Tag Archives: Small Parcel Shipments

6 Proven Ways to Stop Burning Money on Customer Fines

If you’re shipping to a large customer, especially a big-box retailer, then you’ve likely encountered chargebacks or fines. Many large companies fine their vendors when they encounter a deviation from purchase order or vendor requirements. Viewing these vendor fines as an easy way to boost their bottom line, large companies have recently increased their emphasis on chargebacks. Some companies have even created “Profit Recovery” departments with the directive of finding methods to reduce payables to vendors. While some of these fines are necessary motivators for supply chain compliance, many of these deviations are the result of problems on the receiver’s end of operations.

Chargebacks and Fines Burning Money

For those who don’t enjoy paying their customers, here’s five tools to fight chargebacks and reduce the number of fines you receive. Of course, no one strategy can solve all of your problems, but my company was able to reduce chargeback expenses by over 60% with these methods.

1 – Fight Every Single Chargeback

As much as you dislike filing disputes, a clerk somewhere dislikes processing them just as much. Many companies (such as Walmart) will reduce unofficially the number of fines if they know you will dispute them. Paperwork piles up on their end and suddenly charging you for every small discrepancy doesn’t cover the cost of hiring an additional clerk to handle your disputes. Even if you know you’ll lose the dispute, file it anyway.

2 – Perfect Paperwork

Perfect Shipping Documentation

From the disputes I’ve dealt with, approximately half of them are a result of a problem on the receiving (customer) side. However, we can still ended up paying for many of the shortages or other problems if our shipping documentation is not detailed enough. To avoid this problem, over-document when you ship. Absolutely be sure to include carton count, weight, pallet count, and other basic information. If possible, seal the trailer and record the seal number. Having the driver count and sign the bill of lading is also essential.

When shipping by FedEx, we often strapped boxes together to save on freight costs. However, when a customer claims a shortage, this prevents us from proving our carton count because of the banded boxes. We therefore changed our process to not strapping together boxes. This change gives us an exact FedEx paper trail for each carton to help us win future disputes.

Almost as important as perfect shipping documentation is a filing system that will help you find the necessary paperwork when you need it months later. Clearly marked, well-organized folders or paperless filing systems are well worth the time they take. They’ll simplify your life by making the dispute-filing process quick and easy. For chronic-problem customers, we maintain spreadsheets to track pertinent information that we can quickly access later. This few minutes of data entry saves hours of searching when disputes arise.

Perfect Dispute Paperwork

Another place where it helps to be exact is in the dispute paperwork you’ll send to contest the fine. Ensure every field is complete and legible if handwritten (typed is better). Be descriptive and make it very easy to understand. Remember, a clerk who reviews disputes all day will handle your claims. Anything you can do with your dispute to make the clerk’s job easier will result in more fines being rescinded.

3 – Never Pay the Same Fine Twice

When acquiring a new customer, always read their routing instruction guide so you can build a process that follows their requirements. However, if you miss something and are fined for it, improve your processes so you never pay the same fine twice.

For each chargeback we receive, we assemble everyone who interacts with the customer into a quick huddle and agree on changes to avoid future chargebacks. If necessary, we institute a two-person sign off system or other techniques outlined in my previous article, Strategies to Fulfill Customer-specific Requirements. For our very difficult customers, we record every piece of data and take pictures of every piece we ship out. Then when the inevitable chargebacks come, we can easily dispute them by replying with our detailed paperwork and pictures.

For example, one of our more complex customers required slip sheets (40×48 inch pieces of flat cardboard) between different SKUs on a pallet. Since most of our other customers will accept mixed pallets, we missed this requirement. However, after receiving a significant fine, we reviewed and changed our process. The pick sheets that print for that customer now have the instructions clearly outlined. We also take pictures of the pallets and require two authorized signatures before anything for that customer leaves our warehouse.

4 – Collaborate with the DC

Many complicated issues can be quickly solved by going to the gemba, or source, of the problem. Usually, that means visiting your customer’s distribution center and talking with their team. Seeing how they handle your products can spur creative collaboration that saves both companies time, money, and headaches.

We had constant product damage issues with one of our major customers. We were following their routing requirements exactly, but their requirements were often the cause of damages for our unique products. We brought the issue up in a visit and several follow-up conversations with the receiving lead at the primary DC we shipped to. After explaining the problem and brainstorming together, we were able to tweak the routing rules to a solution that both reduced damages and made receipts easier for the their team.

