EDI Chargebacks: Definition and Common Types
EDI Chargebacks (often referred to as “expense-offsets”) are financial penalties for non-compliance with your customer’s requirements. Customers issue EDI chargebacks because vendor noncompliance disrupts operations and creates an additional expense for the customer. Therefore, customers create “expense offset policies” that are intended to recover the additional cost incurred by the customer due to vendor noncompliance.
Unfortunately, EDI-related chargebacks have become profit-centers for a lot of customers. Chargeback fees vary greatly from customer to customer. A $100 penalty for an EDI document containing errors would not be uncommon. Most of the customers provide a charge-back fee schedule. EDI chargebacks are usually deducted off the check payment.
Some common challenges that organizations face with EDI chargebacks problems are:
- Frequency of change: Vendor manuals and routing guides change regularly and companies have issues keeping up with the changes.
- Complexity of the problem: Sometimes hundreds of chargebacks are issued and some of them are too small to investigate and are unclear. Also, every customer’s chargeback deduction schedule is different.
- Internal Organizational Effort: Since so many departments are involved (Logistics, A/R, A/P, sales and etc) internal efforts to manage chargebacks are very challenging.
Common Types of Chargebacks
Chargeback deductions go far beyond the scope of EDI. Following are some chargeback examples:
Examples of ASN Chargebacks
The ASN is the most risky transaction for chargebacks. Following are some examples of ASN Chargebacks:
- No ship notice sent
- Ship Notice is late
- Barcode label put on wrong box
- Wrong Items packed in box
- Serial Number accidentally re-used
- Barcode label is damaged or not scannable
- Information on ASN missing (e.g. BOL)
- Mismatch on ASN, BOL, and 214
- Shipment is incomplete when short-shipments are not allowed
- Shipment arrives after the cancel date
- Invalid PO/STORE combination
- Invalid Item Number/UPC Code
- Invalid Unit of Measure
- Invalid SCAC (Shipment Carrier Alpha Code) Code
- Unauthorized Volume shipment.
- Start working on your shipment and ASN as early as possible
- Be sure to know your cancel date and do not ship before the arrival date
- Know which DC’s are close by so that you can be sure to send the ship notice immediately
- Make sure the shipping department understands where the label goes on the box and puts it on the right one
- Make sure all ASNs are Acknowledged
- Make sure the BOL on the ASN matches the actual BOL.