Root Cause Analysis at Walmart

Learn About:

• What is Root Cause Analysis? 

• Importance of Root Cause Analysis for Retailer Deductions 

• Types of Root Cause Issues 

• Best Tips and Practices for Doing Root Cause Analysis with Deductions

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Root Cause Analysis (RCA) can help uncover the reasons behind frustrating revenue loss instances. This article simplifies RCA for retail deductions, especially for suppliers at Walmart. We'll explore three common problem areas: shortages, in-full charges, and allowances, and provide tools and techniques to help avoid these issues in the future.

What is Root Cause Analysis? 

Root Cause Analysis (RCA) is a powerful tool used to identify the root causes of problems. It's especially useful in business to fix issues in processes, products, or systems before they happen again. The goal of RCA is to prevent future problems by addressing them at their source.

Importance of Root Cause Analysis for Retailer Deductions

RCA is necessary for suppliers handling retail deductions and chargebacks because it identifies and addresses the underlying causes of these financial discrepancies. By using RCA, suppliers can detect recurring patterns that lead to deductions, such as delivery errors or inventory issues, and implement changes to prevent future occurrences of unnecessary revenue loss. This proactive approach not only prevents future financial losses but also strengthens relationships with retailers by demonstrating a commitment to quality and reliability.

Types of Root Cause Issues 

Shortages 

A shortage deduction is any scenario where the retailer withholds payment from an invoice claiming they did not receive some or all of the goods for an invoice.

What Causes Shortage Deductions?

Shortage deductions can occur for different reasons:

• Poor labeling

• Human error (receiving or shipping)

• Mismatched orders (i.e., items shipped differently)

• Invoice arrives before shipment: If you invoice before you ship, you have unearned revenue. This is an accounting issue that unless the retailer approves these on a case-by-case cadence is not standard practice.

Common Scenarios Leading to Shortage Deductions

Matching Quantities on Paper, but Short on Delivery 

Often this is a receiving error. The quantities on the purchase order (PO), invoice, and advance shipping notice (ASN) align, but the retailer reports receiving fewer items.

Received In Full but Still Deducted

This can happen if the retailer processes the invoice before receiving is finalized. This could be due to invoicing too early compared to the shipment.

Overages and Shortages

Sometimes a retailer will report receiving one item in excess and one item short. This could be due to improper receiving and/or difficult to distinguish packaging between items.

Invoicing More Than Shipped

If the invoice shows more items than were shipped (as per the ASN), this is typically an invoicing error. This could be a straightforward error from the supplier's side or a miscommunication between sales and logistics teams about the shipment content.

For more information on the Root Cause of Shortage Deductions read our article, Common Root Causes for Retailer Shortages.

In-Full Charges 

A Purchase Order (PO) is considered 'In-Full' if Walmart receives 100% of all ordered cases. If fewer cases arrive than ordered or no cases arrive at all, the PO is not 'In Full.' Walmart sets a goal of 95% for all departments to avoid In-Full compliance fines. 

How to be In-Full

To ensure POs are received 'In-Full', suppliers should:

• Regularly review and monitor supply and demand forecasts. 

• Update forecasts and plans as necessary to align with actual needs. 

• Clearly mark all packaging to avoid confusion during receiving. 

• Cancel POs that cannot be fulfilled and use Walmart-accountability reason code whenever possible to avoid In-Full accountability. 

Common Scenarios Leading to In-Full Fines Deductions

Overages and Shortages on PO

Sometimes, a single PO may show overages and shortages for different items, which might indicate a receiving error. There could be a mix-up where two correctly shipped orders were inaccurately received - some items over-received and others under-received -- leading to invalid fines.

Canceled Items With Supplier Accountability 

If a supplier is canceling items or entire POs with reason codes where the supplier takes accountability, such as the Supplier does not have the product, then they will be responsible for the Not In Full cases.

Related Reading: The Ultimate Guide to OTIF 

Allowance Deductions

Allowance deductions occur based on the terms outlined in supplier agreements. Suppliers agree to offer Walmart a specific discount such as a percentage off invoices, to account for potential issues like damaged or returned goods. A common example is the Defective Allowance, where suppliers might provide a 1% discount across all invoices as compensation for future defective or returned goods.

If a supplier does not apply the agreed-upon discount to an invoice, Walmart will automatically deduct the appropriate amount from the payment. 

Common Scenarios Leading to Allowance Deductions

Insufficient Allowance Percentage 

This is often an invoicing error and occurs when the discount applied on the invoice is less than what was agreed upon in the supplier agreement. The invoice then fails to reflect the correct allowance percentage, leading to a deduction by Walmart to correct the discrepancy. 

Invoice Adjustment Matches Agreement  

Sometimes, even when the invoice adjustment correctly matches the allowance specified in the agreement, a deduction might still be made---this typically points to an error on Walmart's part or a misinterpretation of the invoice details. In such cases, the deduction is considered invalid and may need to be disputed by the supplier.

Related Reading: The Difference Between Retailer Deductions And Allowances

Best Tips and Practices When Dealing With Root Cause Issues

Best Tips and Practices for Invalid Charges 

• Regularly analyze which items are getting mixed up to prevent multiple revenue losses from a single receiving or shipping issue. 

• Use stickers or distinct packaging to clearly distinguish items, reducing the likelihood of errors during handling. 

• Ensure labels are accurately and visibly placed on all cases to comply with logistical requirements, helping avoid misidentification. 

Best Tips and Practices for In-Full Charges 

• It is advised to dispute in-full charges where applicable. While preventing errors at Walmart's end may be difficult, you can take steps to reduce confusion: 

  • Only invoice for the quantities that were actually shipped. 

  • Consistently review any overages and shortages to pinpoint confused items and address these specifically. 

Best Tips and Practices for Allowance Deductions 

• Always check that the allowances specified in supplier agreements are correctly reflected in the invoices to avoid wrongful deductions. 

• If deductions occur despite correct invoicing, challenge these deductions by presenting the agreement and corresponding invoice as proof.  

• If a dispute over a deduction isn't resolved in your favor, escalate the issue by detailing the denied dispute and the deduction in an email to your Walmart buyer.

Resolving Long and Short-Term Issues with SupplyPike

For long-term success, identifying the root cause of supply chain problems is the only real recipe for success in revenue recovery. Revenue loss can multiply without visibility into particular portions of the supply chain.

In the short term, SupplyPike offers solutions for aggregating data to help with deduction validity, auto-disputing invalid deductions, and winning back invalid deductions. This solution is handy for winning money back quickly and efficiently.

Avoiding deductions, valid or invalid, in the first place, however, is preferable to simply winning back money that shouldn't have been lost in the first place. SupplyPike's flat-rate solution is designed primarily to encourage supplier improvement.

SupplyPike's Get Paid and Get Better motto is meant to convey just that, helping suppliers win money back in the short term and avoid deductions and compliance fines in the long term.

SupplyPike's Root Cause analysis aggregates shipping documents to give helpful language to describe the particular problem. Schedule a meeting with the team to see if SupplyPike's Revenue Loss Solution and Root Cause Analysis feature are right for your business.