Improving
p
g Profitability
y through
g
Vendor Compliance
Optimization
Victor Engesser, Circuit City
David Schneider, David K. Schneider & Co.
Richard Wilhjelm, Compliance Networks
Agenda
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Introductions
Vendor Compliance Optimization Background
Key Retail Trends
Profitability Impact
Case Study – Circuit City
Case Study – Automotive Retailer
Questions & Answers
Vendor Compliance Optimization
Background
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Definition - Aligning the Vendor Community with The
Profit Objectives of the Retail Enterprise
Merchandise Plan Execution
Keyy Issues – Fill Rate,, On-Time Delivery,
y, Packaging,
g g,
Labeling, ASN Performance & Transportation
Combination of Process & Software
Best in Class Retailers
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Communicate Expectations
Measure Performance
Reward Behavior
Retail Trends
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Declining Top Line Growth
Declining Margins Due to Rising Inbound Expenses
Flow Environment Requirement
Speed Mitigates Risk
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Fashion
Margin
Sales
Information Leverage
Carbon Footprint Reduction
Profitability Impact
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Perfect Order Index
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On-Time
Complete
Damage Free
Correct Invoice
Profitability Impact – AMR Research
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Earnings
g 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
Profitability Impact continued
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AMR Research Supply Chain Top 25 (2007)
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17.89%
17
89% Return
6.43% Dow Jones Industrial Average
3.53% S&P 500
Case Study – Circuit City
Victor Engesser
VP Vendor Relations
Case Study – Circuit City
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Internal Alignment & Structure Matters`
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Define Objectives & Value Proposition`
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Part of a larger “Vendor
Vendor Relationship Management”
Management framework
Supply Chain Performance & Compliance is an important part
of a larger picture
Training, “what does good look like & why does it matter?”
K
Keep
it FFocused,
d Simple
Si l and
d Achievable
A hi bl
Allocate Resources to “Role & Opportunity”`
Partnering for improvement is important but so is migrating to
proven performance
Case Study – Circuit City
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Score Card, Report and Trend Performance`
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Let Visibility
y Drive Healthy
y Competitionp
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Supports allocation of external resources
Keeps Supply Chain in the “Game”
Partner for Growth`
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The Goal is Performance not Assessments
Make Supply Chain Compliance part of a larger “score card”
Leveraging Performance for Growth
K
Keep
D
Driving
i i EnhancementsE h
t
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Higher Level Communication, Collaboration and Integration
Case Study – Circuit City
` Key
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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
Visibility drives competition which drives
performance”
`Thank
you!
Case Study – Automotive Retailer
David K. Schneider
Agenda
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Compliance leads to Collaboration
Elements for Improvement
p
Managing Expectations
Measuring Success
Compliance to Collaboration
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A solid compliance program creates a collaborative
environment
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Mutual agreement requires mutual respect
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Respect needs
Respect process
Include Process & Compliance Rules into the Supplier /
Purchase agreement
g
Compliance to Collaboration
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A solid compliance program opens the dialog to
collaboration
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Changes the bad behavior
Memory and avoidance
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“How
How does my company avoid the ‘pain’”
pain
Assures that issues are addressed
Not an overnight success
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The change
Th
h
happens
h
over time,
i
through
h
h repeated
d doses
d
off
correction
Compliance to Collaboration
“What
What is Partnership
Partnership”
A contract between two or more persons who agree to pool
talent and money and share profits or losses.
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Partnership is not collaboration
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But collaboration is part of partnership
Establish a clear goal
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“We are going to work with mutual interest to improve.”
Elements for Improvement
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Focus the issues
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Too many issues “spoils”
spoils the soup
Roll out in Phases
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Break the effort up and build off of “sound” foundation
Reporting & timing failures
Documentation, Accuracy, Timing
Process Improvements
On time, Complete, Damage Free
Managing Expectations
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An Iterative,
Iterative Incremental Process
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Patience is the rule
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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,
valid then learn and collaborate
Expect time, and coach for time
Measuring Success
One Supplier
pp
At a Time…..
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Numbers
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For each rule developed
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Baseline
Change to Baseline
Reaching the Plateau
Other “Measures”
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Conversion of Attitude
Initial Onset Cooperation
Conclusion
Questions?
References
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Perfect Order Index – www.supplychainvisions.com
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
C
Contact
Tl h
Telephone
EM l
E-Mail
Victor Engesser,
(804)486-4834
victor_engesser@circuitcity.com
(610)772 0346
(610)772-0346
davidkschneider@earthlink net
davidkschneider@earthlink.net
(954)385-6527
richard.wilhjelm@compliancenetworks.com
Circuit City
David Schneider,
Schneider
David K. Schneider & Co.
Richard Wilhjelm,
Compliance Networks
Title Sponsor:
February 10- 13, 2008 ● Gaylord Palms Resort & Convention Center ● Kissimmee, Florida