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The Purchase Order Is In … Now What?

The "I-can’t-believe-we’re-in-{insert major retailer here}" moment has come to fruition. Fresh off the printer, the purchase order catalyzes robust smiles and high fives throughout the office. For a moment, let’s disregard the 10 page routing guide that accompanies it and the ensuing groans from the logistics team.

Pop the champagne! 

Not so fast. Undisputedly, the rewards of securing a major contract are vast in scope; however, the planning for it must be comprehensive and thorough. A lack of preparation not only jeopardizes a re-stock order, but it also has potentially devastating consequences for your business as a whole.

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At ROYCE, we’ve been burned in the past because we were so starstruck that a luxury department store actually chose us that it blinded us from the far-reaching implications of that order. No one was asking the important questions — What’s their credit history? What are the logistics chargebacks? What the hell is a "loyalty discount?" (Side note: I will never forget the time that a prestigious UK retailer gave us a significant PO, only to subtly mention in the fine print that there were 21 percent off worth of discounts and co-op advertising costs, after already succumbing to aggressively discounted landed costs!) There’s nothing more anticlimactic than landing a career deal, only to meekly utter “thanks, but no thanks.”

Forget opportunity cost — it’s beyond that. As our 24-year veteran overseeing production (and green tea sipping resident sage), Rena Zhao constantly reminds us, “you must save face.” Who are we without the trust and respect of our industry colleagues?

As a small business, we were simply too inundated in optimism to recognize that any business is not, in fact, good business. Not to mention, with accumulating inventory and bills to pay, we were too hungry to fill up the P&L statement that we lacked the luxury of discerning “good” and “bad” business. Now, 43 years and a plethora of logistics curveballs later at ROYCE, we’re finally getting the hang of this learning curve. Don’t get me wrong, a 6-figure distribution deal still has us scrambling, so things are not foolproof, but here’s what we’ve learned.

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Examine all the "what ifs."

When we recognize a new distribution opportunity, we have a sit down meeting amongst all the teams to discuss its consequences. As we put our proposed assortment and cost structure together, we ask ourselves “what happens if we actually land this deal?”

It’s analogous to the scouting, analytics and preparation that a football team would do in the week leading up to a Sunday night game. Accounting will run a D&B report and evaluate profit margins. Finance will contact the bank to extend a temporary line of credit. Purchasing will examine forecasts of how much we will need to deliver and when it must be fulfilled by, and make contact with raw materials suppliers. The warehouse will study the vendor relations manual to circumvent chargebacks and prevent delays. And IT will streamline the EDI transmission order acknowledgment and invoicing process — because handwritten POs, while charmingly personal in nature, are a nostalgic relic of our father’s era.

Gone are the days in which having a charming conversation over the phone would suffice. Having a solid product at a market-conducive price is no longer adequate — now it’s a mere prerequisite. Big companies care about demonstrating sufficient capability — having the right product at the right place in the right time.

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So what about the sales team?

This all transpires before my brother Andrew Royce and I even clear the security desk at the organization’s buying office. The idea is that when we get the go-ahead confirmation from the merchandising team, we can push the button to move forward.

But a word of caution — no crying if the PO is lost amidst bargaining for better payment or pricing terms. There’s a reason they chose you to begin with, so other offers from similar distributors will come. After all, making nothing is better than being stuck with an order that can’t be fulfilled or worse, potentially losing it all. 

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