How to Win the Retailer Compliance Challenge

As a consumer goods distributor, you know all too well the pain of retailer chargebacks. You also know that most of these chargebacks are due to retailer non-compliance. The frustrating part is that most of these charges are easily prevented, but it’s hard to keep up with retailers constantly changing their compliance requirements. Some retailers are easy to work with; but others will have a 200-page manual that your team must follow to the letter to avoid fees.

If this is a recurring problem for your business and directly affecting your bottom line, you’re not alone. While these charges might be annoying, there is a method to the madness. It’s not just a means for retailers to line their pockets. On the contrary, having strict guidelines on compliance requirements is how retailers keep operational costs down by standardizing documents.

Here are some of the most common retailer compliance issues that distributors have reported:

• Routing instructions not followed properly

• On time, In Full (OTIF) requirements were not met (order was too early, too late or was missing an item)

• Retailer-specific GS-1 barcode was missing information

• The Advance Ship Notice (ASN) was incorrect or incomplete

• Pallets didn’t meet retailer specifications

• Packages were shipped with an incorrect packing slip or an incorrect format

The variations of these requirements are endless. Walmart in particular is notorious for hefty fines levied on their suppliers for minor compliance infractions. If you haven’t budgeted offsets for these non-performance fees, you could be looking at thousands of dollars off your profit margins. While increased profitability is a strong motive for meeting compliance standards, what about your relationships with your retail partners? If your retailers know that you consistently get orders correct and meet (or exceed) expectations, they are more likely to increase their sales with you.

Read on to find out how you can consistently meet retailer compliance requirements and strengthen your relationships with your retail trading partners.

Chargeback Management

Regular chargebacks chip away at your bottom line, inhibiting your profitability. Chargebacks can occur for hundreds of reasons, but most are easily remedied if you have the right tools and information. Your ERP should have integrated chargeback management tools that allow you to capture all the details related to deductions. For example, you need to know deduction amounts, reason codes, store ID, status codes and expiration dates, as well as the related invoice or purchase order numbers.

Aptean Distribution ERP makes it easy to reduce the number of chargebacks, resolve payment discrepancies and boost your profits. With built-in chargeback task management tools, you can assign users and teams to investigate any erroneous deductions. Since the entire organization has full visibility, you can track the status of your deductions and then monitor which chargebacks are in research, and when to require proof of delivery.

These tools help you monitor chargebacks throughout the supply chain. You can analyze which customers consistently have issues and then connect the dots to find a resolution. If the issue is on your end, you can talk with your team to fix it. If it is an error on the customer side, you can send in your service team to dispute the charges and get them reversed. This will not only help reduce chargebacks, but improve your service because you may discover problems that your customers might not be telling you about directly.

Electronic Data Interchange (EDI) Requirements

If your company sells to mass merchant retailers, you need an EDI solution. EDI compliance introduces its own set of complexities and challenges, particularly when all your trading partners have their own set of unique rules. Your customers all want specific documents, so it’s essential to have an integrated EDI solution to deliver them on time. Some of the most common EDI documents include:

• EDI 846 – Inventory Inquiry/Advice

• EDI 855 – Purchase Order Acknowledgement

• EDI 753/754 – Request for Routing/Routing Instructions

EDI solutions enable you to interact with your trading partners seamlessly and in real-time making you more efficient because EDI streamlines transactions with no language barriers and works 24 hours a day. With a managed EDI system, you never have to deal with onboarding, mapping or service issues.

Aptean’s EDI is fully managed, which means that we’ll help onboard new customers and usher them through training and validation processes. With managed EDI, your vendor monitors daily activities, adjusts maps, answers any questions that may arise and addresses pricing discrepancies.

On-Time in Full (OTIF)

OTIF, or On-Time, in Full, is a retailer compliance metric to evaluate the performance of suppliers. It measures the accuracy and timeliness of shipments. At first glance, it seems simple: OTIF rate calculates the overall percent of shipments that are on time and complete. Walmart launched the compliance initiative in 2017 to ensure that items are always in stock for their customers.

Here’s where it gets more complex—it’s calculated differently for each metric. Full-truckload suppliers are fined 3% of the value of non-compliant goods while less-than-truckload suppliers face fines of 3% of the monthly cost of goods sold of non-compliant cases. Those who don’t hit the standards (85% for FTL, 50% for LTL) must then create an action plan documenting the steps they will take to reach compliance. If those plans fail, suppliers can risk expulsion. If Walmart is one of your major customers, failing to meet those standards could be devastating.

To meet OTIF, every shipment must match the exact quantity ordered. So how can you achieve it? With an ERP system built for distributors. Since most distributors must manage the process of importing products with very long lead times, they need robust demand planning. Aptean’s ERP has inventory management and demand planning modules so you can make data-based decisions. You can analyze planning based on different sources, including point-of-sale records, retailer forecasts, historical trends and seasonality.

In addition, integrated EDI, ensures streamlined, efficient data flows across your organization. Retail orders must flow seamlessly through each step of the process, and your ERP with EDI makes that happen. A built-in warehouse management system (WMS) is also a necessity. As orders come in, your distribution ERP gives you full visibility into each step of the sales process, from receiving orders to picking and packing products in your warehouse to scheduling and managing the delivery.

Only an industry-specific ERP has the tools and functions you need. It gives you full visibility into the sales cycle with real-time data that speeds the order to cash cycle and helps you meet even the most stringent OTIF constraints.

Labeling, Branding and Packaging

All large retail establishments have vendor manuals that typically include huge manuals on packaging requirements, delivery policies and how they expect their product to look when it arrives to a customer. Labeling guidelines must be correct, and your orders can be rejected if the labels don’t include mission-critical, customer-specified data.

You risk losing those large-scale orders if your company can’t adhere to these standards. A Distribution ERP, built specifically for the consumer goods industry, has functionality built-in that allows you to meet retailer demands while minimizing errors and associated costs. You need a solution that enables you to enter information and promptly generate labels in your warehouses. It should address evolving customer requirements and their individual labeling conditions.

The ability to automatically generate shipping labels based on individual retailer compliance requirements or ship packages prepaid using a retailer’s shipping account within the ERP system alleviates the stress associated with shipping packages. There’s no more manual entry, so you won’t have to worry about data entry errors as your team tries to apply each retailer’s rules correctly.

The retailer compliance challenge is complex, but if you can master it, you can win competitive opportunities, avoid fines and establish standards and best practices that will help your business grow.

If you’d like to talk more about how Aptean Distribution ERP helps you meet and exceed retailer compliance requirements, reach out to our team of distribution industry experts. We’d love to talk.