Retail chargeback penalties for non-compliant shipments are a profit-draining reality for many CPG companies.  But retail suppliers with the will and the right strategy can avoid hundreds of thousands, even millions, in penalties.   Success requires creating a vendor compliance program, either internally or through a partnership with a third party logistics provider experienced in vendor compliance. 

Following are condensed tips taken from the article by Weber Logistics, “How to Reduce Chargebacks in Your Vendor Compliance Program.” 

1. Quantify the financial impacts of chargebacks.  This won’t solve the problem, but the final calculation may get people’s attention and position you to win support for investments you may need to make.
2. Leverage an advanced warehouse management system (WMS).  Compliance requires accuracy, and a high level of accuracy in a manual-based warehousing and shipping process is difficult to maintain.  The right 3PL partner will have a full-featured WMS using bar code scanning to efficiently check order accuracy.  
3. Get EDI right.   After early/late deliveries, by far the biggest source of chargeback penalties is late, unreadable or incorrect advanced shipping notices (ASNs) – information transmitted to a retailer in advance of delivery that details products and volumes in the shipment.   Address ASN issues and you’ve likely solved a good percent of the chargeback problems. 
4. Make compliance someone’s job.  Who owns vendor compliance?  Logistics?  Sales?  Accounts Receivable?   It’s often unclear.  That means no one person or department is focused on solving the problem.  Outsourcing to the right 3PL can help.  They can take on the compliance challenge, and even work with you to address specific issues with retailers. 
5. Develop a better audit process.   Each retailer spells out its requirement in a detailed document called a routing guide.  Develop a procedure to check all outgoing orders against this routing guide and perform this QC check against a percent of the orders. 
6. Challenge chargebacks.   Many retail suppliers, particularly small to mid-sized companies, are hesitant to do so.  They feel they lack leverage with retailers and accept chargebacks as a cost of doing business.  But chargebacks can be reversed.  The key is having the right documentation that the shipment in question was compliant.  You’re likely to learn of an infraction months after it happens, so you’ll need a log you can refer back to.  
7. Build relationships with key retailer contacts.    Visit retailer DCs.  Understand their receiving process.  Conduct quarterly scorecard reviews.   Retailers WANT you to succeed.  Personal relationships with the right contacts can be the most powerful part of your vendor compliance program. 

Read the full article: Reduce Chargebacks in Your Vendor Compliance Program.