The Best Practices to Implement Vendor Compliance in Your Warehouse

vendor-compliance-best-practices

This next best practice that you can implement in your distribution center is something called vendor performance. So vendor performance is basically you as a retailer or a distributor or as an ecommerce order fulfiller you are buying your product from different vendors. 

When the vendor ship to your DC, you can rate them on how well they are doing in terms of compliance. Compliance requirements are mandatory in all of the big ecom warehouses. For example let’s take Walmart or Staples or Amazon, all these big distribution companies handle larger merchandise, which is being pushed through their supply chain. They need a lot of automation, material handling equipment, sorters, conveyors, and robots for moving these merchandise, which are products through their distribution center. They are all sent it to their stores and for fulfilling orders. When they have all this material handling equipment robots and everything, they can accept only certain box sizes, certain labels and certain barcodes. 

The barcodes, boxes have to be of a certain size, if it’s outside of that size then it has to be marked as a non-conveyable or a non-sortable or a non robot-able. Because nowadays there are a lot of robots hitting the DC so all those things will have to be complied with, only then the product will move smoothly through all these different material handling equipment. All these different material handling equipment are used, so all the boxes whatever you are shipping will go through those MHE. For a smooth operation it’s important that as a distributor you rate your vendor and give them feedback. It can be a box issue, where  the box is too big or too small. In these scenarios you cannot ride your conveyor which means you give them a range of box sizes and tell them to ship in those dimensions. 

Also the label has to be applied only in certain places, because only then the scanners can scan. The barcode and the label should also be at a certain size only, then only the scanner can scan the barcode. If it is way too small the scanner cannot scan and if the barcode is way too big the scanners cannot scan as well. All of these compliance instructions are documented in something called as compliance manual. The compliance manual is also issued to the vendor that is shipping to your facility and obviously which means in delivery there are no horror stories. 

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The compliance manual is big and it takes a long time to understand all the details. Sometimes there is a big difference between the compliance manual versus what this actually being requested for. Sometimes the retailer’s adds chargeback conditions in their manual, that’s when you get chargeback for non compliance. As a vendor if you’re shipping to a big retailer and if you’re not following their compliance requirements then you’re going to get a chargeback. It happens if a box instead of riding through the conveyor and getting to the destination which is either in a reserve location or active piece-pick location it ends up somewhere else. 

Someone has to manually find that box and put the Box in the right place. Let’s say that someone spent one hour fixing this compliance issue. Then the retailer is going to give chargeback for that extra one hour they spent to process they the label as the label was not applied properly or the barcode was not of the right size, or the box was not of the correct size. Incorporating a vendor performance program helps to some extent because you can drive some of the compliance requirements. Of course you want to be careful because you don’t want to issue too much chargebacks and that’s going to create a bad taste in the vendors side. 

Incorporating a vendor compliance requirement is a good idea. It’s a best practice which people will knew when they’re shipping to make sure all these are followed. Vendor should make sure that they pack the box in certain way. You can put these box sizes all those things in the compliance manual, so that’s something to think about. Basically how the way it works is there will be a different vendor performance codes. If there is a box issue, label issue, barcode issue so you can create codes such as b1, b2 or box one, box two. You can create all those codes and then assign some time against the code. If the code one is applied that means you’re spending 10 minutes on that box that means if the labor rate is like $15 per hour then a certain number of dollars is going to be assigned to that code and that’s the chargeback that goes back to the vendor. Like this we can create multiple codes and use those codes. 

If the vendor is so good you can even completely skip the quality inspection. we’ll talk about the quality inspection down the line. So that’s something to think about incorporating some kind of vendor performance program and tell your vendor to follow these compliance requirements. Please let us know what you think about this best practice in the comments section below.

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Originally published at Smartgladiator.com on September 10, 2019.


Puga Sankara is the co-founder of Smart Gladiator LLC. Smart Gladiator designs, builds, and delivers market-leading mobile technology for retailers, distributors, and 3PL service providers. So far, Smart Gladiator Wearables have been used to ship, receive, and scan more than 50 million boxes. Users love them for the lightweight, easy-to-use soft overlay keyboard and video chatting ability, data collection ability etc. Puga is a supply chain technology professional with more than 17 years of experience in deploying capabilities in the logistics and supply chain domain. His prior roles involved managing complicated mission-critical programs driving revenue numbers, rolling out a multitude of capabilities involving more than a dozen systems, and managing a team of 30 to 50 personnel across multiple disciplines and departments in large corporations such as Hewlett Packard. He has deployed WMS for more than 30 distribution centers in his role as a senior manager with Manhattan Associates. He has also performed process analysis walk-throughs for more than 50 distribution centers for WMS process design and performance analysis review, optimizing processes for better productivity and visibility through the supply chain. Size of these DCs varied from 150,000 to 1.2 million SQFT. Puga Sankara has an MBA from Georgia Tech. He can be reached at [email protected] or visit the company at www.smartgladiator.com. Also follow him at www.pugasankara.com.

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