20 July, 2022

THE IMPORTANCE OF A VENDOR COMPLIANCE PROGRAM

Product delays happen due to a range of circumstances, from weather delays to supply shortages. Yet companies face costly disruptions and angry customers if they do not have the right products on hand. A vendor compliance program helps lower risks for companies by better ensuring they receive products on time from suppliers. 

When products don’t reach businesses on time, a chain of events happens that leads to major disruptions in their operations. They must find out the reason for the delay from the supplier or vendor, learn when products will reach warehouses and stores, and deal with disgruntled customers. All of these issues lead to the retailer taking on unnecessary costs.

Even without the products, retailers must continue to pay for workers who wait for the shipments to arrive. They may have to issue refunds to customers who learn that their orders will not arrive by stated delivery times. A company also has no product to offer to new customers, which may lead buyers to purchase these same products from competitors. When the supplier finally ships the products, companies may take on process delay costs as well as inbound costs if the delays happen during the transport of goods. 

To lower these expenses, a company and its supplier may sign a vendor compliance contract. This contract details how supply chain issues may be handled between the two parties as well as allow companies to receive payments from suppliers to defray costs spent due to product delays or errors in fulfillment. 

VENDOR COMPLIANCE IN LOGISTICS 

When talking about vendor compliance in logistics, it is a set of vendor standards that companies and suppliers agree upon for their supply chains. The standards may cover anything that has to do with issues to the supply chain, including supplying the product to the warehouses, transporting shipments, product quality, and customer returns.  

Some aspects found in these documents may include: 

  • Product quality: The contract may discuss standards and requirements for poor product quality and damage to products during the transport of goods. 
  • Shipment issues: Transportation issues with products may go beyond just delays due to route problems or weather-related events. They can also include non-standard pallets, wrong products sent with shipments, and errors in the bill of lading. 
  • Inventory issues: Inventory issues may consist of products having the wrong product order (PO) numbers, failure to obtain prior approval for product substitutions, wrong labels, and mixed SKUs or POs. 
  • Processing requirements: The document may go into detail regarding a range of processing requirements such as necessary paperwork, supply chain system requirements, drop-ship and direct-to-store requirements, product returns and credits, and other service standards. 
  • Vendor chargebacks: The company and supplier may also include fees that the supplier may pay to the company if not meeting contract terms. 

 BENEFITS OF A VENDOR COMPLIANCE POLICY 

By implementing vendor compliance management programs, companies have the means to lower their supply chain risks and costs when problems arise with their suppliers. These contracts detail all roles and responsibilities that each party takes in the supply chain, what is expected from them, and outline accountability for both parties.  

Suppliers agree to abide by the requirements of the contract to help ensure that products reach companies to fill orders and meet deadlines while reaching customers in the highest quality. The policy may provide cost savings for both parties while increasing supply chain efficiency. 

WSI LOGISTICAL SOLUTIONS 

Whether a company has a simple or complex supply chain, it should assure that the products received by its suppliers meet specifications and reach its customers on time. Vendor compliance contracts help companies and suppliers streamline their supply chain and tackle inefficiencies to avoid production delays and unexpected costs.

Here at WSI, we offer outsourced logistical solutions to create strong supply chains for companies and suppliers. Our services include order fulfillment, warehousing, distribution, transportation, 3PL strategies, and contract services. Reach out to WSI to learn more.

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