Strategies for Avoiding Delivery Compliance Fines
Delivery compliance is crucial to ensuring stocked shelves and cost control for the retail industry. At the same time, delivery compliance is putting new pressure on consumer packaged goods (CPG) companies to deliver on time in full, or pay steep fines. Equally important, the delivery compliance issue is placing added strain on the vital, collaborative relationship between CPGs and their retailer partners.
Here’s a snapshot of the financial impact that the lack of delivery compliance is having on the CPG industry
- Analysis by McKinsey & Company shows more than $5B lost for CPGs if US delivery performance doesn’t improve
- IDC estimates that if ALL U.S. retailers imposed a 3% penalty on late or incomplete shipments, the total imposed fees would be over $6B annually
- RSi estimates an average-sized supplier is paying upwards of $1.6M in annual chargebacks
In fact, with non-compliance resulting in many billions of lost retail sales, this growing issue negatively impacts both CPGs and retailers. Also concerning is the fact that, while reducing the number of lost sales, suppliers are increasingly having to “remove focus from key areas like maximizing forecast accuracy, on-shelf availability and other impactful supply chain or sales initiatives, and to move resources toward transportation management and dispute management,” according to a leading CPG company.
To deal with this growing problem, in late 2015 the Target Corporation decided to work “with vendors to speed up the supply chain.” The retail giant was enforcing new regulations “as part of a multibillion-dollar overhaul … to better compete with rivals,” according to Reuters. In addition, Target invested over $5 billion in supply chain and technology infrastructure between 2015 and 2017. They also tightened delivery deadlines and instituted higher fees. Today, the fines implemented as a part of this effort add up to millions of dollar per supplier annually, straining the CPG-retailer relationship.
Neither CPGs nor retailers want delivery compliance to be a profit-killer or operational distraction. In our newly published Delivery Compliance white paper, go behind the scenes of Target Corp’s compliance policy program and learn how both CPGs and retailers can utilize delivery compliance regulations for the benefit of the supply chain as a whole.