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What are chargebacks and how can I avoid them

What are chargebacks and the way can I keep away from them?

A chargeback is a fee that a customer (usually a retailer) places on a supplier for errors in not following the retailer’s business requirements. The chargeback was introduced to offset the extra cost the retailer incurs as a result of the supplier’s non-compliance.

Chargeback schemes began in the 1980’s as a way for retailers to recoup costs incurred due to supply chain errors. At the time, many suppliers objected to them as unfair profit centers for large, powerful retailers. Although purely punitive fines are not legal, cost recovery is so chargebacks quickly became adopted by most retailers. It’s easy to understand how mislabeled, mis-packed, late, and wrong-quantity shipments add up to real labor costs and out of stock difficulties for retailers. Distasteful as they may be for suppliers, chargebacks make business sense for retailers in trying to recover costs and are here to stay for the foreseeable future.

What can lead to a chargeback being applied to my organization?

Early, late, or non-authorized partial delivery of goods or services.Missing, incorrect, non-readable or incorrectly placed shipping labels.Substituting products without prior agreement.Ship to incorrect location.Product packaged incorrectly according to retailers agreement.Damages that did not occur during transit.EDI 810 invoice not matching original purchase order and/or with wrong terms and detailsEDI 856 ASN (Advance Ship Notice) does not arrive on time or does not match items in carton.

How can my organization eliminate chargebacks or at least reduce greatly the potential of receiving them from my customers?

Comply fully with customers EDI requirements.Make sure labels are correct and can be read or scanned easily.Do not substitute products without prior approval.Ship to the correct location.Pack items correctly according to retailer’s requirements.Try to make sure goods arrive in perfect order.Deliver the correct products, quantities and cartonsSend accurate and complete EDI 810 invoices.Make sure EDI 856 ASN (Advance Ship Notice) arrives on time and details are correct.
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