What are chargebacks and how can I avoid them?

A chargeback is a fee that a customer (usually a retailer) places on a supplier for errors in not following the retailer’s business requirements. The chargeback was introduced to offset the extra cost the retailer incurs as a result of the supplier’s non-compliance.

 
Chargeback schemes began in the 1980’s as a way for retailers to recoup costs incurred due to supply chain errors. At the time, many suppliers objected to them as unfair profit centers for large, powerful retailers. Although purely punitive fines are not legal, cost recovery is—so chargebacks quickly became adopted by most retailers. It’s easy to understand how mislabeled, mis-packed, late, and wrong-quantity shipments add up to real labor costs and out of stock difficulties for retailers. Distasteful as they may be for suppliers, chargebacks make business sense for retailers in trying to recover costs and are here to stay for the foreseeable future.
 
What can lead to a chargeback being applied to my organization?

·         Early, late, or non-authorized partial delivery of goods or services.

·         Missing, incorrect, non-readable or wrongly placed shipping labels.

·         Substituting products without prior agreement.

·         Ship to incorrect location.

·         Product packaged wrongly according to retailers agreement.

·         Damages that did not occur during transit.

·         EDI 810 invoice not matching original purchase order and/or with wrong terms and details

·         EDI 856 ASN (Advance Ship Notice) does not arrive on time or does not match items in carton.

 
How can my organization eliminate chargebacks or at least reduce greatly the potential of receiving them from my customers?

·         Comply fully with customers EDI requirements.

·         Make sure labels are correct and can be read or scanned easily.

·         Do not substitute products without prior approval.

·         Ship to the correct location.

·         Pack items correctly according to retailer’s requirements.

·         Try to make sure goods arrive in perfect order.

·         Deliver the correct products, quantities and cartons

·         Send accurate and complete EDI 810 invoices.

·         Make sure EDI 856 ASN (Advance Ship Notice) arrives on time and details are correct.

 
To comply fully with your customers EDI requirements and business rules, I would recommend that you enlist the help of a good 3^rd party EDI provider. 3^RD Party EDI providers immediately know retailers requirements, what is expected and how they must be delivered. If you would like to know more about outsourcing your EDI needs to B2BGateway and how we can help you eliminate or greatly reduce potential chargebacks please call +1 (401) 491 9595 or email Sales@B2BGateway.Net

The differences between EDI X12 and EDIFACT

 

Question: Hi Roger, we recently got a contract to supply an organization in Germany which will require EDI. This would normally be no problem to us as we have been doing EDI with our North American trading partners for over four years; however, our new German contract requires us to use EDIFACT rather than X12 as their preferred EDI standard. Could you highlight the main differences between X12 and EDIFACT and suggest what I should do?

 

Answer:  In 1979 the American National Standards Institute (ANSI) chartered the Accredited Standards Committee (ASC) X12 to develop uniform standards for inter-industry electronic exchange of business transactions – now known commonly as Electronic Data Interchange (EDI). These transaction sets, abbreviated to X12, are the predominant EDI standards used by organizations in North America today.

In 1986, the United Nations Economic Commission for Europe (UN/ECE) approved the acronym "UN/EDIFACT," which translates to United Nations Electronic Data Interchange for Administration, Commerce and Transport. UN/EDIFACT is an international EDI standard designed to meet the needs of both government and private industry. EDIFACT is the most popular worldwide EDI data standard outside of North America.

Here is a brief list of some of the different names given to documents in the X12 and EDIFACT transactions sets. You will notice that X12 assigns numeric values to documents whereas EDIFACT lists names or abbreviations.

TRANSACTION SET/DOCUMENT	X12 SET	EDIFACT
PRODUCT/PRICING TRANSACTIONS
Price Sales Catalog	832	PRICAT
Price Authorization Acknowledgement/Status	845	ATHSTS
Specification/Technical Information	841	PRDSPE
Request For Quotation	840	REQOTE
ORDERING TRANSACTIONS
Purchase Order	850	ORDERS
Purchase Order Acknowledgement	855	ORDRSP
Purchase Order Change	860	ORDCHG
Purchase Order Change Acknowledgement	865	ORDRSP
MATERIALS MANAGEMENT TRANSACTIONS
Planning Schedule/Material Release	830	DELFOR
Shipping Schedule	862	DELJIT
Production Sequence	866	--
Ship Notice/manifest (ASN)	856	DESADV
SHIPPING/RECEIVING TRANSACTIONS
Shipment Information (Bill of Lading)	858	IFTMCS
Receiving Advice	861	RECADV
Non-conformance Information-Disposition Transaction, Cause/Correction	842	NONCON
INVENTORY MANAGEMENT TRANSACTIONS
Inventory Inquiry/Advice	846	INVRPT
Product Transfer and Resale Report	867	SLSRPT
FINANCIAL TRANSACTIONS
Invoice	810	INVOIC
Freight Invoice	859	IFTMCS
Payment order/Remittance Advice (EFT)	820	REMADV

