In this article, learn about:
Chargebacks, Claims, and OS&D
Different types of distributor deductions
How to dispute deductions
Processes rarely go perfectly within the supply chain. Even if the supplier has everything in order, things can still go wrong, and when things go wrong, suppliers get hit with fees. Damage to products, shortages, overages, and general compliance issues can result in a lot of money lost for suppliers.
Sometimes, distributors impose these fees on the supplier in error. For example, a distributor might charge the supplier for a short shipment when the supplier notified the distributor in advance of the shortage and agreed upon additional terms.
Knowing what the various distributor deductions mean, where they come from, and how to dispute them is integral to keeping operations running smoothly and revenue flowing.
Different Types of Distributor Deductions
Each distributor will apply deductions differently. However, most deductions fall under two categories: shipping and compliance. This article will discuss the most common deduction types for KeHE, Sysco, C&S Wholesale Grocers, and McLane, as well as how to dispute them.
Overages, Shortages, and Damages
Sysco refers to its primary deduction category as OS&D (Overages, Shortages, and Damages). As the name suggests, the main types of deductions suppliers receive from Sysco involve shipments that are over, short, or damaged.
Sysco applies deductions based on the following categories:
Overages
Shortages
Damages
Mis-shipped products
Products shipped with insufficient shelf life
The actual value of what Sysco deducts from suppliers for each infraction is not listed in its Supplier Compliance Manual, so it is imperative that suppliers maintain close communication with their contacts at Sysco and understand the process of disputing these deductions as needed.
In addition to its own version of OS&D, McLane deducts the following amounts based on infractions of the following policies:
On-Time: $500 per PO in violation
No-Cancellation: $500 per occurrence
No-Show: $500 per occurrence
In-Full (Inbound Fill Rate): 5% of the value of the product ordered that does not meet fill-rate policy
Unsaleables: The supplier will incur a 25%- 30% fee, plus cost, depending on how they choose to have McLane handle the unsaleable products (dispose of, donate, etc.).
For consecutive infractions, McLane will increase the various deductions and penalties.
Related Reading: On-Time and No Show Policies with McLane Company Inc.
Compliance Deductions
The primary type of deductions suppliers receive from KeHE are compliance deductions:
Fees associated with unsaleables, which fall into the following categories:
Products that are underperforming or discontinued
Products that no longer conform to standards
Spoiled products
KeHE manages financial transactions between itself, suppliers, and retailers. This means that in addition to deducting retailer chargebacks from a supplier invoice, KeHE will also deduct its own processing fees.
KeHE deducts a processing fee of $0.29 per unit for underperforming, discontinued, or spoiled products that go through its DCs. These fees are in addition to retailer chargebacks for noncompliant shipments.
In addition to any possible retailer deductions and processing fees, shipments below 98% filled will incur a 3% fee based on KeHE’s Inbound Fill Rate expectations. For On-Time Performance infractions, suppliers will receive fines quarterly on all shipments below 92% complete.
C&S Wholesaler Grocers also deducts primarily under the compliance category. They separate compliance infractions into five primary categories:
Incorrect or improper paperwork
Incorrect, improper, damaged, or bad palletizing
Issues with products
Issues with carriers:
Carrier no-show
Arriving more than 30 minutes late
No appointment scheduled
C&S structures the associated chargebacks in the following way:
Palletizing infractions will incur a chargeback of $30 per pallet
Any inbound damage will incur a chargeback of $20 per PO
Issues with carriers will incur a chargeback of $200
If no appointment is scheduled, then the supplier will incur a chargeback of $300
Disputing Deductions
Documentation will always be necessary when it comes to disputing deductions because the dispute process involves comparing different documents against the actual shipment and delivery.
Typically, a successful dispute will include some or all of the following documents:
Copy of Invoice
Disputing is important because, while suppliers can make mistakes, so can distributors and retailers. Sometimes a distributor will deduct incorrectly, in which case the supplier should always dispute.
Disputing Deductions with Sysco
For shipments categorized by Sysco as OS&D, Sysco will notify the supplier about the overage, shortage, or damage and allow the supplier a minimum of 24 hours and up to 14 days to respond. The supplier can then give Sysco permission to dispose of or donate the product, or the supplier can pick the product up within 2 weeks.
The supplier must respond to overages or shortages within 14 days and damages within 24 hours. This includes suppliers confirming what they want Sysco to do with damaged or short products and scenarios in which suppliers choose to contest the claim.
Disputing Deductions with McLane
McLane requires suppliers to submit disputes or any other inquiries about invoicing within 90 days of the payment due date. These disputes must be emailed to CAP.Research@McLaneCo.com and must include the following information:
Division that received the product in question
Deduction reference number
Deduction amount
Check number
Documentation, such as POs and BOLs, does not need to be included in the email, as these documents are automatically listed under the supplier’s contact information in McLane’s files. If McLane requires replacements for any documents previously on file, the supplier will be charged $50 per document.
Disputing Deductions with KeHE
To dispute compliance deductions with KeHE, the supplier will need to make sure they understand how to navigate the K-Solve portion of KeHE’s supplier portal.
Suppliers can access K-Solve by selecting the drop-down menu under Sales Orders, selecting Credits, and finally clicking on K-Solve.
KeHE handles all financial transactions in K-Solve. Accessing K-Solve is the first step for suppliers as they review deductions and determine what is necessary to dispute.
Once the supplier feels that they understand the charges, they should email vendorperfromance@kehe.com to dispute the charge(s) in question. This email should include:
All relevant EDI documents, time-stamped appropriately
Signed BOL
All other necessary and helpful information that would support the supplier’s claim
Related Reading: KeHE Deductions and Invoice Prefixes
Disputing Deductions with C&S Wholesale Grocers
Along with the usual necessary documentation, suppliers must also provide the following documentation to dispute deductions with C&S Wholesale Grocers:
A copy of the signed exit pass
Packing slips and case labels
Temperature log
Appointment confirmation
Suppliers must complete the Vendor Relations Claim Form and email it to the Vendor Relations Department. The email must be sent within 30 days of the original deduction and include the PO number, delivery date, and reason for the dispute.
Disputing Deductions with UNFI
UNFI issues deductions and handles disputes separately for natural and conventional suppliers.
Pro tip: SupplierWiki simplifies UNFI’s dispute process through up-to-date and authoritative articles you can save to your own online library!
Best Practices for Disputing Deductions
Disputing deductions promptly is important for many reasons, primarily to avoid losing money. Deductions can build up over time, and many go undisputed, costing suppliers lots of money in the long run.
It is imperative to have a solid system for disputing deductions because if a supplier is getting deductions from their distributors, they are likely also being hit with deductions from retailers.
Ensuring that your entire supply chain is airtight from start to finish is only half the battle. Deductions will still happen, so ensuring you have a solid system for disputing is essential.
Protect your profits with SupplyPike’s deduction management platform!
