Through a special arrangement, presented here for discussion is a summary of a current article from The Journal of Trading Partner Practices (JTPP), the official online publication of the Vendor Compliance Federation (VCF), Trade Promotion Management Associates (TPMA), and the Federation of Credit and Financial Professionals (FCFP).
To alleviate growing pains and facilitate its supplier management process, Urban Outfitters is launching a Product Lifecycle Management (PLM) system which will provide the information needed to scorecard vendor performance. A 20 percent rate of growth over the past several years has engendered significant expansion of its vendor base, which exceeds 1,500 suppliers today.
The apparel and accessories retailer handles products for multiple divisions and manages a supply chain that includes retail stores, wholesale accounts, websites and catalogs.
Jay Hallett, vendor relations and compliance manager at Urban Outfitters, said the information obtained from the PLM system "will provide our buyers with a valuable tool for determining the true cost of dealing with certain vendors. We expect to use vendor scorecards as a way to reduce the amount of handling required in our DCs. Vendors with good ratings will be fast-tracked through our DCs, with limited or no added handling, including count verification." He said the system is expected to go live within the next year.
Currently, deductions are issued from Urban Outfitter's DCs, traffic department and quality control department, with little linking of these various claims into one system. "The PLM system will give us a single location for compiling and tracking all of this information and give us a more accurate picture of who our problem vendors are and the ultimate cost to our bottom line." He said information about the new system will be made available to its vendors through its vendor website.
The move by Urban Outfitters underscores a shift in the way retailers are managing the performance of their suppliers. For years, retailers have relied solely on compliance and deduction policies to manage their suppliers and encourage them to meet their supply chain requirements. However, scorecards offer a more proactive means of measuring supplier performance and enable retailers to closely align themselves with vendors who achieve the highest grades, while providing incentives to those whose scores are on the low end. According to a recent VCF survey, 67 percent of retail respondents noted that their buyers' decisions are influenced by suppliers' scorecard performance.
About a year ago, Urban Outfitters launched a vendor website, which serves as a single portal for vendors to access its routing, packing and ticketing information. The creation of the website has also lifted a burden from the company's buyers, while elevating its vendor relations department to the position of liaison between the buyers and vendors.
Mr. Hallett noted that the increasing complexity of the marketplace greatly increases the need for retailer-vendor collaboration to ensure the unencumbered flow of goods through the supply chain. "The need for quick turn and greater efficiencies makes it critical that Urban is communicating with our vendors and, more importantly, making sure they fully understand our requirements. Add this to an ever-changing landscape surrounding federal and state regulations and we have an even greater obligation to make sure our vendors are educated."
Discussion Questions: What are the pros and cons of using vendor scorecards for retailers over typical compliance and deduction policies? What are overall obstacles for retailers in trying to get suppliers to adhere to supply chain guidelines such as accurate and timely deliveries?