Any manufacturing company shipping to a big box retailer can incur additional costs called chargebacks for errors such as missed delivery deadlines, incorrect package labeling, and paperwork mistakes. Because delivery specifications vary by retailer, manufacturers often have a hard time complying with all the rules, resulting in chargebacks and other fees.
The most common reason for chargebacks is not meeting the scheduled delivery window. Depending on the retailer, the cost of missing a delivery appointment can be charged as a percentage of the invoice (3%+), or as a flat penalty rate. The manufacturer is also responsible for meeting the retailer’s other requirements such as labeling, packaging, pallet configuration, and paperwork.
Over time, these charges can add up, and impact bottom line performance. Larger manufacturers will be affected by the volume of chargebacks, while smaller companies might lose out on future business with big box retailers. While not every chargeback can be avoided, companies can take steps to reduce the cost associated with them.
Know the Rules
Since every retailer has their own rules regarding shipping, it is important to understand expectations from the start. The manufacturer is responsible for meeting delivery deadlines as well as packaging specifications. Requirements should be clear and documented for both parties from the start to reduce complications in the future.
Analyze your History
In order to improve your track record, compile chargeback history for the last few years to determine when and why chargebacks are occurring. Calculate the impact to the bottom line so you know the savings involved by reducing chargebacks. This will help make a case for investing in systems and processes to improve the business.
Internal processes should be streamlined and documented for everything from making delivery appointments to following rules for ASN’s (Advanced Shipping Notification). A quality control process to check for compliance should also be created to cut down on the number of errors. Manufacturers should create a compliance scorecard that will measure performance, and document all important information so that chargebacks can be disputed if necessary.
Allocating resources for improving the process is necessary. Investing in the proper technology systems will ensure shipments are going out correctly and on time. In addition, employees who are involved in the process should be adequately trained and kept informed of any changes.
Find the Right Logistics Provider
Working with a logistics provider who understands your industry does make the delivery process easier. Find a carrier who will work with you for the entire process, from the point of pick up to customer delivery. A partner who has good relationships within the industry and with the retailer can help reduce the amount of chargebacks.
Taking a proactive approach to prevent the issues that cause chargebacks will help to reduce the costs associated with them. If your company is struggling with too many chargebacks, Kable can improve your supply chain processes when dealing with big box retailers. To find out how, contact us today at www.kablefulfillment.com.