At Lowe’s, compliance is called Vendor Performance, and the supplier’s compliance performance can be viewed in the Vendor Performance app, Vendor Compliance System.
Vendor Compliance System (VCS)
Overview
The VCS dashboard is broken down by three main tabs with sub-tabs beneath some of them:
- Fine
- On Time
- Fill Rate
- ASN
- Rebuttals
- Debit Notes
- OTIF
- SOS
- Stock
- ASN
- Stock
The VCS application within Vendor Gateway displays all POs that did not meet the On Time and Fill Rate expectations set by Lowe's. Suppliers can dispute fines deemed to be
invalid, with the appropriate documentation within the VCS application. These disputes are referred to in-app as Rebuttals.
Suppliers have between the 2nd and 16th of each month to dispute the previous month's fines. Once the window has passed, suppliers lose the opportunity to dispute the fines, and that month's fines will be deducted from the invoice.
Vendor Performance Goals
Lowe’s compliance requirements are as follows:
- On Time: 95%, with a charge of 10% of PO Value on non-compliant POs
- Fill Rate: 98%, with a charge of 10% of the shorted quantity $ value
- ASN: 100%, with a $250 charge per non-compliant ASN
Stock Purchase Order Compliance
On Time Compliance
For Stock Purchase Orders, Collect POs are held accountable to the Actual Ready to Ship Date, which is communicated to Lowe’s by the vendor through the EDI/Webform 753 submission.
Prepaid POs are held accountable to the Landed/Received date.
Calculating On Time Stock PO Compliance
The formula for calculating Collect PO On Time Performance is:
Collect POs On Time = Actual Ready to Ship Date - Expected Ready to Ship Date and 10% of the PO Value.There is a 1-day grace period for Collect POs.
In other words, if the Actual Ready to Ship Date is earlier than, exact to, or one day after the Expected to Ready to Ship Date, then the PO meets standards. And if the Actual Ready to Ship Date is two or more days after Expected Ready to Ship Date, then the PO does not meet standards.
The formula for calculating Prepaid PO On Time Performance is:
Prepaid POs On Time = Landed Date/Received Date - Expected Arrival Date.
There is also a 1-day grace period for Prepaid POs.
In other words, if the Landed/Received Date is earlier than, exact to, or one day after the Expected Arrival Date, then the PO meets standards. But if the Landed/Received Date is two or more days after Expected Arrival Date, then the PO does not meet standards.
Fill Rate Compliance
Takes aggregation of Ordered/Received Quantities by Item & SFVBU across POs for the month to evaluate fill rate.
Calculating Fill Rate Stock PO Performance
At Lowe’s, Fill Rate Stock PO Performance utilizes the Lag 6 Forecast Order Qty (Lag 6 forecast can be pulled in the Vendor Partner Plus app in Vendor Gateway) for fulfillment.
If the Fill Rate (Received Units / Ordered Units) is greater than or equal to 98% then the item meets standards.
But if the Fill Rate is less than 98% then, utilizing the agreed upon forecasts, check to determine if Lowe’s ordered over 20% of the forecast.
If Lowe’s orders over 20% of forecast, then evaluate received quantity versus 120% forecast units to measure fill rate versus forecast (Received Units / 120% Forecast Units).
If this number is greater than or equal to 98%, then the item meets standards. Otherwise, it does not meet standards. If Lowe’s ordered less than or equal to 20% of the forecast and the Fill Rate is less than 98%, then performance does not meet standards.
SOS/Drop Ship Purchase Orders
On Time Compliance
SOS/Drop Ship Collect Purchase Orders are held accountable to the Actual Ship Date. Any PO that does not meet the Expected Ship Date will not meet standards. There is no grace period for SOS/Drop Ship Purchase Orders (POs).
Calculating SOS/Drop Ship PO On Time Performance
An SOS/Drop Ship PO is considered to have met Lowe’s On Time standards when the Actual Ship Date is earlier than or exact to the Expected Ship Date. If the Actual Ship Date is after the Expected Ship Date, then the PO does not meet standards.
Fill Rate
Inventory should be assessed daily to prevent any unwanted orders from being placed. If an item is no longer being sold or is out of stock, the vendor should adjust and mark the item as unavailable for purchase.
An item shorted at the PO level with any of the below cancel reasons will incur a fine:
- Out of Stock
- Discontinued Item
- Backordered
- Other
Calculating SOS/Drop Ship PO Fill Rate Performance
Fill Rate for SOS/Drop Ship POs is calculated by taking an aggregation of Ordered/Received Quantities by Item and the Ship from Vendor Business Unit (SFVBU) across POs for the month to evaluate fill rate.
If the Received Quantity is greater than or equal to the Ordered Qty, then the PO meets standards. If the Received Quantity is less than the Ordered Qty, then the PO does not meet standards.
ASN Compliance
ASN compliance is determined by the following factors.
- ASN Received: Lowe’s receives a valid ASN prior to receiving the product.
- Quantity Accuracy: ASN quantity matches the actual received quantity for each item
- ASN Arrival Date Accuracy: Arrival date on ASN is +/- 1 day from the actual arrival date. This applies to prepaid vendors only. Collect vendors are held accountable only for ASN receipt and quantity accuracy.
ASNs meeting all 3 of the criteria above are compliant, and no action is needed. Non-compliant ASNs will be assessed a flat rate fine of $250/ASN.
ASNs not received before receipt of product or ASNs that are rejected and not resubmitted before receipt of product will be deemed as non-compliant, and the fines associated with them will be non-disputable.
ASN accountability applies to Domestic-Stock vendors. The below are excluded from ASN accountability currently:
- Drop Ship/SOS
- Ocean Import
- Live Plants/Nursery
- Reverse Purchase Orders
- Repair or Sample Product Purchase Orders
Disputing in VCS and Best Practices
Only POs that did not meet standards will be available to view in VCS.
On Time, Fill Rate, and ASN fines can be reviewed and, if applicable, disputed daily during the rebuttal review period. Ensure when submitting rebuttals that the correct Reason Drop Down Code is selected, and appropriate required documentation is provided.
Like deductions, rebuttals cannot be reopened once submitted.
VCS holds vendors accountable to original Ship Dates and Order Quantities. Any adjustments to the Ship Date or Quantity will not be shown within VCS.
Prepaid Store Direct POs will not incur On Time fines until further notice.