Companies rely on their vendors to provide them with goods or services that allow them to run their businesses. Types of vendors include equipment manufacturers, suppliers, such as office supply stores, service providers, such as cleaning services, or companies that supply parts and materials. A company could work with dozens or even hundreds of different vendors.
Effectively managing your list of vendors is important for many reasons, such as reducing spend and ensuring that all processes go smoothly between the order and the payment. Vendor compliance is all about setting up requirements for the vendors your company deals with in an attempt to have perfect order and be able to resolve issues effectively and promptly if they arise.
The Need for Vendor Compliance
Without vendor compliance, companies have few avenues to take if something goes wrong, such as a price increase, a late delivery, or a dissatisfactory product. Other than demanding improvements or severing the relationship and absorbing the hidden and direct costs, they have no recourse for non-compliance.
A fully developed vendor compliance policy, on the other hand, can help your company avoid myriad problems, including improper PO numbers, wrong products sent, product substitution without approval, incorrect labels, improperly packaged merchandise, mixed POs, mixed SKUs, incomplete bill of landing, late deliveries, damage, nonstandard pallets, and much more. All of these issues will cause issues that will resonate within your entire organization, and in the end, hurt your customer service and affect your bottom line.
An Often Overlooked yet Effective Document
Of all of the strategies used by companies to reduce costs, vendor compliance is often overlooked or underdeveloped. A formal, well-defined policy used with every vendor can reduce wasted time, lower warehouse, freight, and delivery costs, increase speed and accuracy, and lead to better customer service and higher customer satisfaction. A policy will also allow for the implementation of advanced supply chain systems, just-in-time inventory, RFID systems, source marketing and ticketing, and ASNs, all of which create greater efficiencies. Additionally, an effective vendor compliance program will avoid pitfalls and reduce the time spent on vendor chargebacks, claims, and disputes, leading to better managed vendor relationships.
