HOW TO MANAGE CUSTOMER CHARGEBACKS: PART TWO, PACK-OUT

In the previous post, I discussed what customer chargebacks are and how they can affect your business. There are two key areas to concentrate on when attempting to create a chargeback mitigation procedure, pack-out and shipping. I will examine pack-out first because it is the key to insuring that your product is ready to ship out the door.

 

PACK-OUT

Pack-out consists of all the steps you take to prepare your product for shipment. The following is a list of some items that are part of pack-out, which, done improperly, can cost you in chargebacks:

1. Wrong item shipped
2. Incorrect UPC applied to correct item
3. Incorrect UPC label used
4. Pricing on UPC label doesn’t match customer pricing
5. UPC quality too low
6. Incorrect box used
7. Incorrect master pack / inner pack combination
8. Wrong tape
9. Incorrect tape orientation

etc.…

This short list is just an example of the items that can be part of a chargeback schedule. These mistakes can result in a per-item or per-carton chargeback, which add up quickly on large orders.

For example a $0.50 chargeback assessed for incorrect UPCs across a 10,000-piece order could cost you $5,000. This is a quick way to destroy your margin.

The good news is that pack-out requirements are completely within your control and often don’t require sophisticated technology. I have separated pack-out into two categories: ticketing and packaging.

 

UPCs AND TICKETING

Let us start with UPC and ticketing requirements. Below are a few important steps to ensuring that your ticketing is done properly.

1. Understand ticketing requirements – Big Box customers often want to use unique UPC labels or price tickets. This includes customized descriptions or pricing. Check the routing guide for ticketing requirements.
2. Using the proper price / UPC ticket – A few pit falls of ticketing come from the complexity of the information contained in the ticket. Some customers provide price tickets specific to their products. If that is the case for your customer, great, you just need to ensure that you receive the proper UPCs for each new PO.
3. Creating your own price ticket – Some customers will require the vendor to provide their own price tickets with the information specified by the customer in the routing guide. It is critical that the correct information is used on the label and the label is created with the correct quality. UPC scanners can only scan high quality labels; labels with poor quality or scratches won’t work.

UPC labeling mistakes can be very dangerous because you run the risk of incurring chargebacks on every item.

While Big Box logistics departments can be intimidating and frustrating, they can also be an asset. Once you have identified your ticketing requirements, double check with the logistics department by providing them with a sample UPC ticket to test in the system. Make any changes they suggest.

 

PACKAGING

Now that your product is properly ticketed it is time to box it up. Again, refer to the all-important routing guide. You may have also negotiated pack-out with your buyer before the initial PO. Make sure that the pack-out on the PO is consistent with what you negotiated with your buyer.

Below, I listed a few major pack-out issues that can cause big chargebacks if they are ignored.

1. Ordering units – All customers will agree upon or require a specific number of units per case. This number will feature prominently on your PO. If you have any questions, contact your buyer to ensure that you are putting the correct number of units in each case. Rest assured that any extra units shipped will not be returned.
2. Master pack vs. inner packs – Many vendors want to have smaller inner packs of each unit packaged in the shipping carton. For example a vendor may want 24/6, which indicates a master pack of 24 units with 4 inner packs holding 6 units. Determine whether you need inner packs and what quantity should be in each.
3. Box requirements – Cardboard boxes are far more sophisticated than they seem. The boxing requirements of vendors may be particularly intense. For instance, Victoria Secret requires boxes with specific dimensions, printing, flap orientation, and edge crush test rating (ECT). Ensure that you understand the requirements for the boxes you are supplying. Working with your corrugated vendor will help to ensure you are using the correct boxes.
4. Inner package requirements – Customers may ask for specific inner pack packaging. This can come in the form of poly bags, rubber bands, or cardboard boxes. Do not assume that the customer wants inner boxes. Rules regarding inner packs may also be different depending on the type of product you offer.
5. Tape requirements – This may seem strange, but most vendors require specific tape be used. This is usually water-activated tape, like that used by Amazon. Tape orientation may also be indicated in the routing guide. “H” taping is a special orientation that covers all of the seams on a standard box.

Now that the product is properly labeled and boxed up, it is time to discuss the more difficult chargeback topic: shipping requirements.

In the final post, I will discuss what areas are key to understanding how to properly ship product to your customer. Concentrating on pack-out and shipping when creating a chargeback mitigation system will help you ensure that each requirement is met.

 

–Eric Schorling