5 – Share Feedback with Buyer

If despite your best efforts, you’re still swimming in fines from a specific customer, it may be time to elevate the issue to the buyer. While this depends heavily on your relationship, we were recently pleasantly surprised with how helpful a buyer from a national US retailer was in helping us to solve dispute problems. We were contacted by someone from the “Profit Recovery” department claiming we owed money for product damages from several years prior. Unsure how to respond, we raised the issue with the buyer on our next sales meeting later that month. She was happy to help, and detailed exactly who we should contact and what we should say to have the disputes dropped. This method is especially useful if the charges seem obviously unjustified.

6 – Budget, Minimize, and Improve

Problems and variations are still a reality for most supply chains, especially growing small businesses. While doing our best to standardize and automate, variations still exist, and some will result in fines. A wise course of action at the executive level would be to set a target maximum for customer chargebacks and support improvements that reduce that budgeted allowance. Supply chains are full of different companies and people working together to create value for the end customer. Anything you can do to collaborate and make the jobs of partner companies easier will often reduce fines and chargebacks – and make your offering to the end customer more valuable and competitive.

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How to Ship to Walmart, Target, Walgreens, and Other Big-box Retailers – Part 3 of 3

Shipping to Big Box Retailers

Part Three – Shipping the Order

Congratulations, you’ve received your first order from a new big-box retailer. In part one and two of this series, I described how to bring an order into your system, pick it, and label the product properly. With all of that completed correctly, we move onto the final steps of shipping an order to the big-box retailer.

Specifically, this article will touch on whether to ship via small package or on a pallet, common customer shipping requirements, advance ship notices (ASNs), and paperwork you’ll want to keep for future reference. As with the previous two parts, this article is no substitution for your customer’s routing guide, which is the ultimate authority to any questions you have. Nevertheless, the topics below will help guide you and your team through the process and avoid many costly mistakes.

To Palletize or Not to Palletize?

One of the first major decisions you need to make when shipping your order is whether to ship via a small package carrier (FedEx or UPS), or on a pallet. If the order is large, then palletizing it is the obvious choice. However, when the order is small, that decision becomes less clear.

If the customer is paying for freight, then they likely have firm guidelines about when orders should go small package or palletized. Consult the customer’s routing guide; the rules vary widely for each customer. For example, if the order is over fifteen cases, or weighs more than 150 lbs. total, then several retailers require the order to be shipped on a pallet. However, others put the threshold at 20 or 25 cases, and as much as 300 lbs.

If you are paying freight, then the customer’s case count or weight limit often does not apply, and you can ship whichever method is cheapest or most reliable. However, several big-box stores will refuse shipments over a certain weight, even if you are paying the freight bill.

Small Package Shipping Considerations

When using small package carriers to ship, usually FedEx or UPS, you’ll want to consider several important points. First is the actual shipping label. Because small package shipments do not require a formal bill of lading, many retailers require the shipping label and packing list to include specific information. For example, the customer’s PO#, department, or order type may need to be printed into the specified fields on the label. Even if not required, entering them can help avoid mistakes at the customer’s distribution center (DC), so I recommend it whenever possible.

Another consideration is whether to band the boxes together or not. Often, banding small boxes together can save money with small carriers because they round up the package weight. Thus, two packages that weigh 4.1 lbs. each would cost the same as two 5 lbs. packages. Bound together though, the bill would charge for one 9 lb. box. While this method can sometimes save money, there are many retailers that will fine vendors that send them boxes bound together. Check with your customer, and run price calculations, to see if this method will indeed save you money, and if your customer will accept banded boxes.

Pallet Shipping Considerations

“A” Good Base

If your order is big enough, then you then have to consider the requirements for shipping on a pallet. To begin with, you’ll need a high-quality pallet to stack the product on. Most large retailers require #1 or Grade A pallets. Essentially, these are pallets in very good condition that have not experienced any damage and have all their original parts in strong, sturdy condition. Any pallets that have visible damage or missing parts are not Grade A and should not be sent to customers that require them. Some retailers accept two-way pallets (pallets that can only be picked up on the short ends, as pictured), but many require four-way pallets.

