Executive Briefings

Of Carrots and Sticks

Collaborative data sharing does not equal a collaboration relationship.  What is collaboration? My seven years of research supports that TRUE collaboration happens only when there is a sustainable win/win value proposition. It is held together by six elements:  joint vision, incentives, leadership, skills, resources and a common plan.  At the recent Vendor Compliance Federation conference, I scratched my head.  How did we go so wrong to think that a discussion of BIG STICKS is equal to collaboration?

The pain from deductions is more acute now than in past years. Retail rules are stricter, the policies are ever-changing, and the resultant costs of deductions are increasing.  The process for resolution is messy with uncertain outcomes impacting revenue recognition processes. The impact is sizable. It represents millions of dollars with settlement resolution 6 to 9 months after shipment. Based on information from the Credit Research Foundation, a financial-industry group tracking credit issues, from 5 percent to 15 percent of all invoices are affected by chargeback deductions amounting from 4 percent to 10 percent of all open items on a manufacturer's account receivables.  As budgets tightened in the Great Recession, the battle between retailers and manufacturers on deductions grew worse.  At the conference, retailers were walking softly, but it was clear to everyone that they carry big sticks.

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Collaborative data sharing does not equal a collaboration relationship.  What is collaboration? My seven years of research supports that TRUE collaboration happens only when there is a sustainable win/win value proposition. It is held together by six elements:  joint vision, incentives, leadership, skills, resources and a common plan.  At the recent Vendor Compliance Federation conference, I scratched my head.  How did we go so wrong to think that a discussion of BIG STICKS is equal to collaboration?

The pain from deductions is more acute now than in past years. Retail rules are stricter, the policies are ever-changing, and the resultant costs of deductions are increasing.  The process for resolution is messy with uncertain outcomes impacting revenue recognition processes. The impact is sizable. It represents millions of dollars with settlement resolution 6 to 9 months after shipment. Based on information from the Credit Research Foundation, a financial-industry group tracking credit issues, from 5 percent to 15 percent of all invoices are affected by chargeback deductions amounting from 4 percent to 10 percent of all open items on a manufacturer's account receivables.  As budgets tightened in the Great Recession, the battle between retailers and manufacturers on deductions grew worse.  At the conference, retailers were walking softly, but it was clear to everyone that they carry big sticks.

Read Full Article