Vendor chargebacks can be costly, with shippers and carriers being hit hard with financial deductions on their invoice for a number of violations. Common chargebacks include late/early shipment arrivals, paperwork errors, invalid advance ship notices (ASNs), utilizing the wrong carrier, incorrect packaging/labeling, shortages, damage…the list goes on. Examples of penalties from one such vendor include 10% off the total shipment invoice for late arrival, $195 for each incorrect bill of lading, $10 per carton for an invalid ASN, and $5 for each incorrect label.1
The average chargeback for a carrier missing their delivery window is gradually increasing from 3% off the invoice to 5%. A supplier can therefore see a $10,000 deduction on a $200,000 load. In fact, according to the Credit Research Foundation, 5-15% of a manufacturer’s invoices contain chargeback deductions which “can translate into a 2-10% percent loss of their total revenue.”2
As Supply Chain 24/7 explains, “Vendors like Target and Walmart continue to increase vendor chargeback fines, leaving shippers exposed, and some retailers count these fines as up to 13% of their account revenue.”3
Walmart recently announced its new policy titled, “On-Time, In-Full” (OTIF) which takes place this month and sets a one-day delivery window for food, consumables, and health products as well as a 2-day delivery window for merchandise that carriers must achieve 75% of the time or else impose a 3% invoice deduction. 4Both the shipper and carrier are exposed to such fines depending on who is at fault for the mispackaging or early/late delivery. The change is said to bring Walmart an extra $1 billion in revenue.4
What did drivers think of Walmart’s chargebacks? Many felt that it is going to lead several carriers and shippers to shy away from doing business with the company. Others felt that freight rates were sure to increase to compensate for the exposure. However, most agreed that with the ELD changes taking place in December, Walmart will need to unload drivers quicker.
As TranzAct’s Mike Regan notes, “If you are using the right carrier and the carrier gets to the company and they failed to unload the carrier in a timely manner and they have to dispatch that carrier and it misses the arrive by date, once again, you’re paying for your customers’ inefficiencies at their docks.”1
Shippers/suppliers at a Council of Supply Chain Management Professionals’ meeting told the retail industry, “If you are all about this collaboration, why don’t you stop some of these ridiculous chargebacks for many violations that are out of our control!”5These include late deliveries due to unforeseen circumstances such as traffic, accidents, DOT checks, and detainment at a prior stop.
Experts suggest that companies have a program in place for chargebacks that include “looking at why the chargeback occurred, what carrier was used, and the amount of time a customer spends unloading.”1
For tips on preventing chargebacks download, “How to Reduce Retail Chargebacks in Your Vendor Compliance Program: 7 Tips On Routing Guide Compliance and Other Strategies.”
1http://www.supplychain247.com/article/every_supply_chain_needs_a_vendor_chargeback_program
2http://www.inboundlogistics.com/cms/article/avoiding-transportation-chargebacks/
3http://beetfusion.com/blogs/stephen-deangelis/stories-trenches-retailer-chargebacks
5http://www.scdigest.com/ASSETS/FIRSTTHOUGHTS/10-05-14.php?cid=3464
