In the complex realm of logistics, there are a plethora of challenges to overcome and opportunities to make the most of. We understand the importance of continuous assessment and improvement, and we see vendor compliance and retail chargebacks as a key area that can significantly impact the efficiency and profitability of your supply chain.
The goal of this e-book is to help you understand the complexities of vendor compliance so that you can minimize chargebacks in your retail logistics operation. While many manufacturers accept retail chargebacks as just another line on their overall financial statement, we advocate that targeting this area will yield worthwhile results for your bottom line.
From packaging discrepancies to late shipments and more, we’ll review the vendor compliance categories you need to understand. These are more than operational hiccups – these are real financial stress points that erode profit margins and strain relationships with retailers.
Let’s jump in!
Understanding Vendor Compliance
Vendor compliance refers to the specific standards, guidelines, and requirements set forth by retailers for deliveries. This aspect of the supplier-retailer relationship ensures that products meet predetermined criteria for packaging, labeling, quality, and delivery times. These rules vary from retailer to retailer and across industries. They are set so that retailers can smoothly receive deliveries per their specific processes and resources. Supply chain efficiency, inventory management, regulatory compliance, and of course, the end customer experience, are all factors that rely on shipments arriving per retailer requirements.
Did you catch Motivational's CEO, Tony Altman chatting about this topic on The Logistics of Logistics Podcast? Listen here or wherever you get your podcasts.
The Price of Non-Compliance
When the standards are not met, retailers make shippers pay - literally. This is to enforce the rules, encourage compliance, and of course offset the inconveniences incurred by the retailers when products don’t arrive per their guidelines. When shippers are charged for these discrepancies via a deduction on your invoice, it is called a chargeback.
Research indicates that approximately 5-15% of manufacturer’s invoices to retailers incur some sort of chargeback deduction. Furthermore, it is estimated that vendor chargebacks can account for a loss of about 2%-10% of a manufacturer’s total revenue!
If a routing guide is not followed precisely, the retailer can deduct a percentage of the invoice, a percentage of the purchase order or a set amount from their remittance as a penalty. This penalty can be assessed to each specific infraction and can up to hundred, even thousands of dollars.
For example, if your shipment misses a delivery window, you can expect to see a deduction of around 3% on your invoice for this infraction. Label in the wrong spot for your deliveries, that could cost you $7 per label! While costs vary per retailer and rule, the bottom line is that this impacts your bottom line.
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