In the last several years, Amazon has become a giant problem for its suppliers because of accounts receivable deduction chargebacks. If you are an Amazon supplier, chances are you are leaking more and more profits from increasing charges from Amazon…charges for non-compliance with their rules for order, shipping, delivery, and fulfillment.
Navigating Amazon’s Supply Network
Amazon has over 110 “Fulfillment Centers” with hundreds of millions of square feet of warehousing. With that kind of supply chain, it’s easy to comprehend why they must insist on consistent supplier processes, products, inventory, and logistics.
If you hope to succeed with your Amazon business, you must understand why and how these deductions and chargebacks occur. Then you can make sure you have the staff, systems, and optimal process in place to:
1. Comply with the rules to begin with.
2. Quickly react to and correct your errors so they do not become systemic.
3. Dispute Amazon chargeback errors before the short time bar to get your money back.
Amazon Supplier Performance Ratings
Like most large retailers, Amazon rates your fulfillment performance over time and adjusts its chargeback amounts accordingly. This can stack against you very quickly if you perform poorly.
While Amazon has complex rules and chargeback procedures, they also provide helpful online tools, including:
- Vendor Central is the portal for “1st Party” suppliers selling directly to Amazon. These are usually identified on the site as “sold and shipped by Amazon.”
- Seller Central is the portal for “3rd Party” sellers selling through an Amazon listing and delivering directly to Amazon customers.
- Carrier Central is the portal used for delivery appointments for Fulfillment Centers.
This article is about using Vendor Central to assist in managing the Amazon relationship, and specifically related to accounts receivable deductions.
Amazon Vendor Central Best Practices
When using the Amazon Vendor Central portal, there are specific practices that can help optimize your experience as a vendor. Here are some tailored best practices for Amazon Vendor Central:
Maintain Accurate Product Information:
Ensure that your product listings on Amazon Vendor Central are accurate and up-to-date. This includes product details, pricing, and any other relevant information.
Monitor Purchase Orders:
Regularly check and manage your purchase orders. Stay on top of order fulfillment, shipping timelines, and changes in order quantities to meet Amazon’s requirements.
Adhere to Amazon’s Vendor Policies:
Familiarize yourself with and strictly adhere to Amazon’s vendor policies. This includes compliance with product quality standards, packaging guidelines, and any specific requirements Amazon outlines.
Utilize Amazon’s Marketing and Advertising Tools:
Take advantage of Amazon’s marketing and advertising tools available in Vendor Central. This includes running promotions, optimizing product listings, and using sponsored products to increase visibility.
Optimize Inventory Management:
Efficiently manage your inventory levels to prevent stockouts or overstock situations. Utilize Amazon’s tools for inventory forecasting and replenishment.
Respond Promptly to Amazon’s Inquiries:
Be proactive in responding to inquiries from Amazon regarding product information, compliance, or any other matters. Timely communication is crucial for a smooth partnership.
Participate in Amazon Marketing Programs:
Explore and participate in marketing programs tailored for vendors, such as A+ Content and Enhanced Brand Content, to enhance the visual appeal and information on your product pages.
Stay Informed About Vendor Central Updates:
Regularly check for updates and changes to Amazon Vendor Central features and policies. Staying informed will help you adapt to any modifications and take advantage of new opportunities.
Optimize Pricing and Promotions:
Continuously review and optimize your pricing strategy. Consider participating in promotions or discounts to drive sales and improve your product’s visibility.
Utilize Retail Analytics:
Leverage the retail analytics tools provided by Amazon Vendor Central to gain insights into sales performance, customer behavior, and other relevant metrics. Use this data to make informed business decisions.
Ensure Compliance with Vendor Scorecard Metrics:
Pay attention to Amazon’s vendor scorecard metrics, which measure performance in areas like on-time delivery and order defect rate. Strive to maintain high scores to strengthen your relationship with Amazon.
Remember to consult Amazon’s official documentation and support resources for the most up-to-date information and guidance specific to Amazon Vendor Central. Keeping proactive and staying informed will contribute to a successful partnership with Amazon as a vendor.
Managing Amazon Chargebacks through the Vendor Central portal
You need to become an expert at using the Vendor Central portal. You must also stay on top of Purchase Order status, compliance issues, and chargebacks. Amazon may also send chargeback notices by email, with details about the category, date, and chargeback.
The Vendor Central portal will also have the details and tools to dispute the chargeback and research if you believe Amazon is wrong. The portal also shows the status of your disputes, so click on the Chargeback or Dispute to start your research.
Sometimes, you can complete your research right in the portal. For example, if you have an Advance System Notification (ASN) violation chargeback, reviewing the shipments and their ASNs might give you the necessary information. If you provide ASNs by EDI, you can use a snapshot of the actual EFI file provided by your EDFI.
For many types of chargebacks like labels and dunnage, the proof you need will be a photograph of the open and closed shipping cartons. This should be built right into your warehousing and shipping process.
You should check the Vendor Central portal frequently to monitor the status of your disputes and check for new problems. You have only thirty days to dispute a chargeback, though some variations may be based on the supplier type.
If you are disputing a chargeback, give as complete a story as possible, as Amazon will not revisit the incident more than two times.
If your dispute is accepted due to the proof you provided, Amazon will credit you for that amount. If denied, it’s your loss.
