JTPP: Urban Outfitters Moves to Vendor Scorecards

Discussion
Aug 28, 2009

By John Walsh

Through
a special arrangement, presented here for discussion is a summary of
a current article from The Journal of Trading
Partner Practices
(JTPP), the official online
publication of the Vendor Compliance Federation (VCF), Trade Promotion
Management Associates (TPMA), and the Federation of Credit and Financial
Professionals (FCFP).

To alleviate
growing pains and facilitate its supplier management process, Urban Outfitters
is launching a Product Lifecycle Management (PLM) system which will provide
the information needed to scorecard vendor performance. A 20 percent rate
of growth over the past several years has engendered significant expansion
of its vendor base, which exceeds 1,500 suppliers today.

The apparel and
accessories retailer handles products for multiple divisions and manages
a supply chain that includes retail stores, wholesale accounts, websites
and catalogs.

Jay Hallett,
vendor relations and compliance manager at Urban Outfitters, said the information
obtained from the PLM system “will provide our buyers with a valuable tool
for determining the true cost of dealing with certain vendors. We expect
to use vendor scorecards as a way to reduce the amount of handling required
in our DCs. Vendors with good ratings will be fast-tracked through our
DCs, with limited or no added handling, including count verification.” He
said the system is expected to go live within the next year.

Currently, deductions
are issued from Urban Outfitter’s DCs, traffic department and quality control
department, with little linking of these various claims into one system. “The
PLM system will give us a single location for compiling and tracking all
of this information and give us a more accurate picture of who our problem
vendors are and the ultimate cost to our bottom line.” He said information
about the new system will be made available to its vendors through its
vendor website.

The move by Urban
Outfitters underscores a shift in the way retailers are managing the performance
of their suppliers. For years, retailers have relied solely on compliance
and deduction policies to manage their suppliers and encourage them to
meet their supply chain requirements. However, scorecards offer a more
proactive means of measuring supplier performance and enable retailers
to closely align themselves with vendors who achieve the highest grades,
while providing incentives to those whose scores are on the low end. According
to a recent VCF survey, 67 percent of retail respondents noted that their
buyers’ decisions are influenced by suppliers’ scorecard performance.

About a year
ago, Urban Outfitters launched a vendor website, which serves as a single
portal for vendors to access its routing, packing and ticketing information.
The creation of the website has also lifted a burden from the company’s
buyers, while elevating its vendor relations department to the position
of liaison between the buyers and vendors.

Mr. Hallett noted
that the increasing complexity of the marketplace greatly increases the
need for retailer-vendor collaboration to ensure the unencumbered flow
of goods through the supply chain. “The need for quick turn and greater
efficiencies makes it critical that Urban is communicating with our vendors
and, more importantly, making sure they fully understand our requirements.
Add this to an ever-changing landscape surrounding federal and state regulations
and we have an even greater obligation to make sure our vendors are educated.”

Discussion Questions:
What are the pros and cons of using vendor scorecards for retailers over
typical compliance and deduction policies? What are overall obstacles
for retailers in trying to get suppliers to adhere to supply chain guidelines
such as accurate and timely deliveries?

Please practice The RetailWire Golden Rule when submitting your comments.

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9 Comments on "JTPP: Urban Outfitters Moves to Vendor Scorecards"


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Bob Phibbs
Guest
11 years 8 months ago

Scorecards are a great idea for all organizations–I think it is also applicable for the vendors to rate the retailer. I’m hearing from a number of sources that the big department stores are routinely finding things wrong with shipments, a label off 2″ on the shipping box, anything because they know the vendor will not fight it but eat whatever claims they come up with.

This extends to the buyers as well as they are shipping back more and more product so the consequences of a bad buy end up on the manufacturer rather than the real culprit: inexperienced buyers too new on a job, relying on computer printouts.

Who’s really eating the recession? The vendors who are caught placating the retailer in hopes they will be one of the survivors and be paid on time. Seems risky for all concerned so grab a scorecard now.

Susan Rider
Guest
Susan Rider
11 years 8 months ago

Great idea! This goes above and beyond a revenue generating policy like vendor compliance which, in some instances, is disliked and avoided by vendors. This program goes towards collaboration and a compiling of central data to help not only the retailer to preform more efficiently in their merchandising, stocking and supplying, but also the vendor. A simple compliance program tracks singular problems; this program will compile data that will be proactive and help insure better sales and avoid common habits that are detracting from sales.

If you partner with vendors with an attitude of helping each other to sell more product, it plays better than the traditional “we’re assessing a charge-back because you put the label in the wrong place.” Retailers who collaborate will traditionally get better service, better prices and more loyal vendors that help in a pinch.

