These costs, such as chargebacks, are sometimes unavoidable for companies shipping to retailers – especially the big box sellers. Fees for late deliveries, paperwork errors, or incorrect packaging are often overlooked and considered to be a part of doing business. However, with better management, these costs can be reduced or even eliminated completely in some cases.
Causes of Chargebacks
Failing to meet delivery windows is the most common reason that suppliers and manufacturers are subject to chargebacks. The cost of missing a scheduled delivery appointment varies by retailers, however it is either a percentage of the invoice (up to 3%) or a flat fee of up to $300 per day! At this rate, the penalty could exceed the value of the product.
Chargebacks often occur when specific requirements by the retailer are not met. These include product labeling, packaging, and pallet configuration. A certain retailer might want a maximum case count of 18 per pallet and another might want 22 so planning how product is packaged and palletized is necessary to avoid these fees.
Many times, chargebacks can be avoided by understanding the standards and rules of retailers, Companies can, in many cases, even negotiate the rules and fees regarding chargebacks.
Manufacturers can also be proactive about avoiding chargebacks by documenting internal processes for hitting delivery appointments or following the rules for Advanced Shipping Notifications (ASN’s). A quality assurance process to check for potential errors by retailers is another way to avoid chargebacks. And, implementing a compliance scorecard is a great way to track exactly how your logistics providers, whether it be a 3rd party fulfillment warehouse, co-packer, or carrier, are doing.
Production delays can cause missed delivery appointments but by alerting your carriers, they might be able to rearrange their delivery plan to help the product get shipped faster. While it is your responsibility to understand the rules, experienced service providers might help find solutions to reduce the impact of chargebacks.
Logistics providers who understand the retail industry have the resources to have an efficient shipping process. For example, drivers and dispatchers who know the personnel on a retailer’s receiving dock might be able to further expedite a late delivery by getting last minute appointments and reducing potential fees.
While some chargebacks are unavoidable, taking measures to prevent them will eliminate the back and forth between manufacturers and their retail customers when they do arise. And, good logistics partners will incur the costs when they are the reason for the chargebacks.
Retail is a competitive space, making the implication of errors very costly. Costs must be managed at every level of the supply chain. Those companies who are examining the reasons for their chargebacks and extra delivery costs further are able to reduce their impact. Preventing the situations that result in extra fees and working with logistics partners with experience in the retail industry are two ways to decrease the occurrence of chargebacks.