Vendor management

Out sourcing decision

 Need to out-source
The challenge of sourcing is to
materialize the value that will meet
customer needs . This requires
decision on whether to make or buy .
Any retailer can either manufacture
all goods in their manufacturing
units or source the merchandise or
service from some outside agency.
Need to out-source , cont ..
The decision on whether to make or
buy should be aimed to achieve a
quality cost combination of value
that maximizes both customer
benefits and company profits.
Need to out-source , cont ..
Dramatic changes in the business
environment are demanding flexibility
and innovativeness .
Buyers are aiming towards
maximizing quality and availability
and maximizing cost . These often
can be achieved more effectively
through external network rather than
internal arrangement .
 Where to buy ???
If a retailer plans to buy instead of
make , the next question is from
where to buy .
 Criteria for Vendor Selection
Product type
Capacity
Cost
 Criteria for Vendor Selection ,
cont ..
Countrys infrastructure
Political conditions
Compliance
Financially sound
Criteria for Vendor Selection , cont ..

Technically competent
Quality
Strong product development and
design capabilities .
Lead time .
 Vendor Compliance
Are the rules by which vendors will
conduct business with their
customers . The rules are set up by
the buyer ,and vendor has to follow
them.
Vendor compliance rules help
companies to streamline and
standardize their internal procedures
for dealing with vendors .
 Vendor Compliance , cont ..
Vendor compliance rules can be very
difficult, and expensive, for a company
to implement. Certainly the overhead
of additional procedures, computer
systems, and personnel increases the
cost of goods sold. A vendor may
consider raising the prices of its goods
or services to compensate for the
added costs of vendor compliance
Vendor compliance documents
Routing guide
This document explains how to ship merchandise to
your buyer / trading partner .
Content :
Which carrier to use .
Ship from and ship to point .
Location of ship to point ( Distribution centre or
store )
Which stores are served by which distribution
centre .
Web site to be used for shipment scheduling .
 EDI Mapping guidelines
Directs how inbound and outbound
transactions will be formatted .
 Vendor Guidelines
This document covers all aspects aside from routing and edi
mapping .
Content :
General vendor performance guidelines .
Item , carton and pallet barcode lable specifications
.
Hanger , tag , polybag specifications .
Trading partner contact information .
Set up and testing documentation and procedures .
Value added network and mailbox information .
Logistical requirements .
Product quality specs .
Service standards .
 Advantage of compliance for
retailers
Vendor compliance rules help
companies to streamline and
standardize their internal procedures
for dealing with vendors .
 Advantage of compliance for the
manufacturer
Avoiding charge backs
Improving internal operations
Anti competitive strategy
Enhance product marketability
Define your own vendor compliance
rules
Process and data flow analysis .
 Vendor compliance manual

DOCUMENT RELEASE
DESCRIPTION
NAME DATE

SKU-Based EDI eZCom/SFA partnership announcement and 11/25/08

Rollout For Non- contact information
UPC Vendors
SFA Vendor Vendor requirements for purchase order 09/17/09*
Standards Manual packing, marking, and invoicing.

Drop Ship Vendor Drop shipment timelines and material 03/06/08 *

Requirements restrictions
International Foreign vendor requirements for purchase order 04/02/09
Vendor Standards packing, marking, and invoicing.
Manual
 Vendor compliance manual
Shipping and Routing and Shipping Instructions, 06/04/0
9
Routing Guide Approved Carriers Listing *

EDI 4010 Specifications to implement EDI with Saks 03/06/0

8
Mapping Incorporated. *
 Vendor compliance manual
REFERENCE MATERIALS

DOCUMENT NAME RELEASE DATE

11/15/07*
Off 5th Logo Woven Label Program
Off 5th Logo Woven Label Order
03/06/08*

Form
03/06/08*
Off 5th Logo Woven Label
Placement Guide
10/30/08*
SFA Approved Hanger Outsources
11/15/07*
SFA NEW Script Logo Specialty
Black Hanger Approved
Outsources
2/22/07*
Ticketing and Labels Approved
Outsources
Womens Heat Transfer SFA and
09/17/09

Threads
 Vendor compliance manual
09/17/09
548 Apparel

09/17/09
548 Coats

09/17/09
Care and Content

09/17/09
Cashmere Label

SFA Apparel and Accessories

09/17/09

Threads Labels
09/17/09
 Ethical sourcing in the garment
industry
In the last decade apparel companies knew
that commercial success was dependent on
maintaining quality and achieving the best
freight on board (FOB) price and shortest
lead time for their products.
Today, human rights issues and
environmental requirements are crucial
factors in the selection of business partners
and addressing consumer concerns has
become a very important strategy for apparel
companies.
 The margins offered on products whose
manufacture violates human rights or causes
environmental damage might prove tempting
but even the greediest retailer would think
twice about offending the ever growing ranks
of ethical and green consumers; these are
people that actively choose to buy products
and services from companies that are socially
responsible and they are willing to pay a
premium for them.
 Changes in individual purchasing behaviour
will increase the collective consumer
pressure on producers to use ecologically
friendly materials and processes which do not
violate human rights or use child labour. This
pressure has forced apparel companies,
especially the big brands, to develop
guidelines or a code of conduct that ensure
their business partners comply with these
guidelines.
 Vendor Code of Conduct
In order for the vendors to understand the
standards and expectations , every retailer
creates its vendor code of conduct .
The code requires vendor to act in
accordance with all applicable laws and
regulations when manufacturing products to
be sold to the buyer .
A companies code of conduct includes
principles and policies of a buyer / company .
 VCC Includes ..
Compliance with laws
Environment
Labour
a) Child labour
b) Contract labour requirements
c) Discrimination
d.Forced labour
e.Humane treatment
f.Wages and benefits
g.Working hours
Working conditions
Occupational health and safety
 In case vendor does not comply with the
above , it can lead to ..
Cancellation of orders
Termination of business relationship
Legal action
 Vendor Development
Need for vendor development :
Spread the risk
To ensure vendor is constantly
upgraded as per the latest
technology and know how .
 Ways of vendor development
Providing technical expertise.
Help in getting the vendor compliance as per
requirement .
Helps in establishing R&D cell .
May provide some capital for equipment ,
working capital etc .
Guarantee a certain amount of business .
Provide education and training to agents ,
vendors and factory management .
Making them understand the expectations .
 Vendor evaluation
Vendor evaluation can be defined as a
permanent and objective monitoring
and evaluation process of a vendors
performance regarding specific
criteria as quality or timeliness .
The main objective of any vendor
evaluation is to ensure a companys
product and service quality is
maintained at all times.
 Vendor evaluation , cont ..
Constantly monitor the working of the vendor
Keep taking feedback from the market .
Make visits to the vendors manufacturing
units
Do record checks
Keep asking for new areas developed
Check vendor rating
Monitor compliance follow up .
 Audit suppliers to test compliance :
Payroll and documentation review .
Health and safety inspection .
Confidential worker interview .
De brief with factory management .
Conduct interviews with factory
management .
Conduct private interviews with factory
workers .
 Vendor Management
Vendor management is the process
of constantly monitoring and working
along with the vendor to ensure a
smooth working relation between the
buyer and vendor .
 Points covered under vendor
management
Vendor Rating
Setting guidelines for vendor selection
Setting vendor code of conduct .
Setting vendor compliance
Vendor Selection
Vendor Development
Vendor Evaluation