1. Vendor Collaboration and Initiatives to Improve Performance
Executive Seminar
September, 2005

2. Framing the Vendor Discussion
For today’s discussion, we will be focused on the following supply chain objectives of a vendor relationship …
Shipping the right product and quantity
Ensuring the product is shipped with the right packaging and labeling
Ensuring the product is shipped on time with the appropriate routing
Achieving short, consistent lead times
Executing at the lowest cost appropriate for service requirements

3. Vendor Collaboration
Foundation questions for the vendor collaboration discussion …
Do you have a formal program in place for setting vendor requirements, monitoring performance and communicating results?
If you have a formal vendor performance program, does the program meet all of your expectations?
Who owns the vendor relationships in your company?
Where is the biggest opportunity to improve performance?

4. Where is Performance Today?
… significant opportunities for improvement.

5. Performance Ranges
Looking past the averages, consider the good and the bad ...
… some performances likely result in significant competitive disadvantage

6. Penalties and Rewards Penalties are a key part of many programs
Positive incentives are less pervasive
Intent – corrective action versus revenue line item
Monitoring programs are not always “transparent”

7. Satisfaction with Current Programs
… the satisfaction with current programs is not high.

8. Expediting and Ordering Behaviors
Reasons shipments must be expedited ...
… three of the top four reasons are controlled by the retailer.

9. Joint Initiatives with Vendors
The most significant improvements can result from joint initiatives undertaken with vendors. Initiatives may include:

10. Service Level Agreements
42% of participants have Service Level Agreements (SLA’s) with at least some vendors. Terms include:

11. Vendors Feedback
Is vendor input encouraged? Less than one fifth of customers have a formal program for encouraging feedback from vendors.

12. Dialog with Vendors
Is performance shared and discussed frequently?

13. Learning’s on Vendor Collaboration
Best practice includes ...
Implement a timely, accurate and transparent measurement process. Communicate results. Measurement can be two-way.
Rank vendors so that the largest vendors receive the greatest attention.
Commit resources, potentially dedicated staff to the larger relationships. Commitments should be supported by a solid business case.
Penalties can be effective, but they need to be reasonable (reflect the cost of non-performance), applied consistently and motivated by a desire to fix problems.
Ordering behaviors need to support performance goals.
Information sharing is essential – sales forecasts and future plans.
Focus on specific problems with cross functional teams from the retailer and vendor.

14. Questions?