MABD Compliance: 3 Internal Considerations to Combat Penalties
Posted by Seraj A. Farooqui on Fri, Jan 20, 2012 @ 10:08 AM
Large retailers are known to maintain strict inbound policies to improve their supply chain efficiencies. For Wal-Mart, in particular, Must Arrive by Date Compliance (MABD) is a strategic demand used to accelerate “speed to market,” and streamline the sourcing and procurement of the products they sell.
For shippers, however, MABD compliance translates to risk. How can shippers find a balance between compliance and cost-savings? How can they focus on their core-competencies when the risk of a chargeback totals 3% of the COGS?
As mentioned in, “Third Party Consolidation: Minimize Risks and Maximize Rewards” and "Third Party Consolidation: How Retailers Can Deflect the Cost of EDI," the ideal solution to combat the cost of vendor compliance penalties and identify cost-savings in transportation spend is third party consolidation.
However, prior to implementing such a distribution strategy, manufacturers and wholesalers must consider the following:
1. Is the ROI attractive?
What is the cost of a lost customer? What percentage of revenue-lost is a result of vendor compliance? Will third-party consolidation create a value proposition to attract
additional customers?
2. Is there a sustainable competitive advantage (SCA)?
To achieve a SCA, a distribution partnership must exploit manufacturing assets and competencies, while neutralizing weaknesses. Are we capable of optimizing supply chain performance internally? Coincidently, what benefits would result from re-focusing on the innovation of new products and customer service - rather than supply chain and logistics?
3. Will our present strategy have success in the future?
A distribution strategy must be capable of surviving the ever-changing dynamics of the retail market. Is our present distribution strategy capable of adapting to changing market conditions? Is potential synergy captured by our present distribution model?
What are some other considerations prior to adapting a Third Party Consolidation Strategy?
Photo by Esther Gibbons
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HOW IT WORKS:
The following diagram illustrates how Third Party Consolidation works:
A Multi-Vendor Consolidation strategy allows manufacturers and wholesalers to ship smaller, high-frequency LTL/TL orders to a 3PL Consolidation center and maintain a safety stock. When retailers, like Wal-Mart, place an order; loads are then quickly assembled and mixed with other orders to compose one, 100% retail compliant, truckload shipment. In the process, prepaid freight costs are divided, and risk of charge-backs is substantially decreased.
Additional benefits include:
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Reduced lead times on vendor orders
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Reduced transportation costs
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Improved on-time performance
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Increased visibility through integrated TMS and WMS
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Systems integrations, i.e. EDI
