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Wednesday, March 29, 2006

Stock Balancing Vendor Requirements

Stock Balancing terms are a negotiating point between buyer and seller. As such, there are some items that Vendor's (sellers) typically attempt to negotiate. Its important to understand that many vendors will look to for go any Stock Balancing terms all together. Many large retailers will demand this option or some derivative, as such a vendor must be prepared to walk away from the business or negotiate a middle ground under which they can survive profitably. Here are some examples of items that are desirable from a vendor's (seller's) perspective: 1. Limiting the availability of Stock Balancing on Products - ergo if product bought in 2001 is not sold or balanced by the end of program year in March of 2002, the option to stock balance may be terminated. 2. Limiting the size of Stock Balance Returns 3. Instituting a Stocking fee for Stock Balances 4. Requiring a Purchase Order in advance for newer models or alternate models Ex. Retailer wants to return $1m worth of last year Widgets, Vendor requires a PO for $1m in this years widgets. - Typically it is advisable to require immediate shipment on replacement Purchase Orders. - Staggering shipments of orders might ultimately leed to cancellation. It will definitely not help the bottom line. 5. Consolidation of Products by retailer and return of products from a central distribution facillity. 6. Consolidation of Products by Vendors representative 7. On shelf replacement of items by Vendor using vendors representative Ex. Vendor hires firm to go to every store location in Northeast US and pull last years expensive widget off the shelf, and replace with this years even more expensive widget, taking great care to setup appropriate displays and markings and insuring that neither last years products nor this years products are damaged. 8. Vendor will require tracking information of all shipments of products by Retailer. Think of this as a reverse shipment where a Return Material Authorization (RMA/RA) is required to identify the lot of goods, and tracked against shippers BOL. 9. Vendor might require retailer to destroy last years goods. 10. Time limit on return may be set for retailer. Example, if return is authorized on February 1, Vendor might require that all goods be consolidated and delivered by May 1 to be considered for return credit. It would be a mistake to leave the period open indefinitely only to receive goods a year after approval. 11. Limitations on the number of stock balances that may occur in a period may be set. There can be many other options, for further analysis or information on this topic, please contact Softduit Partners.