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Deduction Survey. Review of Retailer / Vendor Responses. Kim Zablocky , VCF, Founder and Chairman. VCF in 2010. VCF is a leader in Retail and Vendor best practice solutions for supplier-retailer collaboration and is an advocate for retailer-supplier trading synchronization. .

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deduction survey
Deduction Survey

Review of Retailer / Vendor Responses

Kim Zablocky,

VCF, Founder and Chairman

vcf in 2010
VCF in 2010

VCF is a leader in Retail and Vendor best practice solutions for supplier-retailer collaboration and is an advocate for retailer-supplier trading synchronization.

VCF champions initiatives to increase strategic industry-wide productivity, profitability and growth. VCF serves a multitude of touch points in perfecting retailer-supplier execution to shorten cycle times and drive overall velocity in the supply chain. 

VCF draws participation from the Nations' leading department, specialty and discount stores.

vcf membership
VCF Membership

Who are our members?

vcf membership1
VCF Membership

TO NAME JUST A FEW…

1928 Jewelry Co.

K Swiss, Inc.

A & H Sportswear Company

Kayser-roth Corporation

A H Schreiber Co Inc.

Keeco LLC

A. D. Sutton & Sons Inc

Kellwood Company

Adidas Group

Kenneth Cole Productions Inc

Adjmi Apparel Group

KHQ Investment LLC/LF USA

All Access Apparel, Inc.

Knitworks / KWDZ Manufacturing LLC

All- Clad Metalcrafters, LLC

Komar Distribution Services

Amerex Group Inc.

Lasko Products, Inc.

American Innotek, Inc.

Le Creuset of America, Inc.

American Textile Company

Leg Resource, Inc.

Antigua Group, Inc.

Lenox Group Inc.

Applica Consumer Products, Inc.

Levi Strauss & Co.

Ariela-Alpha International, LLC

Libbey Glass Company

Arrow Plastic Manufacturing Co.

Lifetime Brands Inc.

Audiovox Electronics Corporation

Liz Claiborne Inc.

Avanti Linens

Louis Raphael International

BCBG Max Azria Group, Inc.

Louisville Bedding Company

  • We are over 1300 members strong, including:
      • Retailers
      • Merchandise Suppliers
      • and Service Providers

Who are our members?

vcf membership2
VCF Membership
  • We are over 1300 members strong, including:
      • Retailers
      • Merchandise Suppliers
      • and Service Providers
slide6

Deduction Survey - Survey Background

  • Survey recently conducted by VCF and Attain Consulting
  • Coordinating retail and vendor surveys designed to:
    • Highlight areas of alignment
    • Provide insights into current deduction management trends
    • Identify opportunities for collaboration
  • Responding companies included:
    • 22 Retailers
    • 251 Vendors
slide7

Deduction Survey - Survey Background

  • Questions fell into 5 major groupings:
      • Pre-Deduction Notification Information
      • Remittance Information
      • Deduction Processing & Supporting Documentation
      • Disputing Deductions
      • Deduction Metrics
      • Trading Partner Collaboration
slide8

Vendor Participants

Type of Business

slide9

Vendor Participants

Primary Business Channel

slide10

Vendor Participants

Annual Gross Sales

Median size of responding vendor - $101 - $500 Million

slide11

Vendor Participants

Industry

(Includes Giftware, Glass, Luggage, Packaging & Containers, Photographic Equipment, Publishing, Prepaid Cards, Cable / Internet, Infant Care, Transportation Carrier)

Type of Business

slide12

Pre-Deduction Notification Information

Pre-Deduction Notification Information:

Information on vendor violations or errors provided by or available from retailers before an actual deduction is taken.

slide13

Pre-Deduction Notification Information (continued)

Retailer:Do you provide pre-deduction notification to your vendors?

Vendor:How many of your top 10 customers provide / make available pre-deduction notification information?