Stacking the Product – Pallet Height Limits

Once you’ve found a good pallet that will meet the customer’s requirements, stack the product on the pallet to evenly distribute the weight and support the product. Most retailers do not allow any overhang, so be careful to stack everything within the 40 x 48 inch space. As the product stacks up, you’ll want to consider pallet height requirements. Most large retailers limit how high pallets can be in order to maximize their DC’s racking space. Some retailers will publish this limit in their vendor guide, but often you must call the DC and ask what their limit is. This varies widely by retailer. The lowest I’ve seen is 55 inches (60 inches including the 5-inch pallet). Some allow as high as 96 inches. The most difficult customers are the few who have different requirements for each DC. CVS is an example of this. My team calls each DC to get a pallet-height limit, which sometimes changes. We could ship shorter pallets to all the DCs, which is what we often do, but sometimes stacking the pallet a bit higher can save us a significant amount in freight costs.

Once the pallet is built, be sure to securely shrink wrap it to protect the product while in transit. If the product is light, secure the product very well to the pallet with several layers of shrink wrap. This will prevent it from coming off the pallet when it is moved.

Some retailers require black shrink wrap, especially if the product is a high-value item. Black shrink wrap hides the product from those moving it, which can reduce theft or other problems.

Advance Ship Notices (ASNs)

As discussed in part 1, most large retailers communicate with vendors via EDI (Electronic Data Interchange). An increasing number of big-box stores are requiring  vendors to send advance ship notices (ASNs) when they ship orders. An ASN is an EDI document (EDI document number 856) that tells the customer how each order was shipped. More than just a tracking number, ASNs detail the carrier, tracking information, and ship date, as well as a detailed breakdown of how the order was packaged. Vendors usually require special ASN labels that show a serial shipping container code (SSCC-18) that is 18 digits long. These codes are unique to each package or pallet sent to a customer, and the customer’s receiving department can know exactly what is contained in the pallet or package by scanning the 18-digit barcode. One of the key benefits of ASNs is that they easily communicate such detailed information that they reduce the work load on the receiving end, as well as decrease opportunities for error. The label shown here is an example of an ASN label with the 18-digit barcode at the bottom. If your customer requires an ASN label, it will have very detailed requirements, which should further explain what you would need to put on the label. Additionally, many retailers recognize the limits on small suppliers, and many offer a free, web-based ASN system that allows you to print labels from the vendor’s website.

Scheduling the Shipment and Delivery

Preferred Carriers

If you’ve submitted routing for the order (as discussed in part 1), then you will likely receive instruction on which carrier to use. However, if you must choose your own carrier, you may want to check if the customer has any preferred carriers. Many have a handful of favorite carriers, which reduces congestion at their receiving docks and helps avoid errors from unfamiliar shipping companies. Some retailers will not accept shipments from carriers not on their approved list. Others will grant special leniencies if you use their preferred carriers. For example, if a shipment leaves your warehouse on time with a customer’s preferred carrier but still arrives late at the destination DC, some vendors will not issue a fine. Be sure to note which freight carriers to use and to implement a process that ensures only those carriers are used. Even if preferred carriers are slightly more expensive, they are often cheaper overall when considering the potential fines or issues with a problem shipment.

Delivery Appointments

Another requirement for many retailers is a delivery appointment. Usually, the trucking company handles the delivery appointment, often coordinating the delivery a day or two in advance or arrival. However, some retailers require you to call and schedule the delivery before you even ship the product. In this case, be sure to communicate clearly with the trucking company about the scheduled appointment.

Signed, Sealed, Delivered

Packing Lists and Bills of Lading

With the order correctly labeled and packaged, you’re ready to hand over the product to the freight company. Your job is almost done if you’re using a small package carrier, but you still have a few more important steps ahead if you are shipping a palletized load, most involving paperwork. The packing list should go in a marked pouch on the lead carton so that the receiver can quickly find it. In addition, many retailers will require you to put specific information on the packing list and bill of lading. Be sure to follow all these requirements to avoid chargebacks and fines.

A Foolproof Paper Trail

A common problem when shipping to large retailers is loss or damage of product when they receive it. Sometimes the product really is lost in transit, but other times the receiver may miscount your product when receiving it. When this happens, the customer will usually take a deduction from your invoice or fine you through a chargeback for the product that they did not receive. You can still obtain the money from these deductions or chargebacks if you have the proper paperwork, signatures, and information. Specifically, place a seal on the trailer and record the seal number, and instruct the driver to count your product and sign accordingly on each bill of lading. If you are having frequent problems, take detailed pictures of your loads when they leave for additional proof that you shipped the order complete. Recording all this information will help you easily dispute chargebacks or file freight claims with carriers. If you have all your paperwork in order, then in most situations you will likely receive compensation from either the customer or carrier.

