All major retailers have a deductions process, each with its own rules and quirks unique to the function of their business.
Obstacles to Disputing
Knowing When to Dispute
Have the potential deduction detected emails created unneeded stress? Amazon’s smart match technology and the automatic email notifications can feel like the boy who cried wolf. Wait until after the invoice’s due date to review for deductions.
One Strike, You’re Out
Retailers like Walmart give suppliers roughly 3 strikes per dispute in their applications. Conversely, Amazon only allows one dispute attempt. After that, suppliers can only dispute through a manual process with Amazon’s analyst team. To reopen a dispute, go to Payments > Dispute Management in Vendor Central. Input the dispute ID you wish to re-open. Note that some disputes, like Purchase Price Variance (PPV), cannot be reopened.
Provisions
Provisions, also known as “holdbacks,” are holds placed on supplier accounts by Amazon to ensure the supplier pays the amounts owed.
Currently, there are three types of holdbacks, including provisions for missing actuals, receivables, and aged receivables.
- Provisions for Missing Actuals are due to issues with payments of Commercial Operation (CoOp) Agreements.
- Provisions for Receivables are only used when the supplier does not have enough potential receivables to cover amounts due for marketing services and returns.
- Provisions for Aged Receivables are the least common of the provision types. This holdback occurs when an invoice for a CoOp return has aged.
These may seem scary, but they can be easily avoided and reversed. Avoiding provisions comes down to ensuring returns, marketing, and rebates are paid for. Amazon states that “...provisions are recalculated, adopted or reversed on a daily basis. As they are not ‘real’ deductions, there are no invoice copies.”
Returns
Why Do Returns Occur with Amazon?
Vendor Returns (VRET) occur when the supplier’s products are overstocked or damaged. Amazon outlines the Return Type details in the supplier’s Vendor Agreement. This can be found under Settings > Agreements > Accepted/Rejected > Purchasing Terms.
Below is an outline of all the types of returns that can occur, with definitions.
- Customer Damaged – The product has been returned by a customer and is not in new condition; the product packaging is damaged, or the product shows signs of use, wear, or damage (including where the customer has broken the seal, opened the box, or used or tested the product).
- Carrier Damaged – The product has either: (a) been damaged during transit or delivery to an Amazon customer; or (b) been returned by the customer to Amazon and damaged during return transit or delivery to the fulfillment center.
- Vendor Damaged – The product was damaged before the point of delivery to Amazon (including damage due to handling by the vendor or the vendor’s carrier)
- Defective – The customer has returned the product and told Amazon that it is defective. This includes missing parts, manuals, instructions, or warranty information.
- Warehouse Damaged – The product was damaged after the point of delivery to Amazon but before leaving our fulfillment center (including damage due to handling in Amazon’s fulfillment center).
- Undamaged Overstock – Products that are not damaged or defective but lack customer demand (overstocks).
- Expired – Products that are past their expiry date.
- Advantage – Stock under a consignment PO (Advantage stock), which is not damaged or defective but where Amazon lacks customer demand (overstock)
- Mixed Damaged - The shipment includes different types of damaged products from the above list.
Remember, if a supplier’s shipments are subject to return, Amazon will act according to the terms agreed upon in the contract. Make sure the return address is correct before the return process is initiated. Lastly, if terms require a Retail Merchandise Authorization (RMA), make sure to submit it within 7 calendar days of the returns notification from Amazon.
Bonus: Chargebacks
While chargebacks are technically not deductions, these fines create revenue loss. A chargeback is fine due to a supply chain compliance infraction.
Amazon groups all of the compliance issues into seven categories listed below.
- PO-Related
- ASN- Related
- Prep-Related
- Delivery
- Receive
- Packaging
- Direct Fulfillment
Luckily, chargebacks are disputable 30 days after the notification date. These disputes are manually reviewed, so stay on top of your dispute statuses. Chargebacks can only be disputed twice. If a chargeback has been disputed and rejected twice, it is no longer eligible for dispute.
Operational Performance
Under the Reports dropdown is the Operational Performance page. This page is the one-stop shop for viewing your chargeback data and disputing invalid claims.
To dispute a chargeback, click View All in the top right corner beside the total chargebacks. This will redirect you to the ‘Transaction’ page to view the fill defect list. Select one or multiple chargebacks that you want to dispute.