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Highlights from the 2018 Retail Deductions Study Part 2

July 26, 2018

Dan Gilmore


Supply Chain Digest

Every three years or so, the Attaining Consulting Group, in partnership with the Credit Research Foundation, conducts a survey of vendors relative to the always controversial topic of "deductions" in the consumer goods to retail value chain.

We're back with more highlights from the recently released 2018 report.

Where does vendor compliance management sit within the vendor's organization?
The plurality report into operations or logistics organizations, at 34%, followed by finance at 27% and customer service at 16%.

Supply Chain Digest Says...

While many retailers use technology to manage the chargeback process from companies such as Compliance Networks, vendor use of technology to manage retail deductions is limited.


Given all the complaints about chargebacks from vendors, it is surprising how few of them vendors actually believe are invalid.

When asked, based on historical information, what percent of total deduction dollars received are invalid or disallowed and charged back to retailers, the median of all respondents is just 5.1-10%. This is consistent with the results of the 2015 survey.

But just because a vendor views a chargeback as invalid doesn't mean it will recover those dollars from a retailer. While about 16% of vendors say they recover more than 90% of invalid chargeback dollars, almost 45% say they recover less than 50%, and 15% recover less than 10% of allegedly invalid deductions.

What are the top causes of operational deductions (as opposed to those related to trade terms)?

When asked to report their top 3 reasons for deductions based on both the number and dollars of deductions received, "concealed shortages" (missing items in a mixed SKU carton) topped the list in terms of number of chargebacks, followed by transportation routing issues, then early or late shipments, EDI or ASN errors, and full carton shortages. As shown in the chart on page 1, the results were almost identical when looked at from a dollars of chargebacks perspective.



32% of responding companies reported an increase in deduction dollars taken in the past 12 months. 29% of respondents indicated that deductions have declined.

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A question was added to the 2018 survey asking whether respondents noticed any changes in the types of deductions received in the past 12 months. 37% of respondents indicated that they have not noticed any changes, while 27% reported noticing that new compliance rules or deduction types were being taken.

While many retailers use technology to manage the chargeback process from companies such as Compliance Networks, vendor use of technology to manage retail deductions is limited.

56% of respondents reported that they do not use any 3rd party technologies in deduction management, but that was down from 69% in the 2015 study. But just 9% said they were using a tool listed as "claims reconciliation/validation," while only 11% use a tool the survey called "deduction reporting."

Interestingly, outsourcing has not yet hit the deductions world at vendors. Just 9% reported outsourcing any part of the chargeback process.

The excellent full report is available from the Attain Consulting web site.

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