EDI Chargeback Management: Tracking and Prevention

EDI Chargeback Management can be a difficult task as chargebacks may reflect shipments that were made several weeks ago. Therefore, it is important to have a good chargeback tracking and EDI Chargeback Management process in place.

EDI Chargeback Management – Tracking

Develop a process to find out about deductions as soon as they are issued. For example, JC Penney sends daily email notifications about EDI ASN deductions to the email address in the PER-04 segment. Once the deduction information is received a process must be in place to resolve the chargeback and get the right functional team members involved. Create a dispute resolution process to suit your company’s requirements. The following is an example of a dispute resolution workflow:

EDI Chargeback Management

A chargeback tracking database should be created to track the status of each deduction. This can be a simple spreadsheet with the defined fields.

EDI Chargeback Management – Preventive Action List

  • Master your customer’s requirements: Most customers will provide the following documents: 1) Vendor Manual 2) Routing Guide 3) EDI Requirements. Each department should have a subject matter expert on the customer’s requirements. Since the customer requirements change frequently, there should be a process in place to monitor changes to the requirements. Sites like http://www.tradingpartner.info/tpie/ and http://edi-l.blogspot.com/ offer the most recent news about changes for all your trading partners from a single location. Also, most EDI customers will send letters or emails describing new initiatives and changes. Make sure these letters are communicated to the right party.

Make sure you are in agreement with your customers on total lead-times. This includes order processing, packing and transit times from each ship-point to each ship-to location. Accepting inadequate orders with inadequate lead-times is a major cause of chargebacks.

  • Conduct Training & Test Runs: Make the warehouse personnel pack an actual carton and/or pallet per the customer requirements as a training session (without actually shipping the carton). Another example would be to validate your barcode symbology quality by sending your labels to a third-party barcode validator.

Also, most customers conduct vendor compliance training. Make sure the people doing the actual work get enough training on various topics, including: EDI, Shipping, Invoicing, Routing, Packaging and Product Data.

  • Setup Alert Systems: Create alert systems that will advise of you of potential chargeback risk. For example, query your sales-order database and shipping database by comparing the required ship-dates against ASNs. If a shipment should have already gone out and there is no ASN for it, setup an email notification system to alert the appropriate party. Another example would be an alert system for transmitted ASNs or Invoices that do not have 997 Functional Acknowledgements.
  • Improve customer relationships: Hold face-to-face meetings with your top customers at least twice a year. Bring to these meetings your deductions “packages” and relevant documents such as sales agreements, compliance manuals and then negotiate any disputes. Sometimes you can convince your buyers to wave the chargebacks or give you a grace period if they see strong progress in improving vendor compliance.

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