend Performance- The Goal is Performance not Assessments Make Supply Chain Compliance part of a larger score card Let Visibility Drive Healthy Competition- Supports allocation of external resources Keeps Supply Chain in the Game Partner for Growth- Leveraging Performance for Growth Keep Driving i Enhancements- Higher Level Communication, Collaboration and Integration

10 Case Study Circuit City Key Learning's- Connect the Dots for both the Buy and Sell side decision makers Teach them to Negotiate as if Implementation matters - Because it does! Visibility drives competition which drives performance Thank you!

11 Case Study Automotive Retailer David K. Schneider

12 Agenda Compliance leads to Collaboration Elements for Improvement Managing Expectations Measuring Success

13 Compliance to Collaboration A solid compliance program creates a collaborative environment Mutual agreement requires mutual respect Respect needs Respect process Include Process & Compliance Rules into the Supplier / Purchase agreement

14 Compliance to Collaboration A solid compliance program opens the dialog to collaboration Changes the bad behavior Memory and avoidance How does my company avoid the pain Assures that issues are addressed Not an overnight success The change happens over time, through h repeated doses of correction

15 Compliance to Collaboration What is Partnership A contract between two or more persons who agree to pool talent and money and share profits or losses. Partnership is not collaboration But collaboration is part of partnership Establish a clear goal We are going to work with mutual interest to improve.

16 Elements for Improvement Focus the issues Too many issues spoils the soup Roll out in Phases Break the effort up and build off of sound foundation Reporting & timing failures Documentation, Accuracy, Timing Process Improvements On time, Complete, Damage Free

17 Managing Expectations An Iterative, Incremental Process Patience is the rule Some suppliers will cooperate quickly Thank them and make mutual commitments Some suppliers will need to feel the need Continue to express the need for change Some suppliers will be stubborn, very stubborn Listen to the argument, determine the motivator If the argument is valid, then learn and collaborate Expect time, and coach for time

18 Measuring Success One Supplier At a Time.. Numbers For each rule developed Baseline Change to Baseline Reaching the Plateau Other Measures Conversion of Attitude Initial Onset Cooperation

19 Conclusion Questions?

20 References Perfect Order Index Benchmarking Study - /white-papers/theperfectorderv3.pdf AMR Top Supply Chain

21 Contacts Contact Tl Telephone Victor Engesser, Circuit City (804) David Schneider, (610) David K. Schneider & Co. Richard Wilhjelm, (954) Compliance Networks

22 Title Sponsor: February 10-13, 2008 Gaylord Palms Resort & Convention Center Kissimmee, Florida