NML - December 2010 Newsletter

Distribution is an inherently process-oriented function with relationships up and downstream from you, your team and your customers. On the one hand, you have vendors and suppliers with whom you must negotiate terms and manage orders. On the other, you have your "customers," internal and external, who have expectations and needs for products and services. Following are 9 policies to consider implementing to keep the lines of communication clear and the flows tangle free.

CUSTOMER RETURN POLICY

This policy stipulates when an item and quantity may be returned to the storeroom or distribution facility. It will identify the differences [if any] in stock versus non stock and any credit amounts. It will cover situations that determine when to destroy product as in damaged during delivery, etc. The policy should also stipulate a turnaround time commitment from item pick up to credit issued.

NON-STOCK ITEM POLICY

This policy will identify the criteria of a non stock item, when it might be ordered by customers and the related receiving and delivery cycle time commitments. Non stock items may have unique lead time requirements based on specific vendor/manufacturer minimums and return policies.

VENDOR SELECTION/RELATIONS POLICY

This policy identifies the criteria that a vendor or manufacturer must adhere to when establishing a trade relationship with your supply chain. It will identify the details of a "preferred" program [if desired] that outlines performance expectations, customer service and account representation requirements and inventory and logistics practices. The policy will also identify the benefits offered to Vendors that comply with your company "standards".

CUSTOMER CLASSIFICATION POLICY

This policy addresses customer stratification rationale to include rate type of customer [class of trade], order frequencies, spend requirements and services provided. It will identify all classification categories and the criteria necessary to meet them, how often they are reviewed and the communication protocol for resolution

EDI TRANSACTION POLICY

This policy will identify when to use EDI transactions, which ones will be used for both inbound and outbound, as well as the requirements associated with exceptions. This policy will be part of any "preferred" vendor relationships.

ACCOUNTS RECEIVABLE POLICY

This policy will identify the accounts receivable requirements or cost center charging practices from customers serviced [usually in the form of days sales outstanding or prepayment requirements]. It will address aging and problem resolution timelines as well as review frequencies. The policy will also identify how to determine repeat problems and the appropriate course of action along with who is authorized to modify A/R terms.

ACCOUNTS PAYABLE POLICY

This policy will identify accounts payable requirements [AP days] and who is authorized to modify them. It will also identify who is responsible for communicating issues related to receipts or purchases that are in dispute.

VENDOR GUARANTEE POLICY

This policy will identify when a vendor guarantee form is needed, who is authorized to initiate it and how long they are in effect. It will also identify the review frequency and update requirements as well as inventory disposition options.

CUSTOMER DEMAND CHANGE POLICY

This policy will identify the frequency of demand review for inventory, along with the authority levels needed to make both manual and system generated adjustments to projections. It will also address situations when customer orders exceed "normal" demand in terms of who is authorized to accept these orders and when they are acceptable.