HOW TO MANAGE CUSTOMER CHARGEBACKS: PART THREE, SHIPPING
SHIPPING
In the previous blog entry, I discussed how to ensure that your product is properly packed for shipment. For this entry, I will outline the key areas to concentrate on when you route and ship your product. For more information about what a chargeback is, please visit the first post in this series.
This is the most technical part of a chargeback system because it requires the use of electronic data interchange systems (EDI). These systems can be intimidating, which can make it difficult for small businesses to understand the requirements.
I will break shipping requirements into two categories: labeling requirements and freight requirements.
LABEL REQUIREMENTS
Below is a list of mistakes in shipping requirements that can cost you money:
- ASN not submitted
- Incorrect information on the ASN
- Incorrect information submitted through EDI
- EDI information not properly submitted
- Incorrect shipping label
- Incorrect label placement
- Incorrect inner pack labeling
- Wrong pallet used
- Pallet stacked improperly.
- Poorly wrapped pallet
- Pallet not properly labeled
- Missed Shipping window both early or late
- Incorrect carrier used
etc.…
Carton labeling requirements will likely be the most difficult part of dealing with new Big Box customers. This style of labeling may be new, but, if not, it will likely be different from customer to customer. One of the first big steps will be to find an EDI system that will work for you.
EDI systems transmit information to your customer about the shipment, which is used to properly process your product once it reaches the DC. SPS Commerce is one popular system. EDI systems are not free. There are fees to set up customers and transmit documents.
How to use an EDI system and processing advanced shipping notices (ASNs) is beyond the scope of this post but they are critical to proper data transmission. One of the benefits of an EDI system is label generation. EDI systems will produce UCC-128 labels. This label is used by DCs to scan in product and route it to the proper store or storage area.
If you are choosing not to use an EDI system because of the cost, be aware that incorrect shipping labels will incur chargebacks that can add up quickly. It is likely that you will save money in the long run by investing in an EDI system.
LABELS
Once you have chosen a label generation strategy, you should review the following items when producing an internal shipping guide:
Barcode Label
- Label format – Each routing guide will have a section that describes all of the necessary information for each label as well as the size and formant of the label. Strictly adhere to these guidelines. This is a key place for chargebacks as a mistake often extends across the entire shipment. Also, remember the adage “crap in, crap out”. Quadruple check the information that you have input.
- Label creation – If you are using an EDI system, the program will print a label for you on label stock that has to be purchased specifically for your printer. If you are creating your own labels, ensure that you have the correct size label and that you are printing the labels at the correct resolution. The dots per inch (DPI) will be outlined in the routing guide as well.
- Label placement – Routing guides will often provide a graphic representation for where labels should be placed on the carton. This is another key requirement because it is critical for proper processing of cartons in the DC. Requirements usually refer to a specific side of the box and a distance from the edge. Once you understand the distance from the edge of the carton, create a guide that you can use on all cartons. The DC employees will be using a guide to judge your label placement. Make sure that the labels are placed as straight as possible and do not rip or fold when applied.
Now the boxes are labeled and you are ready to pallet and ship. A quick note on palleting and shrink wrapping. The routing guide, again, will provide you with information on how a pallet should be stacked, wrapped, and loaded in a truck.
For example, pallets should be stacked to avoid overhang of boxes. The guide may also require that only 40” x 48” pallets be utilized. This is a standard size that can be purchased from pallet suppliers. Double check that you have stacked your pallets correctly.
ON TIME SHIPMENT / CARRIERS
The final subject that I will cover is on-time shipment and carriers. Big Box companies carefully control the receipt of shipments and delivering product on time and with the correct carrier is critical to avoiding chargebacks. I have listed a few keys to ensuring that on-time shipments are made:
- What is on-time? – The purchase order (PO) you receive from your customer will provide a few pieces of information about on-time shipment. The most critical is the shipping window. A shipping window will tell you the exact time when your customer is willing to receive your product. You want to avoid shipping too early or too late. An early shipment may be refused just as readily as a late one. There are many different ways that a vendor can indicate the delivery window. Each PO is different and it can be confusing. Contact the logistics department if you are confused about what the dates mean.
- Carriers – There are many different ways to ship your product across the country. Big Box customers often have special deals with carriers to reduce shipping costs. They will indicate the correct carrier for each shipment. This information may be as specific as carriers designated at the DC level.
FIGHT?
I have covered some of the general issues that can arise when incurring chargebacks and the areas to concentrate on to reduce them. The next question to answer is; should I fight the chargebacks I incurred? In a word, yes.
Fighting a chargeback only costs your time and there are instances when you incur chargebacks that are not your fault. However, you are unlikely to ever successfully fight a chargeback.
Chargebacks are assessed at the time of receipt and often you won’t be informed of the chargeback until you are paid, 60 to 90 days after the product hit the dock. The lag between the issue and the time you can begin to fight it makes it difficult to track and prove your challenge.
That being said, I would advise challenging all the chargebacks you receive, if only to gather additional information about the chargeback to use in the future.
LOOKING FORWARD
Chargebacks are a financial burden for small businesses and can spiral out of hand quickly if not dealt with before the first shipment. However, chargebacks can be a critical tool in creating a good customer relationship.
Remember to check and recheck your routing guide. There is a good chance that your customer will change the guide and it is important to stay up to date with the requirements.
Keeping tight control over chargebacks will save you money and provide you with important lessons that can improve your supply chain management. Do not overlook this when you finally get a new Big Box customer. Successful management of chargebacks will make that first check even more satisfying.