There are many differences between an X12 and an EDIFACT document and I would recommend that if you do not have the capabilities to do EDIFACT in house that you outsource to a strong global EDI solution provider who can handle both data formats. At B2BGateway, we have offices located in North America, Europe and Pacific/Asia regions and can handle all internationally recognized EDI data formats including not only X12 and EDIFACT but many, many more (Tradacoms in the UK for example).

For further information on B2Bgateway’s international data standards capabilities please visit www.B2BGateway.Net or call (401) 491 9595. 

Roger Leyden is Director of Global Business Development at B2BGateway.

 

Why outsourcing EDI may make sense for your organization.

Although EDI (Electronic Data Interchange) has been around since the late 1970’s, it started gaining increased traction in the early to mid 1990’s. The increased popularity in the 1990’s was mainly due to a heavy push from large organizations with large transactional volumes to reduce costs and increase efficiencies through automation.

Unfortunately, the very thought of EDI, can be daunting for an organization that has not used EDI before or has limited IT resources. The initial reaction is that EDI has been ‘forced’ on their organization by a large retailer or trading partner. Terms such as ANSI X12, UN/EDIFACT, Tradacoms, VAN, AS2, seem like Double Dutch and better still, the traditional English language has been replaced by numeric values, e.g. a Purchase Order is now called an 850, an Invoice becomes an 810, a Ship Notice becomes an 856, and so on. After a short period in production, the new EDI user will suddenly understand the benefits of EDI for their organization – reduced errors, shorter order to payment cash cycles, and reduced costs.

As mentioned above, there are many standards and communication protocols associated with EDI – in North America ANSI X12 is the predominant EDI standard, whereas in Europe and the Far East a far more popular standard is UN/EDIFACT. Some trading partners prefer to communicate through a VAN (Value Added Network), whereas others will prefer AS2 or FTP. Add to this mix a myriad of 318+ recognized EDI documents, customized mapping and reporting functions and it is clear to see why EDI becomes a daunting task for any organization.

It is at this stage that outsourcing your EDI requirements should make sense to your organization. Outsourced EDI solution providers come in various shapes and sizes. Some providers will require you to invest in your own mapping solution and they then develop the maps. Then there are others, like B2BGateway.Net, that provide the entire service and are also the first point of contact between your organization and your trading partners to resolve any EDI issues that may arise.

For further information on B2BGateway.Net’s fully outsourced EDI solutions please visit www.B2BGateway.Net or email Sales@B2BGateway.Net

Why Should Your Organization Consider a Supplier Portal?

Does your organization have hundreds if not thousands of small, low volume or seasonal suppliers still sending your organization paper invoices for their goods and services?

We understand the pressure and strain that this manual data entry must put on your resources and accounts receivable department. To help your organization overcome this burden, B2BGateway has developed a web based EDI Supplier Portal that will allow your organization:

·    Eliminate paper and allow all suppliers (no matter what size or volume) to become EDI compliant

·    To export Purchase Orders (EDI 850 documents) to your suppliers and import Invoices (EDI 810 documents) from your suppliers through our web based Supplier Portal direct to your Accounts/ERP software solution. Full seamless cloud based, integration to your back end accounts

·    Reduce costs and reduce errors associated with manual data entry.

·    Add or delete suppliers as the need arises.

·    Add Advanced Shipping Notices (856) & UCC-128 Barcode Labels should your organization require same.

·    Be compliant with all global EDI standards including ANSI X12, UN/EDIFACT, EANCOM, Tradacoms, Odette, XML etc.

The Supplier Portal will be branded using your organizations logo’s and images and can also be customized for extra documents should your organization require more than just Purchase Orders and Invoices.

 What are the benefits for your suppliers?

·    They do not need to invest in additional hardware or software systems – all they require is a computer and an internet connection

·    Our web based EDI solutions are very cost effective for suppliers – often working out much cheaper than the combined total costs of print, stationery and postage

·    There is an on screen record of all transactions

·    It speeds up the suppliers Order to Payment cash cycle

For further information and a free demonstration of our web based EDI Supplier Portal please call +1 (401) 491 9595 or email Sales@B2BGateway.Net