In this article, learn about:
Walgreens’ Cost Recovery Program
What constitutes a compliance fine at Walgreens
How these fines are calculated
How to dispute compliance fines at Walgreens
Compliance at Walgreens–often referred to as their Cost Recovery Program–started in 2018. Like similar programs at other major retailers, Walgreens designed this system to monitor and encourage better supplier performance.
The Cost Recovery program incentivizes compliance through weekly charges issued when suppliers fail to meet required standards. Compared to bigger retailers like Walmart, Walgreens’ compliance program is relatively simple, consisting mostly of industry-wide standards related to on time and in full shipments.
Walgreens outlines their compliance goals and program in their Shipping and Routing Guide, which can be found at SupplierNet > General Information > Vendor Compliance > Shipping and Routing Guide.
Related Reading: How to Dispute Deductions at Walgreens
Walgreens’ Objectives for the Cost Recovery Program
In the Shipping and Routing Guide, Walgreens highlights several of their compliance program goals:
To improve the on-time performance of suppliers and thereby “reduce Supplier order cycle time variability”
To improve supplier shipment quality and the accuracy of Advanced Ship Notices (ASNs)
To improve order communication on the supplier and retailer fronts, making revisions/resets smoother and more accurate
To educate suppliers on areas of strength and areas for improvement
Related Reading: EDI 856: Advance Ship Notice/Manifest
Walgreens Compliance Data on SupplierNet
From SupplierNet, go to Metrics/Reports > Cost Recovery. There are a variety of filters, application options, and groupings that can be used to generate performance-related insights.
In May of 2018, Walgreens moved away from email reporting to this interface, keeping it all in one place.
How Walgreens Compliance Fines are Calculated
A Walgreens chargeback dollar amount is calculated by taking the difference between the revised ordered units and the on time units.
Compliance Fine = (95% of the Revised Ordered Units - Vendor On Time Units)*Unit Cost*.05
Vendor On Time Units: an adjusted on time units calculation that accounts for the following scenarios: Insufficient Lead Time, DC Appointment Pushout, Cancelled Line/PO, Revised WSTAs (Will Ship to Date).
Revised Ordered Units: a mutually agreed upon adjusted order quantity or simply the original total ordered units number. In case of a Walgreens error, they will revise this number using Revised Ordered Units instead of Original Ordered Units.
The Vendor On Time Rate is the quotient of Vendor On Time Units / Revised Order Units. This is a very important supplier performance metric, and it is a good general indicator of compliance performance at Walgreens.
How to Dispute Compliance Fines at Walgreens
Walgreens suppliers have 4 weeks from the date of the email notification to dispute a compliance fine. After that, the dispute window is closed. Deductions are received via email at SupplyChain.Compliance@Walgreens.com.
From there, the disputes are reviewed by a Walgreens Cost Recovery Analyst or Walgreens DC Subject Matter Expert.
There are three main steps to follow in disputing a cost recovery chargeback at Walgreens:
1. Find Backup Information
Go to SupplierNet > Metrics/Reports > OTFR to find backup information (see the list in Step 2 for more details on this backup information) on the individual claim.
2. Fill Out a Vendor Dispute Form
In SupplierNet, download a Vendor Dispute Form. These can be found at SupplierNet > General Information > Forms > Vendor Dispute Form.
For this you will need the following information:
Vendor Number
Contact Name(s)
Email(s)
Case IDs
PO#s (if applicable)
Reason for Dispute
For each reason, supporting evidence (i.e. photos, documents, shipping documents, emails)
Supporting documents should be attached to new tabs within the Excel file.
3. Email the Vendor Dispute Form to SupplyChain.Compliance@Walgreens.com
4. Dispute Statuses
Once these disputes are sent, they will have statuses that live in SupplierNet. These statuses follow a fairly traditional structure for the industry:
OPEN: The chargeback violation is still within the 4-week dispute period, but has not yet been disputed.
UNDER DISPUTE: The chargeback violation has been disputed and is under review by the Walgreens team.
CLOSED: The chargeback violation is closed and will be billed in the next billing cycle. A chargeback is considered closed if no dispute is filed in 4 weeks or a dispute is denied by the review team.
REVERSED: The chargeback violation has been reversed and will not be billed to the Supplier.
Walgreens Compliance Chargebacks Validity
Walgreens communicates in their Cost Recovery Program FAQ documents (see SupplierNet > General Information > Vendor Compliance) that forecasts are not guaranteed order quantities. Instead, they represent the best estimate of order quatnitites established by vendors and demand planners on the Walgreens side.
There is not a percentage increase threshold at which a cost recovery chargeback for failing to meet WSTA standards can be disputed and won. In other words, if actual orders significantly exceed the forecast, vendors will still receive cost recovery chargebacks for failing to meet demand.
Aside from these two examples, it is important to note that there are some instances in which Walgreens chargebacks occur when they should not.
If a Walgreens DC pushes out an appointment to a date after the WSTA, the vendor is not subject to a Cost Recovery chargeback. Those are considered invalid chargebacks, and they can be disputed.
Similarly, if the vendor/carrier is not given enough transit time to deliver on the WSTA due to a Walgreens late shipment tendering, the vendor should not receive a cost recovery chargeback.
Notes for Collect Suppliers
Suppliers must create the shipment in FOM 12 calendar days prior to the PO’s WSTA or 1 day after the PO issue date.
Early available date must be 10 days prior to the WSTA date.
Late available date must be 1 day prior to the WSTA date.
Notes for Prepaid Suppliers
PODs that are marked “said to contain” cannot be used to dispute fill rate cost recovery chargebacks. These PODs are subject to further evaluation at DC receiving.
Also, using LTL carriers does not exempt suppliers from any compliance rules. The supplier must hold LTL carriers accountable for holding goods for consolidation and/or being consistently late.
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