Carol Spieckerman
Guest
11 years 8 months ago
Vendor scorecards serve a purpose, particularly for retailers that manage large supplier bases such as Urban Outfitters…and Walmart. I mention Walmart because they have utilized vendor scorecards for years and have recently upped the ante by requiring top suppliers to participate in a sustainability indexing initiative (essentially, another scorecard). http://is.gd/2DZxl In Walmart’s launch presentation, John Fleming, Walmart’s chief merchandising officer stated that “the buyer of the future” will be responsible for “total product lifecycle management;” however, Walmart’s expectations go beyond supply chain efficiencies and into sustainable accountability. I would think that it would be more relevant for Urban, as a youth-focused retailer, to take that next step as well and fold sustainability into is transparency efforts. The one pitfall that I see more and more in the scorecard world is that suppliers don’t always realize that scorecard metrics are a baseline expectation; not something that gives immunity. Thus many are shocked when they are downsized or eliminated altogether despite maintaining high scores. Not everything that matters can be measured and subjective, off-the-scorecard considerations factor into… Read more »
Dick Seesel
Guest
11 years 8 months ago

There are so many elements to successful supply chain management that it pays for smart retailers to put some metrics in place. It’s not just a matter of ticketing errors triggering a chargeback mechanism, but also questions of accurate data transmission, timely delivery, floor-ready packaging, and so on. A scorecard allows the retailer’s supply chain team to construct a “weighted-average” way of looking at each vendor’s logistical performance. It also allows the merchants to view each vendor’s profitability not just from the usual perspective of sales and gross margin, but also from the broader angle of total profitability. The only surprise in this story is the length of time it took for Urban Outfitters to put these “best practices” into place.

Bill Robinson
Guest
Bill Robinson
11 years 8 months ago

Applause to Urban Outfitters for showing the relevance for vendor scorecards in the apparel business. It is clear that the scorecard does a good job in measuring and reporting vendor compliance. That’s valuable. But even more important is the context into which the information is presented. For example, does the Urban Outfitter scorecard answer these questions:

1. How is the vendor’s compliance in relation to its competitors?
2. Is compliance improving or deteriorating?
3. Is there a relationship between compliance and operational performance such as stock outs, lost sales, and overstocks?

Then from the vendor’s point of view….

1. Is Urban Outfitters performing against the vendor’s expectation by such measures as sales against last year, gross margin, GMROI?
2. Is the retailer upselling and cross selling within the vendor’s assortment?

As important as compliance is to establish the foundation of trust between retail and vendor, it is important to go further with scorecards.

Bill Emerson
Guest
Bill Emerson
11 years 8 months ago
Vendor scorecards, like all automated tools, can be very useful in having an objective, fact-based conversation about trends, opportunities, and potential actions. Scorecards also provide both vendor and retailer with an important element of relative profitability by account. Anything that can help in understanding this relative profitability is a plus. The only concern about systems like these is that they become too influential in deciding on vendors and retailers. There are many elements to this decision-making. For instance, for decades the department stores have been using shipping chargebacks as a way to build margins (along with markdown money and a variety of other practices). Having a tool to record this well is unlikely to change these practices. Secondly, vendors are obviously not going to stop doing business with retailers who abuse these shipping policies. If they did, many large retailers would have no vendors. The point here is that the value of the tool is directly proportional to the relationship between retailer and vendor. If the relationship is truly collaborative (like an Urban Outfitters), it… Read more »
Don Delzell
Guest
Don Delzell
11 years 8 months ago
PLM does not represent a methodology for a retailer to “control” or monitor vendors. The scorecarding output from a good PLM system is just one of the many benefits of implementing this type of technology. Did I miss something somewhere? Isn’t the vast majority of Urban Outfitters merchandise exclusive if not private label? PLM, as tool for collaboration, monitoring, and problem solving has a very strong value proposition. Yes, many of the other points are well noted. However, I think many of the comments may have been from writers unfamiliar with PLM systems. Gross margin basis points are lost with delivery delays, increased costs and packing mistakes. Single point repositories for all information relating to an order, a common interface for managing communication and tracking, and an open set of facts governing the flow of the product from inception to liquidation are all very good things. And, frankly, any retailer with a large amount of exclusive or private brand merchandise should be employing one of these systems. It will pay for itself within a year,… Read more »
Miles Baidack
Guest
11 years 8 months ago

Rubbish. It’s just another make-work task for the vendor, the retailer and the staffs of each. Retailers don’t have buyers any more, they have number crunchers who fill their shelves with dollars instead of seeking merchandise to satisfy their customers. These scorecards are yet another number crunching invention to demonstrate how hard everyone is working–at filling in the blanks rather than understanding the market and their customers.

This philosophy goes so deep it is nearly impossible to reverse in most organizations. Another year of tough business, store closings and bankruptcies may bring the buyers–the real merchants–back as big boxes become flooded with more and more of the same old stuff from vendors producing dollars instead of merchandise lines.

It’s a bit of a shame that Urban Outfitters carries the headline for this story as they have succeeded as one of the quirky, old-merchant appearance, in-tune buyer retailers, and now they are succumbing to “the system.”

Where have all the merchants gone?

Kai Clarke
Guest
11 years 8 months ago

Vendor scorecards are only part of the solution. The retailer and their suppliers need a full 360 degree feedback loop. Without this, the retailer does not get the full picture and the data gathered in the scorecard is not just distorted, but many times bad.

For instance, if the retailer regularly changes POs on a last-minute basis, the supplier may fail to properly fulfill their requests. This shows as a poor scorecard for the supplier, when the retailer is not forecasting their needs properly and keeps changing their POs. The scorecard only indicates that the POs were not fulfilled on time. Not the conditions surrounding this.

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