Improving Profitability through
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g
y
g
Vendor Compliance
Optimization
Optimization
Victor Engesser, Circuit City
David Schneider, David K. Schneider & Co.
Richard Wilhjelm, Compliance Networks
Agenda
Agenda
`
Introductions
`
Vendor Compliance Optimization Background
`Vendor Compliance Optimization Background
`Key Retail Trends
`
Profitability Impact
`Profitability Impact
`
Case Study – Circuit City
`
Case Study – Automotive Retailer
`Case Study Automotive Retailer
`Questions & Answers
Vendor Compliance Optimization
Background
Background
`
Definition - Aligning the Vendor Community with The
Profit Objectives of the Retail Enterprise
Profit Objectives of the Retail Enterprise
`
Merchandise Plan Execution
`
Key Issues – Fill Rate, On-Time Delivery, Packaging,
y
,
y,
g g,
Labeling, ASN Performance & Transportation
`
Combination of Process & Software
`Best in Class Retailers
` Communicate Expectations ` Measure Performance
Retail Trends
Retail Trends
`
Declining Top Line Growth
`
Declining Margins Due to Rising Inbound Expenses
`Declining Margins Due to Rising Inbound Expenses
`Flow Environment Requirement
`
Speed Mitigates Risk
`Speed Mitigates Risk
` Fashion ` Margin ` Sales
`
Information Leverage
Profitability Impact
Profitability Impact
`
Perfect Order Index
` On-Time ` Complete ` Damage Free ` Correct Invoice ` Correct Invoice
`
Profitability Impact – AMR Research
` Earnings Per Share – Additional 10 % Points resulted in $.50 g
Increase
` Return on Assets – Additional 5 % Correlates to 2.5% better
ROA
` Profit Margin – Additional 3% Correlates to a 1% Margin
Profitability Impact continued
Profitability Impact continued
`
AMR Research Supply Chain Top 25 (2007)
` 17 89% Return ` 17.89% Return
` 6.43% Dow Jones Industrial Average ` 3.53% S&P 500
Case Study – Circuit City
Case Study Circuit City
Victor Engesser
Victor Engesser
Case Study – Circuit City
Case Study Circuit City
`
Internal Alignment & Structure
Matters-` Part of a larger “Vendor Relationship Management” framework ` 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?” ` K it F d Si l d A hi bl
` 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
Case Study – Circuit City
Case Study Circuit City
`
Score Card, Report and Trend
Performance-` The Goal is Performance not Assessments ` The Goal is Performance not Assessments
` Make Supply Chain Compliance part of a larger “score card”
`
Let Visibility Drive Healthy Competition-
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y
p
` Supports allocation of external resources ` Keeps Supply Chain in the “Game”
`
Partner for
Growth-` Leveraging Performance for Growth
`
K
D i i
E h
t
`Keep Driving
Case Study – Circuit City
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
`Teach them to “Negotiate as if Implementation
matters”- Because it does!
`
“Visibility drives competition which drives
`Visibility drives competition which drives
performance”
`
Thank you!
Case Study – Automotive Retailer
Case Study Automotive Retailer
Agenda
` Compliance leads to Collaboration ` Elements for Improvementp
` Managing Expectations ` Measuring Success
Compliance to Collaboration
`
A solid compliance program creates a collaborative
environment
environment
` Mutual agreement requires mutual respect
` Respect needs ` Respect process
` Include Process & Compliance Rules into the Supplier /
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’” ` How does my company avoid the pain ` Assures that issues are addressed
` Not an overnight success
Th h h i h h d d f
` The change happens over time, through repeated doses of
Compliance to Collaboration
“What is Partnership”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
`Establish a clear goal
Elements for Improvement
`
Focus the issues
` Too many issues “spoils” the soup ` 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
Managing Expectations
`
An Iterative Incremental Process
`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 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 If the argument is valid, then learn and collaborate
Measuring Success
One Supplier At a Time…..pp
`
Numbers
` For each rule developed ` For each rule developed
` Baseline
` Change to Baseline ` Reaching the Plateau
`
Other “Measures”
` Conversion of Attitude ` Conversion of Attitude ` Initial Onset Cooperation
Conclusion
Conclusion
References
References
`
Perfect Order Index –
www.supplychainvisions.com
`Benchmarking Study
`
Benchmarking Study
-http://www.compliancenetworks.com/!userfiles/pdf/library
/white-papers/ThePerfectOrderv3.pdf
`
AMR Top Supply Chain 25
http://www.amrresearch.com/content/view.asp?pmillid=21
042
Contacts
Contacts
C T l h E M l
Contact Telephone E-Mail
Victor Engesser, Circuit City
(804)486-4834 [email protected]
David Schneider (610)772 0346 davidkschneider@earthlink net David Schneider,
David K. Schneider & Co.
(610)772-0346 [email protected]
Richard Wilhjelm, (954)385-6527 [email protected] Compliance Networks
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