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  First Thoughts

    Dan Gilmore

    Editor

    Supply Chain Digest



 
Nov. 16, 2017

More Stories from the Consumer Goods to Retail Chain Front

Lots more Chargeback Oddities, and Insights on Doing Vendor Drop Shipping Well

As we cruise into a Thanksgiving holiday week here in the US, some more summary from the last week's Retail Value Chain Federation fall conference in Scottsdale, which brought together several hundred consumer goods companies and retailers to discuss opportunities for supply chain collaboration - and sometimes a bit more than that.

Last week, my "trip report" included some very interesting insights into what Amazon may be planning in terms of logistics services from an anonymous executive at a leading freight forwarder; the dismay of a number of manufacturers which started receiving major chargebacks from a well-known specialty retailer for bad bar codes on shipping labels - it appears after said retailer implemented a new handheld bar code quality verifier; and how another department store chain has been issuing "post audit" chargebacks to vendors one or even two years after the alleged incident (must be the result of some automatic data analysis), obviously making it very hard for vendors to dispute the fines.

As I wrote last week, "Such can be the strange world of vendor compliance.
"

Gilmore Says....

I will note it is not just apparel/department stores that are generating complaints. One of the two major home products retailers also took some licks for recent chargeback activities.

What do you say?

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The last two anecdotes came from a 90-minute session for vendors only that was basically an opportunity griping about retail chargebacks and what might be done about some of them. There was a parallel session for retailers only where I assume they gripe about vendor performance. Sometimes just getting something off your chest is therapeutic.

Read the full part 1 trip report here: Trip Report: Interesting Tales from Retail Value Chain Federation Fall Conference

I ran out of space for many other such stories from the session last week, and asked if anyone was interested in more. I received several responses urging me on, such that here we get part two of my RVCF summary.

Before we get back to compliance issues and oddities, I have more room here this week for highlights of a panel discussion on vendor drop shipping in ecommerce, featuring three manufacturers and one 3PL. As I mentioned last week, this RVCF event is a semi-private function, so I am keeping company identifies mostly anonymous.

There are many approaches to managing drop ship inventories, including having a dedicated inventory in a separate location in the DC, having one pool of co-located inventory for a company's own piece pick/ecommerce business plus the retail drop ship, and having separate inventories logically but storing them together, if your allocation and WMS systems can handle that. Take your pick - I don't think any one is always better than the others.

I believe all the panelists agreed, however, that they tweak inventory availability information to guard against receiving a drop ship order from the retailer for which they have no inventory, either because of accuracy issues or someone else grabbed the merchandise first. One of the vendors, for example, reports no inventory to a retailer when the count reaches five or less for a SKU.

Inventory information is sent via an 846 Inventory Advice EDI transaction in most cases. However, while almost all retailers want that data sent daily, others want it refreshed multiple times throughout the day, it seems just based on their level of IT maturity.

One panelist interestingly noted you really have to think though inventory and order priority logic - how does retail drop ship orders rank compared to retail store orders and a vendor's own consumer direct business? One company on the panel puts drop ship ahead of its own B2C. Interesting.

Most of the panelists stressed the need for a robust on-boarding process for new retail drop ship customers, and noted the big IT headaches relative to custom packing slips each seems to want. This is actually quite a big issues, as the costs for this work can be high. Some panelists also stressed the need to really analyze the impact of drop ship generally and new customers specifically on DC operations and throughput - which is of course why some outsource the function.

But beware sales giving away the farm to get the new retail business, as some of the vendors push surcharges to retailers for the service.

OK, back to the fun stuff - more vendor griping about chargeback issues.

In general, over the last 60 days, vendors report more and more carriers assigned by the retailers missing appointments for pick-ups, sometimes by days, sometimes by two weeks. This is true almost across the board, as the US freight market heats up.

What is vexing to manufacturers - besides possibly losing sales by merchandise not getting to stores - is that almost always they get a chargeback for a late shipment out of this. This is because while checking to see if a PO shipment was made by the expected date can be relatively easily captured manually or systematically, there is no real way today for electronically linking a carrier's failure to pick-up as the cause. That's a real problem that has been going on for decades, and can also be an issue when the vendor hires the carrier and it can't get a timely delivery appointment at a retail DC.

What to do? Not much. Key is lots of documentation. One vendor said the retailers generally don't want screen shots off the carrier's system showing pick-up not made but actual emails from the carriers acknowledging such. All that's a lot of work, but worth getting the chargebacks reversed.

One vendor was wondering if others were having a hard time getting response on chargeback issues from a retailer known to be struggling financially. My reaction: no kidding, it probably fired most of the people in that department, and can't afford to give the money back anyways. Good luck.

Interestingly, no vendor, it seemed, really had a great way to maintain a database of retail chargebacks, challenges and resolutions. Some used Excel, some One Note, etc. This is an opportunity for someone to automate this in some way - may have quite a payback.

In peak shipping periods, such as end of quarter, some vendors are getting routing information for a shipment after the pick-up date. In some cases, the carrier is somehow getting the information first, and is contacting the vendor to arrange before the vendor is aware the carrier/date has been determined by the retailer's system. All this apparently especially true at one major department store chain that switched technology vendors not long ago.

One major regional department store chain has been issuing heavy chargebacks lately for ecommerce/drop ship violations without any documentation or clarification of what the failure was. Will just note something like "UPC issues." Makes it just a bit hard to challenge, doesn't it?

This same retailer has strangely started issuing chargebacks related to failure to consolidate shipments when a given PO requires more than one trailer to deliver.

I will note it is not just apparel/department stores that are generating complaints, though they lead the way. One of the two major home products retailers also took some licks for recent chargeback activities.

Chargebacks relative to pallet quality were also reported as on the rise. Incredibly, one vendor is reworking all the shipments it receives from its suppliers on to its own, generally better quality pallets just to avoid related chargebacks.

I have many more pages of notes here, but am again out of room. Very interesting to say the least. Look for our benchmark study on the state of supply chain relationships between retailers and vendors in a few weeks.

The RVCF conference is a good one - I recommend it.

Any reaction to this part 2 summary of the RVCF fall conference? Do you have any strange compliance stories to share? Let us know your thoughts at the Feedback section below.

 


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