Tracking the Order

The final step in the process is tracking your order and ensuring delivery. Tracking orders helps to find delays, which can often be resolved quickly by calling the carrier. Most retailers are much happier when you call and inform them that the carrier will be a day late, but that you have resolved the issue, than if they have to call you two weeks after the product should have arrived asking where it is. Once the product has delivered, print and file a copy of the proof of delivery (POD). Sometimes large retailers will fine you for shipments that arrived many months ago. To prove that you fulfilled the order, you will often need a POD. However, many carriers delete and purge their records after 9 to 12 months, so without a printed copy, you may never be able to prove delivery. Although most PODs will just sit in a  file, the few that you do need will often justify the cost of tracking each shipment to your larger customers.

Final Thoughts

Shipping to big-box retailers can require a lot of effort and staff. This three-part series has given an overview of how to receive an order into your system, prepare and label the order, and ship it to the destination. Always keep in mind that the goal is to move your product efficiently through your customers’ supply chains and into consumers’ homes. Most of the customer requirements have this same goal in mind – even if they sometimes feel like hoops to jump through. You should consider adding to your standard fulfillment process anything that reduces opportunities for error, improves efficiency and accuracy, or helps your customer’s team correctly receive and process your product. By collaborating, sometimes even visiting, with your customer’s receiving team, you may come up with additional ideas on how to better move your product through the supply chain.

What experiences do you have with shipping to big-box retailers? What additional questions do you have? Although my team has shipped to several dozen large customers, we also are always looking for advice and opportunities to improve.

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71lbs.com Review – Stop Overpaying FedEx and UPS with 60 Seconds at 71lbs.com

I recently recovered $284 from a FedEx shipment without doing anything at all. Here’s how you too can save money on your FedEx and UPS bills.

71lbs Service Logo

Several weeks ago, I stumbled across a freight auditing service called 71lbs. Intrigued by the service’s promise, I did a little research to find out exactly what the company did. Basically, 71lbs combs through your FedEx and UPS accounts to find late small parcel shipments. When they find a late shipment, 71lbs requests a refund on your behalf. You get that shipment charge deducted on your next UPS or FedEx invoice, and 71lbs invoices you for half of the refund.

Sounds like a great service, but since they are a relatively new company, I wanted a few more details before signing up. My first concern was a service fee. I’m familiar with a few similar services, but they usually require a monthly fee whether they find anything or not. Other service’s monthly fees usually outweigh the potential gain if shipping volumes are low or everything delivers on time. To see whether this service was indeed free, I dug a little deeper into their business model.

I read 71lbs’s entire user agreement, but just to make sure, I also emailed the company. The CEO, Jose Li, responded personally to my questions. He guaranteed me that the only charge my company would ever receive was half of what we saved. Additionally, he told me that if I was not satisfied for any reason, I could simply send an email and they would cancel the service – there was no long-term contract. I went ahead and signed up my company’s FedEx account for 71lbs’s service.

Now I certainly cannot say that your business will experience the same quick results that mine did, but I received two emails within two weeks of signing up explaining successful refunds that 71lbs secured on my behalf. One was just a $17 domestic shipment, but the other was for a 26-piece shipment to Germany worth $569. Of course, half of those refunds will go toward 71lbs, but that’s still $293 in my company’s pocket that we would have paid to FedEx. I see it as a definite win for me, a win for my company, a win for 71lbs. It’s also a bit of motivation for FedEx to increase its service levels.

Now to be realistic, these two shipments were quick successes that represent far less than 1% of the shipments my company sends out. Certainly, I wouldn’t lower my freight budget forecast because of this service – at least not at first. Nevertheless, a quick and easy setup has the potential to save money you weren’t expecting.

71lbs is also working on a few other services that could help your business even more in the future. One is a service that audits your FedEx and UPS invoices to make sure the pricing matches contract pricing. I see huge potential savings for this, since I often have to dispute pricing errors. Additionally, I asked Mr. Li if 71lbs could notify me the morning a shipment is late so that I can contact the customers and manage damage control for a late shipment. He responded, “I know exactly what you are being faced with. I’ll add it to our product pipeline and will get back to you when we have it done.” I look forward to what other great services 71lbs creates.

Update Since Posting

My company is a 71lbs customer, but I did not receive any compensation for this review. I think 71lbs’s service is a great add-on for any business wanting to lower small parcel freight expenditure. A year after posting this review in Sept. 2012, 71lbs began advertising with Supply Chain Cowboy. As an update, my company saved over $2000 in the past year from their service.

Questions or comments? Please join the discussion below.