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The Importance of Supply Chain Compliance

Supply chain complianceAn efficient and effective supply chain can become a powerful competitive advantage in a marketplace saturated with demanding customers and innovative competitors. Many companies struggle with the daunting task of reducing freight costs every year, when their vendors are already struggling to provide the service at such low costs. An alternative to beating down your vendors on price to reduce supply chain spend, is to focus on compliance. Holding your vendors accountable for falling short on service levels and billing expectations can save your company time and money, as well as improve relationships with your customers. Vendor’s should be compliant in two distinct areas; billing and performance.

Billing Compliance

The term billing compliance refers to your vendor’s ability to invoice you according to contract, within a reasonable timeframe. Billing compliance is especially important within supply chain, where companies are more focused on cost reduction and efficiencies than ever before. Auditing your vendor’s invoices to ensure that they are 100% accurate is only half of the battle. Many companies do this currently, but they allocate small armies of auditors to find and correct these errors. Is the juice worth the squeeze?

Billing KPI’s such as billing accuracy and number of days from order to invoice have become incredibly important indicators of a vendor’s ability to bill you properly. Tracking such KPI’s will allow you to pick out the ‘bad apples’ and correct the root issue at the source. For example, if a vendor takes an average of 19 days to invoice you, a simple discussion with your sales rep could resolve the issue, as opposed to having you’re A/P team send out daily emails requesting invoices from this vendor.

Performance Compliance

Performance compliance on the other hand refers to your vendor’s ability to execute a service to a specific standard as outlined in a contract. An example of this would be a carrier that is required to deliver all orders with an on-time delivery % (OTD%) of at least 90%, with less than 3% of orders with overages, shortages, and damages (OS&D). Such KPI’s are crucial to track as they directly affect your customer’s relationship with your organization.

Interestingly enough, companies in todays marketplace lack the ability to track KPI’s such as billing accuracy and OTD%. The issue many companies are faced with is the inability to track and store accurate data pertaining to their supply chain.  As competition in the marketplace increases, companies are looking for ways to set themselves apart from their competitors. Do you possess the business intelligence to maximize efficiencies within your supply chain? Your competitors may…

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