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Scorecards vs. Continuous Compliance Monitoring

cycle-300x300Monitoring vendors for compliance is, obviously, a key to both good business and good business relationships. Relationships between retailers and vendors are, at best, complicated and difficult; at worst, as many buyers have painfully learned, the partnership can become chaotic and nearly impossible.

Most fall somewhere in the middle, and a key to success requires cultivating the best vendors while culling out those who fall below par. Keeping the best suppliers can be, at first, a simple matter: pay the right price, and be a good partner yourself. But making sure the top performers remain the top performers over time requires a time investment. Companies with smaller supply chains can accomplish this on their own by simply monitoring and assessing each supplier periodically.

Many retailers have traditionally used vendor scorecards to evaluate performance. For small and medium-size supply chains, these can work fairly well. Typically, the scorecards measure, in a shorthand fashion, how well the supplier has met the processes and procedures agreed upon at the outset of the partnership.

This approach is limited, however, in many ways. The benefits of a single, formal, standardized report belie some glaring shortcomings: scorecards are almost always too generalized, and too late, to be useful in resolving issues between retailers and suppliers.

Fortunately, other processes have been developed that enable buyers to indentify and fix problems before they show up in the vendor scorecard. Not surprisingly – because continuous monitoring is an enormous, complex task for most retailers – outsourced systems have developed to provide an efficient method of compliance monitoring.

When you contract with a provider of compliance monitoring, the time taken in the initial setup is repaid many times down the line. You begin the process, at one level, by simply connecting your supply chain data to the system provider. For each supplier, however, the provider needs to program in a variety of scenarios that look for changes and aberrations.

These anomalies are what will be reported on when they’re found. It’s crucial to the process that the reporting is done in real-time: the system provides great value by alerting suppliers to small problems before they become big ones, and enabling “on the fly” fixes. For the most part, retailers don’t even need to be involved past the initial programming stages – resolution facilities enable suppliers to automatically report fixes back to the system.

These processes are often fast and automatic. They are also very visible, via real-time dashboards and detailed reports of violations (with documentation). In addition, incidents can be escalated, depending on severity and history.

By both adopting continuous compliance monitoring and relying on an a well-equipped, expert firm for the service, retailers can reap many financial benefits – and improve relations with top vendors at the same time.
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