How Improving Vendor Performance Can Yield Higher Retailer Profits

The relationship between vendor performance and retail profits is inextricable, and improving it yields big wins for both parties.

A hallmark trait of successful companies in any industry is their ability to do things—even the simplest, most basic things—better than their competition. This usually requires a willingness to do such things differently, to shrug off the notion that the inefficiencies of standard operating procedures are a cost of doing business, to wring as much error and anomaly as possible out of the operation—no matter how mundane.

In retail, opportunities to find competitive differentiation are perhaps nowhere more plentiful than in the complex and variable supply chain.

Inbound transportation logistics are affected by a number of factors that have a large, direct, yet difficult-to-measure impact on retail profitability. Lead time, on-time delivery, order accuracy, and fill rates are among the many levers that impact store performance, yet these complex variables that present opportunity are often the very challenges that stifle its pursuit. If a retailer can’t specifically measure the cost of out-of-stocks and lost sales due to variables such as vendor error and noncompliance, vendor performance improvement doesn’t make the short list of supply chain investment priorities.

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