Scents and Sensibility

As profit margins decline and competition rises, more retailers are beginning to take a long, hard look at their supply chains. For some, vendor scorecards are deployed to analyze the performance of their CG suppliers. Scorecards allow retailers to gauge a supplier's performance using different metrics and impose fees if orders do not satisfy their standards. These fees can obviously take a bite out of profits and disrupt a supplier's sales force.

Sensible Boost

To boost customer satisfaction and decrease compliance fees, Coty, Inc., a leading manufacturer of personal fragrances, color cosmetics and skin treatments, needed to understand how its retail partners were evaluating its performance. The management team at Coty's felt that existing performance standards were too internally focused and that performance perceptions varied between Coty and its customers. Coty needed a sensible series of metrics that represented similar ones used by its key customers.

Clarkston Consulting, a management and technology consulting firm, worked with Coty to develop a customer scorecard that contained metrics pertinent to its key accounts. Clarkston accompanied Coty on visits to five key retail accounts in North America to gain a better understanding of what was important to customers and developed a customer scorecard to measure Coty's performance across all accounts. The Coty scorecard is essentially a document that measures performance on 12 key metrics centered on the supply chain, such as on-time delivery and order fill.

"We've invested heavily in our logistics infrastructure and systems," says Mark Newberry, vice president of logistics and execution at Coty. "The scorecard allows us to measure our progress post-investment and to pinpoint specific opportunities for improvement. Since the scorecard is tightly aligned with the customer's measurements, the improvements we pinpoint clearly drive added value in our relationship with them."

Room For Improvement

By utilizing the scorecard, Coty's management recognizes opportunities for improvement and plans initiatives to act on those opportunities. To build this capability, Clarkston used the scorecard and worked with Coty to define and implement new management processes useful in making decisions about operations and improvement initiatives. Instead of building the ability to respond to point-in-time issues, Coty's focus is to eliminate these issues altogether by changing business practices.

For example, a business practice that Coty's management has changed based on scorecard reports is the frequency of Advance Ship Notices (ASNs). By increasing the frequency of ASNs, customers gain timely visibility to product shipments. Efforts such as the implementation of ASN frequency bolster Coty's customer relationships. Coty's retail partners have expressed satisfaction with the company's new practices and perceive Coty as a progressive-thinking company.

The scorecard also arms Coty's sales force with accurate information about customers before important meetings.

"The value of this is that the salespeople have this information prior to their sales meetings with clients so they are now aware of any problems and can work to correct the problems prior to the meeting," says Newberry. "The meeting is now focused on expanding business opportunities instead of identifying problematic issues."

This effort spawns new relationships between the sales force and Coty's key accounts, enabling conversations in key areas such as managing in-stock inventory, which reduces stock-outs. In addition to increasing sales through reduced stock-outs, Coty believes the improvements will lead to a reduction in vendor compliance fees adding directly to the company's bottom line.

Coty's scorecard is reviewed on a monthly basis and provides a performance overview on the company as well as key retailers.

"We have received requests from all of the retailers we've met with in the last six months to be added to the scorecard, so we're looking to add more customers," says Newberry. "We now want to look at a more robust enabler, which can perhaps bring us to more frequent reviews. Instead of monthly, maybe we can now look at twice a month. It may get to the point of being virtual where the customer will be able to review online."

Prudent Process

While the Coty scorecard is a sensible, low-cost, low-tech approach to gain efficiency within the supply chain, Newberry firmly believes that it is a process that empowers all the technology within the company.

"You need to have the right process around the technology," says Newberry. "Without the process to help effectively collaborate with retailers and the sales force, it doesn't matter how much money is spent on technology."

So, if the Coty scorecard is the ultimate tool in building customer relationships, how can it adapt and improve the company's future business prospects?

"We're very keen on leveraging our logistics capabilities to improve customer relationships, because supplier logistics is a major component of any retailer's supply chain," says Newberry. "Our ability to measure and improve our logistics will, in turn, aid their operations. We'll take the scorecard results and manage our way to preferred supplier status in every channel of trade we operate in."