Vendor chargebacks occur in retail when brands do not meet scorecard parameters. Out-of-compliance shipments cause costly inefficiencies and result in the potential loss of sales (out-of-stocks). Fines can go up to 20% of the invoice and can be really costly for vendors.
Common Reasons for Vendor Compliance Chargebacks
Late or Early Deliveries
Retailers place purchases based on sales projections in order to receive items just when their shelves are about to run dry. The just-in-time concept reduces inventory expenditures. When freight arrives late or early outside of the retailer's Must Arrive by Date (MABD) limitations, the retailer's efficiencies are jeopardised.
Order Fill Rate Violations
Delivering too much or too little product upsets the popular just-in-time strategy in the same way that delivering items late or early does. Walmart is an excellent example of a retailer that adheres to this standard. Vendors are graded on how accurately they deliver the quantity of cases ordered as part of their On Time In Full programme.
Late, Unreadable, or Inaccurate Advanced Shipping Notifications (ASN)
ASN is a means of communicating shipment content and carrier tracking between vendors and Amazon. Retailers require shipment information to be transmitted prior to delivery. Distribution centres (DCs) can't adequately prepare receiving docks, assign existing inventory, or arrange for labour when there are inaccuracies in this data. This sets off a chain reaction of problems.
Choosing the Wrong Carrier
When it comes to less-than-truckload (LTL) shipments, retailers tend to work with some carriers more frequently than others. Some LTL carriers visit large retail and food stores on a regular basis, while others only visit once a week. Preferred carriers are those who travel more frequently and can assist companies in meeting tight MABDs, providing better service, and meeting retailer-specific requests. If you choose the wrong carrier, your order could wait at an LTL facility for days, missing your deadline despite the fact that you gave yourself plenty of time to meet it.
Improper Paperwork or Label
Including incorrect paperwork in shipments, whether hard-copy or digital, can result in a slew of problems. The facility will not accept the order if the ASN, BOL, or PO is inaccurate. Your package will be in limbo until the issue is resolved.
Shipping to the Wrong Location
This happens more frequently than you might expect. Dropping an order off at Building A instead of Building C, for example, might cause severe problems. Delivering to the wrong building, whether due to a driver, paperwork, or operations error, can be costly. Your shipment must be repacked and redelivered, even if the transfer location is close by. This necessitates labour and is subject to a fee from the receiver. It's possible that your order will be delivered late as a result of this.
Not Being Packed According to Retailer Specs
Reconfiguring a skid or truck consumes both resources and time, resulting in frequent delivery delays. Problems with single pallets can, thankfully, be readily resolved provided rework facilities are in place. When equipment instructions are not followed, problems become more complicated. Pinwheeled pallets, for example, are not allowed by DPSG since they are loaded on a truck in an alternating configuration. Unloading takes at least an hour longer if your 20 skids arrive pinwheeled. This causes all subsequent appointments to be disrupted, putting everything behind schedule.
There’s a common thread between all these chargebacks – the disruption of planned efficiencies. Chargebacks are not issued to punish vendors, but instead to incentivize behaviour that helps promote optimum profitability for all parties.
Keep an eye out for our next week's blog on ways to avoid the above chargebacks!