All retailers unable to provide pre-deduction notification information indicated was due to system limitations

There is an opportunity for more retailers to provide pre-notification information

slide14

Pre-Deduction Notification Information (continued)

Retailer:What method do you use to communicate this information with your suppliers?

Vendor:What is your most preferred method of receiving this information from your customers?

Retail Delivery Vendor

Rank Option Rank

#1 Email #1

#2 Postal Mail #3

#3 Phone -

#4 Vendor Portal #2

N/A Doesn’t -

Matter

Email is the # 1 choice for both

retailers and vendors!

slide15

Pre-Deduction Notification Information (continued)

Retailer:For what types of errors / reason codes do you provide pre-deduction notification information?

slide16

Pre-Deduction Notification Information (continued)

Retailer:For what types of errors / reason codes do you provide pre-deduction notification information (cont’d)?

slide17

Pre-Deduction Notification Information (continued)

Retailer:How long after an order is received is pre-deduction notification information available or provided?

(At invoice / PO match, debit memo is posted to Extranet; varies by type – monthly/weekly cycle)

slide18

Pre-Deduction Notification Information (continued)

Vendor:Do you routinely review pre-deduction notification information?

Vendor:How frequently do you review this information?

slide19

Pre-Deduction Notification Information (continued)

Vendor:How do you track / manage pre-deduction notification information?

Over 60% of vendors use spreadsheets or manual processes to track.

slide20

Pre-Deduction Notification Information (continued)

Vendor:After pre-notification has been researched, how do you track / communicate the information so that it is not “re-researched” if / when actual deduction is taken?

Opportunity to automate / streamline tracking & communication

slide21

Pre-Deduction Notification Information (continued)

Vendor:Have you ever taken preventive action based on information from researching pre-notification information?

For vendors, this can result in direct savings to the bottom line!!

slide22

Pre-Deduction Notification Information (continued)

Vendor:How often can you research and “resolve” pre-notification prior to deduction being taken?

Retailer:If vendor can accurately dispute pre-notification, can deduction be avoided?

slide23

Pre-Deduction Notification Information (continued)

Vendor:What is the biggest challenge you face in trying to manage pre-deduction notification information?

Both collaborative and independent opportunities exist

slide24

Remittance Information

Vendor:How many of your top 10 customers provide payment information electronically via 820 or 812?

Retailer:Does your company provide payment information electronically?

Excludes “Not sure” responses

slide25

Remittance Information (continued)

Retailer:Do you have a standard listing of deduction reason codes communicated and/or available to your vendors?

slide26

Remittance Information (continued)

Vendor:For those customers where you receive detailed remittance information electronically:

Have you “mapped” codes so that deductions are created in your system with appropriate code?

Has mapping streamlined the deduction management process?

slide27

Remittance Information (continued)

Vendor:Has your cash application department been given any training to understand customer specific remittance information?

slide28

Supporting Documentation

Vendor:Do you find it easy or difficult to get documentation from your customers to support the deductions they have taken?

slide29

Supporting Documentation (continued)

Retailer:If you send documentation to support deductions, when is it available?

Retailer:How long after check is received should support be available / received?

slide30

Deduction Management

Vendor:Do you have a time limit beyond which you will not honor a deduction claim?

If so, what time limit?

slide31

Deduction Management (continued)

Vendor:Do you have a time limit on how long a deduction can remain open before it is written off?

If so, how long?

slide32

Deduction Management (continued)

Vendor:Do you require that all deductions be supported by a detailed customer claim or debit memo?

slide33

Disputing Deductions

Retailer:If a supplier would like to dispute a deduction, is there a time limit to submit information to submit?

If so, when does the “clock” start?

slide34

Disputing Deductions

Retailer:If a supplier would like to dispute a deduction, is there a time limit for information submission?