Amazon chargeback categories
Amazon chargebacks fall into the following general categories, and they will assign you a performance rating for each violation category. Ratings go from Good down to Very Poor. Report these ratings throughout your organization to get all departments to focus on improvement.
Purchase Order (PO) Chargebacks
Purchase Order related chargebacks add up to “real money” very fast, so this area demands close attention and prompt action. Make sure to handle PO confirmations within the time frames allowed.
Advance Shipment Notification (ASN) Chargebacks
Depending on your compliance history, the chargeback can vary from 1% of the product’s value to as high as 6%. If you violate the product expiration rules, you can be charged 100% of the product cost plus a handling charge.
Typical ASN Chargeback Situations
- After the trucker picks up the shipment, the vendors must submit the ASN, so the receiver has advance knowledge of the incoming shipment.
- Amazon must know what is being received and when to plan and process products through their warehouses. ASNs advise them of the shipment contents and establish carrier tracking. They will check the ASNs for errors and alert you via Vendor Central and email.
- If the ASN is not received before the shipment arrives, is incomplete, or is incorrect, you can be charged up to 6% of the product cost and even 100% plus handling if your product expirations (if applicable) are within 90 days.
How to Dispute ASN Chargebacks
By going to Vendor Central, you can determine if ASNs have been received and posted. Submit a screenshot from Vendor Central showing the proper submission or, if transmitted by EDI, a screenshot of the text copy of the transmission to prove it was submitted properly.
Receive Process Chargebacks
Amazon Fulfillment Centers check all incoming shipments for strict compliance with their policies for packaging, barcode, labeling, etc.
This type of chargeback also covers a wide range of issues that are encountered in receiving departments and include missing or unscannable barcodes, missing carton labels or information, no barcode on the products inside the carton, wrong item shipped, and product expiration dates, etc.
Preparation Related Chargebacks
Amazon requires that packaging and product preparation comply with its regulations. They can charge compliance penalties from 70 cents to $2.00 per unit if they aren’t. This includes bubble wrapping, taping, boxing, bagging, and suffocation warnings.
To dispute preparation-related charges, be sure your processes include photographs of open and sealed cartons so that the product is clearly visible. If needed, include measurements from your product specs. We also recommend completing a root cause analysis to identify the critical items that drive the largest dollar and volume of chargebacks.
Transportation Chargebacks
Amazon’s delivery rules are strict, as non-compliance slows down the high-volume fulfillment centers’ receiving. Vendors make frequent transportation-related mistakes, resulting in chargebacks for appointment mistakes, paperwork, or carrier selection. You need to be careful that you and your carrier are aligned with respect to delivery requirements and that they are correctly reflected in Carrier Central. Watch out for duplicate entries, which are also subject to chargebacks.
You can dispute these charges if you provide proof of delivery showing delivery of the product or documents on time and the inbound shipment appointment (ISA) number.
Types of Transportation-Related Chargebacks
- If you are not ready to load when the Amazon carrier shows up or miss the scheduled pickup date, they will penalize you for $200 for LTL and $500 for TL shipments.
- If, instead, you ship prepaid with your own carrier (vs. Amazon’s), and they do not deliver on schedule, it will cost you from $90 for LTL to $250 for TL.
- Import Vendor. For On-Time Window violations or Late Booking, it could cost you 3% of the cost of the product. For late delivery of Import Documents, $150 for the first three days, then an additional $50 per day afterward.
- Non-Delivery Cancellation: If the order is not delivered within the delivery window and was not back ordered earlier, Amazon will automatically cancel the order and charge back the supplier for delivery compliance.
- No Routing Request: Shippers should create advance routing requests for “collect” shipments where Amazon pays the freight. If they fail to do so, or if the date is outside the shipping window, it will lead to a chargeback.
- Orders not delivered within the window will be canceled by Amazon, resulting in another sizable chargeback for non-compliance.
Best practices to reduce chargeback profit leakage
Ensure you understand what specific guidelines apply to your type of product and market, as rules may vary. However, the best practices remain the same.
- Appoint an Amazon specialist to be the focal point for compliance, order, and shipping regulations.
- Ask for a specialist expert from Amazon as part of their new vendor support program. Use this expert to drive periodic reviews.
- Create an internal Amazon “book,” including references and basic instructions, and distribute it to all stakeholders.
- Monitor Amazon’s guidelines for changes.
- Become an expert in using Vendor Central. Vendor Central has training resources within your account, so use them.
- Employ an outside service to manage EDI transmissions.
- Understand what the rules are.
- Dispute chargebacks via Vendor Central within 30 days with a complete narrative and documentation the first time since they will only review a chargeback twice. Follow Up in 15 days. Contact the buyer directly if you need to.
- Have an automated process in the warehouse to photograph the boxes, including the inside, before sealing them with tape.
- When disputing a chargeback, provide proof of invalidity – photographs, screenshots, etc.
- Take screenshots or text files for ASN violations and submit them from Vendor Central.
Carixa automation manages chargebacks.
Lastly, employ Carixa deduction management software to automate and streamline chargeback management and, using robotic process automation and AI, instantly gather and reconcile chargebacks with accounts receivable and improve the successful disputing of chargebacks, thus minimizing the risk of claim denial. These automation routines can do follow-ups, gather documentation from internal and external portals and upload to Vendor Central at the designated trigger or time windows.
Good luck in this journey to better profits, and if you need guidance, please contact our experts at Carixa.
