How Can Retailers Minimize Vendor Friction?

How Can Retailers Minimize Vendor Friction?

The retailer-vendor relationship is a complicated one. It is built upon trust and an open line of communication, as well as the ability to efficiently order, receive, promote and pay for goods and services. Retailers, however, engage in such a large volume of complex supplier-relationships it can be nearly impossible for them to keep up.  Whether accounting for product shortages, promotions, pricing differences or just the millions of transactions taking place, friction is bound to occur.

Poor vendor relations can lead to supply chain breakdowns that bring about unsatisfied customers and the potential for millions in lost profit. On top of that, the rapid pace of commerce today means there is little room for operational error.

Retailers can avoid this by shifting gears and creating transparent, positive vendor relationships. At the end of the day, this enables them to enhance the value of their promotions, secure better contracts and establish a much simpler flow of operations all the way from sourcing products to getting them into consumers’ hands.


Correct communication errors early

Breakdowns across multiple points of interaction are commonplace in today’s industry and can adversely impact the retailer-vendor relationship, including purchasing, shipping and receiving, matching and paying, deals and promotions, returns and post-audit. Consider, too, that millions of transactions occur simultaneously, which inevitably increases the possibility of unforeseen errors.

Without a viable solution to communication issues, vendor abrasion can worsen over time. Therefore, it is crucial for retailers to nip issues in the bud with a sense of urgency by developing and executing a plan that assigns roles and responsibilities for managing vendor communications – including timelines, deliverable dates and other performance benchmarks to work against.


Leverage an outside partner

An experienced outside organization can enhance vendor relationships by improving transparency, communication and timing. Third-party firms, for example, can enhance the deduction dispute process. Often, retailers send vendors payments that include deductions – but fail to explain why. This practice often results in disputes that can take more than 90 days to resolve – and millions of dollars in revenue lost researching and defending disputes.

Such delays can cause both confusion and friction, largely due to a lack of transparency. Vendors want to ensure they are properly accounting for deductions and expenses, while retailers want to ensure the terms of their contracts are fulfilled. That is why undocumented events or processes, such as a phone call between the retailer and supplier to negotiate price, may result in calculation errors.

When such issues lead to undocumented promotional plans or lax vendor income collection processes, additional collections can occur during a post-audit review. The result? Frustration on both sides.


Provide vendor tools

To counteract or alleviate such frustrations, forward-thinking retailers often provide a portal for suppliers to easily access information needed to resolve issues. Portals can be configured so vendors serve themselves with minimal interaction; i.e. they can often find what they need quickly and easily, without human input. Retailers with an “open book” transparency are more apt to build trust.

While some issues may be easily resolved with access to the right data, to further improve vendor relations, retailers should also provide a path to a human – and not just a chatbot. With millions of transactions, errors will occur. However, if these errors are caught before a payment or deduction takes place, it can be much easier to address and eliminate potential roadblocks in the systems.

Providing vendors with access to an associate who can help resolve complex issues quickly not only improves internal processes, it keeps suppliers satisfied as well.


Improve vendor relationships to contribute to the bottom line

Without a doubt, retailers can improve their vendor relationships by cultivating transparency and communication in a timely manner. Every retailer, regardless of size, should review processes and develop a plan that accounts for overall governance programs – whether that includes compliance or dispute management.

And by having a person on the other end of the phone, rather than just a chatbot, retailers can be proactive rather than reactive – which increases source-to-pay accuracy and cash flow while decreasing vendor abrasion.


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