If so, when does the “clock” start?

slide35

Disputing Deductions (continued)

Retailer:How long does a supplier have to dispute a deduction?

slide36

Disputing Deductions (continued)

Retailer:Does your organization have a documented process that suppliers can follow to dispute deductions?

slide37

Disputing Deductions (continued)

Retailer:If so, where can documentation be found?

Behind the numbers:

“…there is some information on our website, but no formal documentation…”

“…only documentation for some types of deductions…”

“…we are rolling out a new process…”

slide38

Disputing Deductions (continued)

Retailer:Do you have specific forms vendors are required to complete when disputing deductions?

Retailer:Can these forms be submitted electronically?

Behind the numbers:

“…disputes can be submitted on our web portal…”

“…at this time, we can only accept requests via email or mail…”

slide39

Disputing Deductions (continued)

Retailer:How long after receiving a deduction dispute and supporting documentation from a supplier will your organization respond?

slide40

Retailers

Vendors

  • EDI / ASN
  • Concealed Shortages
  • Ticketing / Labeling
  • Early / Late Delivery
  • Freight / Routing
  • Full Carton Shortages
  • EDI / ASN
  • Ticketing / Labeling
  • Freight / Routing
  • Full Carton Shortages
  • Concealed Shortages
  • BOL

Tied for 1st

Tied for 4th

  • Deduction Metrics

Top compliance deduction reasons based on number of deductions?

Both retailers and vendors reported the same reasons for 5 of the top 6 reasons

slide41

Vendors

Retailers

  • EDI / ASN
  • Early / Late Delivery
  • Freight / Routing
  • Concealed Shortages
  • Ticketing / Labeling
  • Fill Rate
  • EDI / ASN
  • Early / Late Delivery
  • Freight / Routing
  • Ticketing / Labeling
  • Full Carton Shortages
  • Concealed Shortages
  • Fill Rate
  • Substitution

Tied for 2nd

Tied for 3rd

Tied for 4th

  • Deduction Metrics (continued)

Top compliance deduction reasons based on number of deductions?

High correlation between retailer and vendor responses

slide42

Deduction Metrics (continued)

Vendor:What % of total deductions are ultimately allowed ?

12% reported > 90%

Median was 61 – 70%

slide43

Deduction Metrics (continued)

Retailer:What % of vendor disputes were reversed in last 12 months?

  • 70% of retailers reported that they reversed 10% or less
  • 24% of retailers reported that they reversed 20 – 50%
  • 1 retailer reversed 90% or more
slide44

Deduction Metrics (continued)

Has deduction volume increased over the past 12 months?

Retailers

Vendors

slide45

Deduction Metrics (continued)

Have deduction dollars increased over the past 12 months?

Retailers

Vendors

slide46

Deduction Metrics (continued)

Vendors: Have post audit deductions increased over the past 12 months?

slide47

Trading Partner Collaboration

Retailer:Do you have a “preferred vendor” or “cross-dock” program?

2nd most important element – shipment matches order (67%)

slide48

Trading Partner Collaboration (continued)

Retailers: When a supplier asks to set up a customer / vendor meeting to review compliance issues or performance, how is this request perceived?

slide49

Trading Partner Collaboration (continued)

Behind the Numbers

Retailers:Please briefly explain your response to the previous question?

“ … we like proactive vendors …”

“ … we look at this as an opportunity to address business and process issues and enhance our working relationship …”

“ … we want to help our vendors succeed and not have the costs associated with the violation …”

“ … we encourage visits to the DC to review and discuss corrective actions …”

“ … we view all chances to meet or talk as opportunities to make the process better for everyone …”

“ … if we can be proactive in our efforts in resolving issues, both parties benefit … it is a win – win situation…”

slide50

Trading Partner Collaboration (continued)

Behind the Numbers (continued)

“ … if a vendor is willing to come visit us, we are more than willing to set up a meeting with them …”

“ … face-to-face meetings are beneficial, help the supplier understand our payment / dispute process and allows us to education them on the use of the tools available to them…”

“ … we are willing to work with all of our vendors to improve the way they ship. In the long run, it will help our DC’s to become more efficient…”

“ … there are 2 sides to every situation … the important things is to resolve the issue going forward …”

“ … we look at this as a chance to education the vendor on their issues …”

“ … we value our partnership with vendors, these meetings have been very successful when looking to reduce deductions and compliance issues …”

slide51

Trading Partner Collaboration (continued)

Vendors: Have you had face-to-face meeting with at least some key customers in past 12 months to discuss compliance issues?

