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The Amazon Effect: When There’s a Spotlight on Compliance, Automation is Key

by Peter Edlund

We are all trying to traverse the Amazon jungle…not the famed wilderness in South America but the retail behemoth that has completely transformed the industry.  Amazon sets the bar not only in terms of the variety of products available but also the speed it can deliver those products to the consumer’s front door. Amazon has made product distribution central to its online retail experience and invested heavily in reducing the delivery time of its products. And, because of its size, it has been able to speed up distribution at a fraction of the cost, putting significant pressure on its competitors.

The Amazon Effect: Tighter Compliance Rules & ChargebacksAmazon.jpg

The other retailers aren’t sitting idly. They’re implementing new programs to keep up. Target offers free shipping and 5% discount on essential items like diapers and toiletries to Target credit and debit card holders. This summer, Walmart experimented with a free shipping membership program, where for $50 a year members can have any product delivered to them in three days or less. A number of retailers also offer in store and curb side pickup, allowing customers to order a product online and then pick it up at their convenience.

But that’s just the tip of the iceberg. With retailers promising customers quicker delivery and affordable products available at any time, they are increasing the pressure on suppliers to comply with business rules and manage a more efficient supply chain. In the past, retailers may have waived penalties for violation of EDI or business rules.  Now, under increased pressure, retailers are cracking down on suppliers. They are assessing fees for a variety of issues, including late delivery, subpar packaging, failing to meet fill rates, and noncompliance with UPC barcode standards. Some retailers have even tightened their compliance standards. For example, Lowe’s recently reduced its on-time performance grace period from four days to two.  Neiman Marcus created a branded shopping experience with a supplier enablement solution.

As Amazon Grows So Does Supply Chain AutomationGrowth.jpg 

Suppliers need to be ready.
The business rules agreed upon at the start of the supply arrangement can be applied at full force at any time. And if suppliers are unable to meet the requirements, the agreements may even be cancelled and the business replaced with competitors that can keep up with the demand.

In this intense environment, automation can make all the difference in enabling the supplier to keep up with changing dynamics, and helping to ensure long-term, positive supplier-retailer collaboration. Some of the benefits of automation include:

  • Creates a single record of the transaction between the retailer
     and supplier:
     In fact, business rules are baked right into the system. 34354294_M.jpgThis ensures data accuracy, and helps to eliminate any finger pointing or judgment calls that can be present in manual process. Automation also enables exceptions to be quarantined and addressed quickly.

  • Scales with the business: For suppliers focused on growing their businesses, automation enables them to handle larger and larger volumes of orders without concern for business rule complexity and potential chargebacks. Business that are only partially automated are very difficult to grow in the current retail environment.

  • Drives transparency and better collaboration: Ultimately, automation improves scorecard performance, and strengthens the retailer-supplier relationship. With easy and quick sharing of data and real time communication between the two parties, everyone has access to the information they need.

Automation also provides new opportunities for data analysis so suppliers can view sales and anticipate results, and even detect problems before they arise. Suppliers can analyze inventory at a particular retailer, analyze item movement throughout the retail chain, and revise product quantities and shipment delivery schedules to meet the demands of each particular outlet.

Automation can also enable the supplier to expand reach and add new retailers to the network. In fact, there are many retailers that make EDI capabilities part of their compliance standards and vendors that cannot work within the EDI framework are penalized for working outside the system, such as submitting manual invoices.

There’s no turning back. Amazon has forever changed the way retailers and suppliers conduct business. Manual supply chains cannot keep up with the current pace of product purchase and delivery. Suppliers that do not automate their supply chains will be left behind. It is more important than ever for vendors to move forward and incorporate new technologies that will save them time and money and grow their business.

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