What Is a Vendor Compliance Program & Why Do You Need It?

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Inbound shipments are vital to successfully operating supply chains. Usually, due to the lack of control and visibility, inbound shipments can consume up to 40 percent of the overall freight costs. Apart from that, maintaining good relationships with vendors and ensuring on-time, high-performing deliveries can be quite a challenge. Engaging your suppliers in a vendor compliance program is an effective way to foster trusted relationships with them and ensure superior performance from their side.

What is a vendor compliance program?

The vendor compliance program is a series of rules and regulations established by a company to ensure on-time deliveries and highly professional performance from its suppliers and vendors. Such a program aims to get the vendor charged in the case of delay or fulfillment issues.

In the dynamic supply chain industry, any disruptions can lead to frustrated customers and lost costs. Compliance programs reduce the probability of supply chain discrepancies. When the supplier fails the agreement, the company receives payments to cover its losses. This way, businesses secure themselves and enhance their vendor management.  

Additionally, all parties are involved in defining and negotiating the process when setting a compliance agreement, including retailers, vendors, suppliers, and merchants. Inventory control and accounting personnel determine the policies.

What is a vendor chargeback?

A vendor chargeback is a fee that the retailer assigns to the supplier for failing to meet the terms of the agreement. The retailers develop the percentage or amount of this charge individually from regional to huge players. Because of this, it’s hard to state the range for the costs, but according to the Retail Value Chain Federation, the average charge can be $250-$300 per occurrence. Generally, there are many things that you lose when suppliers are not compliant.

Why is vendor compliance substantial?

Without a compliance program, a company risks dealing with the lack of organization, hidden costs, and failed vendor performance with little accountability. Which in turn, has implications on the overall business efficiency and affects customer satisfaction.  

In most cases, supplier issues mean lost sales or the need to manage backorder. Every time this happens, the company loses money on customers and reverse logistics. Apart from costs, this also does significant damage to the company’s reputation and results in increased spends on customer support and retention. Another concern is inbound freight costs, which arise when shippers don’t follow pre-determined routes or when any delay occurs. Collectively, this can cut a large piece of a company’s budget.  

If there is any disruption, this results in longer operational processes. For example, the need to produce more paperwork, add more manual force to fix the issues. Inconsistency in operations leads to even more chaos, becoming long and inefficient. Also, the whole retail industry depends on EDIs to manage their business, and non-compliant suppliers can cause significant complications with document processing.

Effective inbound freight management with PLS

Managing your  inbound shipments can bring immediate freight savings. Additionally, our solution lets you increase control over your supply chain and gain complete visibility. Our web-based TMS, PLS PRO, makes all inbound shipment information visible in real-time.  

Why partner with PLS?

  • PLS customers save an average of 20 percent on their inbound freight.
  • PLS maximizes cost savings based on service measures that our clients specify.
  • We minimize the number of carriers needed, therefore reducing unloading time.
  • Our clients have increased visibility with a single system with all the reports and data visiting multiple resources.

Check out our Inbound Freight solutions here!

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