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Even if you’re a new Walmart supplier, you understand the costs resulting from non-compliance to Walmart’s guidelines. From filling out that first purchase order to the truck arriving at the distribution center, Walmart monitors each piece of the supply chain process. The company issues chargebacks and deductions to encourage suppliers to improve their supply chains.
In this article, we’ll look at the differences between Walmart’s chargebacks and deductions. We’ll also cover questions surrounding the two, how to dispute, and offer solutions to eliminating these penalties by improving processes.
What is a Walmart Deduction?
A deduction is the dollar amount Walmart subtracts from a supplier’s invoice payment. After a supplier submits an invoice, Walmart may deduct money from the invoice if the company finds errors with the delivery or transaction.
Some of the more common reasons for Walmart deductions include:
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- Damaged product – items in the shipment arrive at a Walmart store or distribution center defective or broken
- Shortages – Walmart orders a specific amount of product, but fewer items are delivered
- Pricing mistakes – item prices on the invoice do not match the purchase order (PO)
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What is a Walmart Chargeback?
A chargeback is the dollar amount Walmart issues when suppliers fail to meet Walmart’s compliance guidelines or do not meet the terms of a contract.
Most of the chargebacks issued by Walmart fall under two compliance programs:
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- OTIF
Walmart’s OTIF initiative stands for On Time In Full. As its name suggests, Walmart monitors a supplier’s compliance in delivery expectations with these two requirements:
On Time – A supplier’s delivery must arrive at the Walmart distribution center or store within an assigned time period. Suppliers are penalized for deliveries that arrive outside the assigned window of time, whether early or late.
In Full – A supplier’s delivery must contain all items specified on the purchase order (PO). Suppliers are penalized if the order contains too few or too many of the items ordered.
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- SQEP
Walmart’s SQEP initiative stands for Supplier Quality Excellence Program. SQEP monitors a supplier’s compliance with supply chain safety, accuracy, and communication.
Walmart will issue chargebacks to suppliers under SQEP if there are problems with:
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- Inaccurate purchase orders
- Advance Ship Notice (ASN) issues
- Incorrect labels
- Barcode errors
- Non-compliant packaging
- Unstable loads
- Poor pallet quality and security issues
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There are other non-compliance items related to OTIF/SQEP that can be issued as a chargeback, but most fall under these categories.
How can I prevent future chargebacks and deductions?
If your company is paying the same Walmart penalties over and over, it’s important to take action soon. Walmart isn’t interested in profiting off of chargebacks and deductions. In fact, repeated poor supply chain performance can result in losing shelf space or being removed from the modular completely.
To start eliminating the penalties and improving your supply chain, put these best practices in place:
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- Send questions specific to your business to the 5G team (click for a FREE consultation)
- Train your team on compliance requirements
- Use Walmart’s approved carriers
- Ensure all labels and ASNs are accurate and timely
- Double-check quantities before shipment
- Review your invoices against POs and contracts
- Follow routing guides precisely
- Monitor the dashboards and scorecards regularly
FAQs on Walmart Chargebacks and Deductions
Q: What is the difference between a chargeback vs. a deduction?
A: A chargeback is a financial penalty based on compliance-related issues (i.e., ASN error, late delivery, etc.).
A deduction is when Walmart does not pay the full amount of a supplier’s invoice due to errors with the order (i.e., too much or too little product, errors in pricing, defective product, etc.).
Though chargebacks and deductions seem similar, they are handled and disputed differently in Walmart systems.
Q: Can I dispute a Walmart chargeback?
A: Yes. Simply log into Retail Link and go to the Accounts Payable Disputes Portal. You’ll see the chargeback here and be able to submit a dispute. In order to dispute a chargeback, be ready to submit the following documents:
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- Routing confirmations
- Proof of Delivery (POD)
- ASN screenshots
- Bill of Lading (BOL)
- Any email communication with Walmart contacts
You must submit a chargeback dispute within 15 – 30 days of the chargeback posting date (times may vary depending on the type of chargeback).
Q: Can I dispute a Walmart deduction?
A: Yes. Simply log into Retail Link and go to the Supplier Dispute Portal. You’ll see the deduction here and be able to submit a dispute. In order to dispute a deduction, be ready to submit the following documents:
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- Photos of packaging or product
- Copies of invoices
- Proof of Delivery (POD)
- ASN screenshots
- Bill of Lading (BOL)
- Any email communication with Walmart contacts
You must submit a deductions dispute within two years of the invoice date. It is recommended to submit the dispute as soon as possible.
Q: How long does it take Walmart to resolve disputes?
A: For both chargebacks and deductions, Walmart will typically resolve the dispute within 30 to 45 days. However, complex issues may take longer. Suppliers can check in on the status of their disputes in the portal.
Q: Is there a difference in chargebacks for DSV and warehouse suppliers?
A: Yes. Drop Ship Vendor (DSV) suppliers have different requirements, particularly as it pertains to shipping timelines and carrier use. Warehouse suppliers are held to stricter routing and ASN rules. Pay close attention to any updates in the compliance guide for your fulfillment method.
Q: What are the most common Walmart chargebacks and deductions?
A: The most common chargebacks to Walmart suppliers are:
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- Code 22: Routing guide violations
- Code 25: Late/early delivery
- Code 27: ASN non-compliance
- Code 83: Packaging or labeling errors
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The most common deductions to Walmart suppliers are:
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- Code 22: Routing/non-compliance
- Code 25: Quantity shortage
- Code 30: Pricing error
- Code 70: Duplicate billing
- Code 94: Damaged or defective product
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Q: If we shipped everything in the order, why would Walmart deduct for a shortage?
A: Even if everything is complete in the Walmart delivery, a shortage deduction can be applied for:
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- Mislabeled or damaged cases
- Merchandise lost in transit
- Receiving errors at the warehouse or store
- Incorrect packing lists or ASNs
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In order to dispute due to one of the above reasons, be prepared to submit photos, proof of delivery, or the bill of lading.
Q: If we fix the issue, will the chargeback or deduction be reversed?
A: No. Even if a supplier corrects the issue, a chargeback or deduction must be formally disputed through the portal to receive reimbursement.
Learn More From 5G!
The finance team at 5G brings a wealth of Walmart knowledge to your accounting process. We understand how time-consuming researching each deduction and chargeback can be, which is why we’re happy to take it on for you to add those profits back to your bottom line.
A consultation is absolutely FREE! Click here to set up a call with our team to learn more.