I interviewed Norman Katz who discussed Supply Chain Vendor Compliance.
My first question what is vendor compliance?
Hi Dustin, yes, it's Norman Katz and happy to Interviewed again by you, it's a pleasure to be back. So vendor compliance, well, you know that when I look at vendor compliance my--I define vendor compliance I think as internal controls for external relationships. Vendor compliance being internal controls for external relationships, these have to be written down, vendor compliance is an agreement or a contract and those are legal terms which have to be flushed out between a company, a buying company, a customer enterprise and its suppliers of goods and services. And pretty much when I consult for companies we are considering suppliers that provide goods not so much services. These are legally binding--these are legally binding document of rules and requirements of engagement covering technical operational legal and ethical aspects of the buyer-seller relationship. So again, very important that this is written down and I consider vendor compliance to be the internal controls for external relationships.
Why is vendor compliance important?
Well, for customers, vendor compliance brings efficiency across the supply chain trading partners through uniformity. Retailers for example will have thousands if not, maybe ten thousand different companies that are selling products to them and it's simply is not possible for all of the vendors, to have different bar code, have different sized cartons, different weights, submit all of their invoices differently to be communicated with differently. So, the consumer entity, the buying entity, whether it's--a retailer or a pharmaceutical distributor or a manufacturer such an automobile manufacturer or a grocery store, they need all of their suppliers to conform to certain requirements for the sake of uniformity.
For suppliers, yes, this is a cost burden of doing business. But they should look at it as an advantage, it's a learning opportunity and it's a chance to say, "Well, you know what, if we are being forced to receive purchase orders electronically for one customer, maybe we can take advantage of this and streamline our internal operations. If we have to barcode label our products in our cartons, maybe we should look at introducing bar coding to increase our efficiency, it's a chance to leverage this technology internally, gain competitive advantage operationally and from a data analysis perspective on who the supplier is competing with. The supplier should not be grudge necessarily having to conform because in a competitive world, the smart supplier will take advantage what their being look to doing and say, "How can we utilize what we have to do strategically into our company plan in order to better position ourselves not only as good suppliers within our supply chain but also competitively against the companies that we are competing with.
Can talk about how done effectively?
And unfortunately Dustin, I have typically not seen vendor compliance done very effectively at all. In fact, it's typically done very ineffectively because vendor compliance is typically ill-conceived and poorly communicated which only frustrates the suppliers and the customer entity staff. This is because vendor compliance requirement sometimes conflict with themselves it's because the supplier, the vendor maybe calling--maybe trying to get an answer on something and the customer entity doesn’t provide a phone number or the staff is too difficult to reach or you can only e-mail and e-mails go unanswered for days or you can only communicate through a portal --and the portal responses are not even answered. For example, within the US. Or the vendor gets two different answers depending on who they asked at the customer entity.
Frustrations flare on both ends, there are delays in taking supply chain actions and so there's a lot of tension and mistrust.That also comes into play when charge backs are involved, when charge backs are excessively assessed or aggressively assigned. And this just creates a lot more tension between the customer and the vendor community. Now the customer and its vendors are supposed to be trading partners, not trading adversaries and the customer entity has to realize that suppliers have as much value as customers and need to be treated as such. I have yet to find the customer entity that is a hundred percent in everything that they do. But the expectation is vendors will be a hundred percent perfect. And this is no way to start a relationship, not personally and not professionally. But this is how the many supply chain relationships are expected to exist. And in the United States we have the legal system is based on innocence before the presumption of guilt and in to many supply chain relationships it's guilt before you prove yourself innocent and even if you can and then even you do prove yourself innocent, we're still going to assess you as guilty anyway. And these--this is why too many supply chain relationships are just--are just not healthy in certain industries. So, there needs to be a much, much better job done in supply chain vendor compliance.
Were have you seen success?
So, as far as successes go, I've really only seen one or two companies come close to getting their vendor compliance acceptable. Even now, I've seen a lot of vendor compliance documentation and websites in my over 20 years of vendor compliance experience and yet I'm sure that there are many companies that are patting themselves on the back for vendor compliance documentation and vendor compliance portals but they are, and I will use the term horrible, dysfunctional and not written to their audience. When you do vendor compliance documentation, whether it's a word document and something that goes into PDF form, whether it's a website, when you write to your audience, remember that you are writing for your vendors and for your internal audience which comprises employees that may not be familiar with what you're writing about and employees leave, new employees come in and so, you have to be very, very careful about writing to you audiences internally and externally. I have only seen very, very poor jobs of that in vendor compliance and vendor compliance documentation.
Can you please provide brief background of myself?
I think I have a very unique perspective of vendor compliance in my 30-year career which includes software development, business and operations analysis and systems analysis. I've been involved in supply chain vendor compliance since 1993 with expertise in ERP systems, electronic data interchange and barcode labeling and scanning applications. My vendor compliance experience is mostly in retail but also in pharmaceutical industry, electronics, the publishing industry and the marine industry. I did spend 4 years as the supply chain consultant to the largest marine industry trade association in the United States and I also developed a unique 6-part supplier education course while consulting for the retail industry's trade association prior to its merger with GS 1 US. I have consulted--I've been consulting for 20 years and I have helped a number of companies from a vendor compliance standpoint both a technical aspect and operational aspect comply with the mandates of their top level customers as well as have helped some companies create downstream vendor compliance documentation for their downstream supply chain. Now I have a book that is being published in January of 2016 called "Successful Supply Chain Vendor Compliance". It is the only book that I can find on the topic supply chain vendor compliance. I filled that with my over 20 years of experience in supply chain vendor compliance technically and operationally with some of the unique experiences I've had that somebody had to write a book and that I was a good person to do it. So that is my experience, my expertise in supply chain vendor compliance. And Dustin. I just want to thank you again for the interview opportunity, as always, it's great speaking with you.
About Norman Katz
Supply Chain:Technologies, Operations, Vendor
Compliance, Fraud ~ Consultant | Analyst | Author |
Presenter | Instructor