You sent your retailer some product to sell in their store. You invoiced them what you should be making from those sales, but they paid you less than the invoice amount.
Why didn’t you get paid in full?
Probably because there was a deduction, chargeback, or billback on your invoice. These are fees that your retailers impose when they believe you were not in compliance with their purchasing policies. Below we’ll discuss some of the common issues you may be experiencing if you’re not getting paid in full.
Why do retailers and distributors have retail compliance programs?
First off, why would your retailer do this? You had an agreement and this can feel like a violation of that agreement. But there are multiple reasons why you may see fees on your invoices.
The idea behind deductions is that they are a way to create sales, increase efficiency, drive costs down that erode profit margins, improve the supply chain, and help retailers grow. In the end, it’s all about the consumer. Retailers and distributors want to make sure your product is available when it’s needed, where it’s needed, and in the amounts needed. In order to facilitate this, they may implement “incentives.” These incentives include regulations that can turn into fees and fines.
Additionally, deductions keep the payment cycle transparent and hold everyone accountable. Compliance programs are not meant to be wholly penalizing, but your retailer needs to keep profit margins up as well.
Valid deductions vs. invalid deductions
Some fees are earned; some are actually mistakenly given by the retailer and are not your fault. You have the right to dispute some claims and learn from ones you can’t. Deductions, chargebacks, and billbacks can be tricky to navigate, so it’s best to keep yourself informed on what your retailers’ requirements are. For example, Walmart has nearly 100 adjustment codes that explain why it charges you fees, whereas Amazon will simply tell you the chargeback reasons on your remittance. UNFI has its own fee schedule, but it also does a lot of pass-through billing on behalf of its retailers, and Kroger charges flat rates for many of their deductions, in addition to percentage fees for some issues.
Valid Deductions
Sometimes, deductions come from simple oversights, but other times, they indicate deep-rooted supply chain problems. Either way, these deductions and chargebacks are valid and that money is not coming back. Many things can cause fees to occur, but the three most common issues that cause deductions, chargebacks, or billbacks are:
- EDI 856 (Advance Shipment Notice/ASN) issues
- Short shipping
- Labeling issues
Advance Shipping Notice (ASN) Issues
ASN issues arise when you have not set up your electronic data interchange (EDI) connections properly or there is an issue with the transaction (document) itself. Your retailers will typically require that they receive your ASNs before your shipment arrives but the ASN must also be accurate and contain the data as requested.
Common issues include:
- Missing data, such as the PRO number (also known as the shipment tracking number)
- Invalid item details, such as the UPC codes or case count
- Missing the ever-important marks and numbers (MAN) segment containing the SSCC18 pallet label information (something your warehouse should provide)
Retailers like Amazon will issue chargebacks for non-compliant ASNs and Target will charge for missing ASNs, late ASNs, and ASNs with compliance issues. ASN issues can be resolved by communicating with your warehouse or shipment origin and your EDI provider. To figure out where the problem lies learn where the documents originate, where they go, and how they are transmitted to your customer.
Short Shipping Issues
You may also receive fees from shipping issues such as short shipping. Short shipping occurs when you send less product to your customers than what they ordered on their purchase order (PO). This can be due to food spoilage, improper packaging, or just not getting the correct amount of product shipped. To avoid fees like this, you will need to communicate with all parties along your supply chain to make sure everything goes as expected..
For Walmart, you can view your On Time In Full (OTIF) scorecard in Retail Link to see your chargebacks for issues with your shipments. Kroger’s Original Requested Arrival Date (ORAD) measures your case fill rate and your on-time compliance. You can also contact your replenishment manager about your short shipping issues and discuss where in your supply chain you may be experiencing difficulties.
Labeling Issues
Labels are an ever-present issue within the supply chain world. Some warehouses label pallets, while others label cases. This affects your EDI and ASNs, but it can also affect your shipments. Label deductions occur when the SSCC18 (as above, the marks and numbers segment on your ASN) is missing or inaccurate. The destination distribution center will scan the SSCC18 barcode on the pallet or case to check the quantity and contents of the unit.
If the label on a pallet says that there are 18 cases of one item, there should be 18 cases of that item. The data has to match what is on the ASN as well. The ASN information comes from the warehouse, so they should know what was shipped and be able to pass that information along.
Invalid Deductions
Oftentimes with invalid deductions, you can get your money back! These deductions occur when your retailer made a mistake, so you have the right to dispute them. It takes some work on the supplier end, but isn’t it worth it? Some CPG suppliers hire full-time employees to dispute deductions, chargebacks, and billbacks while most use their accounts receivable (AR) department.
You will need to prove your case and work with your retailer to find out what its particular dispute procedures are. For example, Walmart and Home Depot use Direct Commerce for their disputes while others may use their accounts payable department directly.
First, you will need documentation. If you receive an adjustment code 022 from Walmart stating that you billed for items that were not received, then you will need your original purchase order (EDI 850), your invoice (EDI 810), a bill of lading (BOL) which shows that the items were put on the truck, and a signed proof of delivery (POD) which shows that all merchandise was received by the distribution center or store. Prepared with these, you can go to your customer and show that everything was in order.
Once your case has been made, your retailer may follow up with you requesting more documentation, so make sure your supply chain partners are ready! Soon, you should see a nice check from the retailer or distributor paying you back for the invalid deduction.
How can SupplyPike help?
SupplyPike’s team has over 100 combined years’ experience with Walmart, so we know the ins and outs of its processes. We have built a software solution for identifying, understanding and disputing Walmart deductions with the click of a button. Start your free trial today!
Explore SupplyPike on RangeMe Services for more information on how they can help your brand grow.
About the Author:
SupplyPike is a leading supply chain software solutions company helping CPGs increase their retail intelligence and profitability with analytics applications, machine learning, and deductions management. SupplyPike’s team has over 100 combined years’ experience with Walmart and is located just 20 minutes away from Walmart HQ. They empower CPGs and brokers to create solutions to the biggest headaches in the supply chain business. Sara White has been with SupplyPike for 3 years, and she enjoys creating content and talking through business challenges to help entrepreneurs grow their business at mass retail.