Big opportunity for vendors to improve customer relationships

slide52

Trading Partner Collaboration (continued)

Retailer:Who from the vendor organization, should attend these meetings to review compliance issues?

Operations ranked higher than Compliance on who should attend

slide53

Trading Partner Collaboration (continued)

Vendors: Do you periodically negotiate settlements to “clean up” accounts?

If yes, have you had any settlement discussions within past 12 months?

slide54

Trading Partner Collaboration (continued)

Vendor:If you have had settlement meetings within past 12 months, how would you describe the overall results / outcome?

Preparation, preparation, preparation

slide55

Trading Partner Collaboration (continued)

Retailers:What are the 3 most important elements of a successful trading partner compliance meeting?

  • Developing a plan to fix a compliance related issue (69%)
  • Having the supplier understand the problem and our requirements (69%)
  • Understanding the supplier’s issue and/or constraints in meeting our requirements (56%)
  • Using the meeting to further the Trading Partner relationship (38%)
  • Resolving the Issue (38%)
  • Agreeing upon a time frame to correct the issue (25%)

Tied for 1st

Tied for 3th

slide56

Trading Partner Collaboration (continued)

Retailers:In terms of compliance, what do you believe are the top characteristics or traits of a perfect vendor?

  • Proactive & collaborative: proactive in improving; willing to work to resolve issues; acts collaboratively and interested in a partnership; open lines of communications; honest about capabilities, admit when they make mistakes; good internal communication; follow up
  • Compliant: follow all requirements; 100% fill rate; on time delivery; correct ASN; ships according to PO
  • Understand requirements: understands the policies and procedures; understands operational requirements; understand the supply chain
  • Technologically capable: automation is top priority; electronic / technology informed; compliant with EDI & floor ready requirements; fully automated distribution processes
  • Flexible: willingness to adapt
slide57

Trading Partner Collaboration (continued)

Retailers:What are the areas where you believe suppliers need the most improvement regarding the compliance / deduction management process?

  • Proactive & collaborative: dedicated compliance group; proactive in improving; timely; follow through; understand root causes; willing to set timelines; honest about capabilities; design processes changes that benefit both parties; reinforce communications; quality audits of outbound shipments
  • Compliance: follow all requirements; 100% fill rate; on time delivery; correct ASN; ships according to PO; carton contents; warehouse communication; duplicate shipments; label quality; packaging quality; cube & weight accuracy
  • Understand requirements & processes: read / understand requirements; understand dispute / compliance process; understand escalation process; understand who to contact
  • Processes: Disciplines in executing PO changes; scanning outbound shipments to generate ASNs; warehouse communication; train staff in compliance requirements.
  • VCF leading the way of the adoption of the 865 PO Change Act.
slide58

Trading Partner Collaboration (continued)

Retailers:What changes, if any, are you making to your compliance / deduction management processes in the next 12 months?

  • New enhanced system: new system to handle internal processes; upgrading compliance system so vendor can access information thru web portal; simplify and automate; update on-line claim inquiry system
  • Improved processes: reducing time between receipt and notification; documenting exception process; more formal process to ensure advance notification is given to vendors
  • Other: task force to help key vendors who need additional support to improve compliance performance; partnering between buying staff and supply chain management to increase compliance
slide60

Questions?

?

Thank you. For more information, please contact:

kzablocky@vcfww.com