In this article, learn about:
What excessive defective post audit claims are at Walmart
How to read and interpret the claim explanation
How to prevent and dispute excessive defective post audit claims
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Excessive defective claims represent the most common type of post audit claim. As a result, it’s important for suppliers to know how to best reduce the number of defective units, as well as how to dispute excessive defective post audit claims.
What Are Excessive Defective Claims?
Excessive defective post audit claims represent claims for defective products in excess of the defective allowance on the purchase order. Typically, excessive defective claims are the result of returned items or items deemed defective within stores being higher than the allowances given on the supplier agreements.
If you’re a prepaid supplier, excessive defective claims could include freight charges. Additionally, excessive defective claims often include freight and handling charges on returned products. This could be counted as a separate line item on your claim packet, but these charges are always associated with related returned products.
If Walmart can’t link defective products to a particular purchase order, it will often create a one-month deduction, considering all products within that month defective.
There are some common scenarios that can result in invalid excessive defective claims. For instance, let’s say your supplier agreement states that an allowance should be given off invoice, but your EDI provider actually provides the allowance off line-item. Off-invoice allowances are applied directly on the invoice, effectively reducing the price paid upfront. Off-line item allowances, on the other hand, are applied to specific line items on the invoice, meaning the discount is calculated based on the quantity purchased of a particular product. In the case above, the invoice will still show the correct amount being withheld, but it’ll be withheld from the wrong place, resulting in an excessive defectives claim.
Valid excessive defective post audit claims can result from:
Incorrect information in your purchase order, which can result in discrepancies if shipped as-is.
Allowances on the purchase order which aren’t reflected in the invoices.
Using the wrong code for allowances in your EDI system.
Allowances calculated based on the net amount in the invoice, rather than the gross amount.
If the purchase order is incorrect, do not ship the products. Instead, contact Walmart and/or your buyer. If you ship an inaccurate purchase order, then Walmart can view this as verifying the inaccurate information, which could block later attempts to dispute excessive defective post audits.
Related Reading: Code 59: Defective Merchandise Allowance (DM)
Excessive Defective Post Audit Claim Packet Explanation
Here is an example of how Walmart might explain excessive defective charges in its post audit claims packet:
The first sentence of this explanation contains the generic claim type (excessive defective merchandise), while the second sentence details the reason behind the claim. In this case, the explanation is that the defective merchandise returned exceeded the quantity on the allowance for the quarter. To check your defective merchandise allowance, be sure to check out your supplier agreement with the retailer.
The third sentence of the claim explanation clarifies that the expenses the retailer incurred to return the defective merchandise was due to the quantity exceeding the allowance. The final sentence says that the expenses in the post audit are the result of those incurred expenses, as the retailer is attempting to recover those lost funds.
In general, claim explanations follow a similar pattern, with each sentence building on the previous sentence to provide an overview of the charges in the post audit.
How to Prevent Excessive Defectives
The only way to guarantee that you’ll save all your revenue in a post audit is to prevent the issue in the first place. With that in mind, the best way to save money in excessive defective post audits is to produce quality products with as few defects as possible, minimizing returns and keeping the total number of defective merchandise within the given allowance on your supplier agreement.
Other ways to prevent excessive defective post audits include:
Correct Allowances and EDI Data
Be sure to be familiar with your supplier agreement so you’re aware of the quantity of allowed defectives. When checking the allowance, make sure that they are applied to each purchase order, as post audit claims can result if they’re only applied to certain purchase orders.
Ensure that the allowances are included in the proper segments of the EDI raw data. If the allowances are in the wrong segments of the raw data, then they might not be applied to the purchase orders, resulting in post audit claims.
Before invoicing, be sure to pull all segments of the EDI raw data. That way, you won’t miss any allowances that might be applied to the wrong data segments, and you’ll ensure that Walmart is applying all the allowances properly.
Improving Your Email Communications
Make sure that your email communications with Walmart use clear language and an understandable structure. This reduces miscommunications and any discrepancies that might result, especially with regards to how the supplier agreements are applied.
If your organization employs a professional writer, such as a copywriter or content writer, it might be a good idea to have them revise your communications, to ensure that they’re as clear as possible.
Another method of reducing miscommunications with Walmart, your buyer, or the third-party auditing firm is to bold or CAPITALIZE all essential information. If someone is skimming your emails, then this method helps to ensure that they will still read the important information.
When employees leave your organization, they inevitably take knowledge with them, and sometimes that knowledge can be invaluable in preventing post-audit claims. With that in mind, it could be a good practice to create a shared team folder, such as in Google Drive or Microsoft OneDrive, in which your employees can record their communications and any necessary documents. That way, if essential employees end up leaving, you’ll still have access to their emails with Walmart and/or the buyer.
Related Reading: Walmart Supplier Agreement Glossary
How to Dispute Excessive Defectives in a Post Audit
All types of post audit claims are disputed over email with Walmart and the auditor. When emailing the auditor to dispute these claims, include any supporting documentation, which Walmart requires for a successful disputation.
Supporting documentation may include:
Any written documentation, including emails with the buyer, showing any conversation regarding excessive defective allowances or how those allowances are being applied to the purchase orders.
Any invoices (EDI 810) demonstrating the applicable allowances.
Communications from Walmart notifying you of defectives in excess of allowances.
A copy of the purchase order maintenance email, if received.
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