In this article, learn about:
The different types of Kroger deduction codes
What each code means and how they’re triggered
How to prevent valid deductions
How to dispute invalid deductions and what documentation to use
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Kroger suppliers may encounter a variety of deductions that directly impact profit margins. To navigate these chargebacks effectively and avoid preventable losses, it’s essential to understand what each deduction code means, why it's taken, and how to respond. This article breaks down the most common deduction types, explains their meanings, and provides helpful tips to address them.
What are the Types of Kroger Deductions?
Kroger suppliers may encounter up to 13 different types of deductions, each identified by a specific code on the invoice (such as CD or ORAD). It's important to review these codes carefully because suppliers have a limited window of just 180 days to file a claim for any invalid charges.
Cash Discount (CD)
On the invoice, suppliers will see the Cash Discount (CD) deduction as “Discount Amount.” These types of deductions are typically in percentage terms. To understand them, suppliers must research any cash allowances before submitting their dispute claims.
CRV Repays (CV)
The CRV Repays (CV) type of chargeback isn’t for everybody. They are only applicable or relevant to suppliers with a California Refund Value (CRV) or Bottle Deposits agreement. A Bottle Deposit Repay Request and Proof of Delivery is necessary to dispute this deduction.
EDI Non-Compliance (EC)
The EDI Non-Compliance (EC) deduction occurs when there is an issue with a required EDI document. It’s worth noting that Kroger prioritizes Electronic Data Interchange (EDI). EDI helps with:
Increasing accuracy
Improving timelines
Lowering operating costs/expenses
To this end, suppliers should have no problem receiving or sending any documents through EDI. They usually have 90 days to comply with this requirement. Otherwise, they should be ready to pay an additional fee of either $250 or 1% of the amount on the invoice.
Related Reading: Avoiding Common EDI Errors with Kroger
List Cost (LC)
List Cost (LC) is another term or code that suppliers must learn when invoicing Kroger. It refers to the difference in cost in simple terms, which the vendors can determine from reason code “3”.
For price increases, Kroger requires written notice from the supplier within the following deadlines:
90 days prior to the effective date for general merchandise
60 days prior to the effective date for health and beauty care products
30 days prior to the effective date for all other items (excluding commodity items, such as perishables or tobacco)
Kroger is not obligated to increase a good’s price if the retailer does not receive a notification within the timeframes listed above.
For price decreases, suppliers must submit a written notice of a proposed decrease a minimum of 30 days prior to the effective date (excluding commodity items). If Kroger does not receive a notification within that timeframe, the retailer will apply a price support charge.
List cost deductions occur when price changes are reflected on the supplier’s EDI documents but not in Kroger’s system, either due to proper notification not being provided to Kroger or an error on Kroger’s side where their system does not accurately reflect the supplier’s compliant price increase.
To dispute List Cost deductions, the supplier should provide supporting documentation that the proper notice was given, a copy of the associated invoice, and an email from the buyer approving the repayment of the deduction.
Off Invoice (OI)
Suppliers with allowances that are due off-invoice will receive deductions with this Off Invoice (OI) code. Typically, they work with Kroger to take these allowances from their invoices but only as a “2” reason code.
However, suppliers have to take note of two other things here:
Deductions are only from the payment.
Deductions only come into play when manual corrections are necessary for trades, co-ops, salvages, or any other kind of off-invoice allowances.
To dispute these, suppliers should provide a copy of the invoice the deduction was taken from and the appropriate contract the allowance was taken under.
Late Shipment (ORAD)
Suppliers who would prefer to interact with Kroger at any level can only do so after acquainting themselves with Supply Chain Vendor Documents listed on the Lavante platform’s help menu. These documents are full of information on codes such as On Time Delivery Charges.
More importantly, the documents also inform suppliers about the applicable Late Shipment (ORAD) fines. ORAD stands for “Original Requested Arrival Date,” referring to the delivery date listed on the purchase order. Kroger has other compliance requirements regarding the delivery of ordered items, such as on-time and case-fill rates. When disputing a Late Shipment deduction, a Proof of Delivery is required.
Overage (OV)
Overage (OV) is simply an overpayment that’s above what suppliers indicate on their invoices. An overage is the extra amount on top of the gross total appearing on the invoice. Under the Kroger system, this would include claims that fall under any “7” reason code.
Shipper Billing (PS)
Shipper Billing (PS) is a type of Kroger deduction that applies to specific invoices. This applies only to invoices shipped to the Kroger or Peyton warehouse locations. This deduction will appear as ###PS.
Pickup Allowance (PU)
The Pickup Allowance (PU) deduction type refers to the freight charges that suppliers have to pay on purchase orders that Kroger carriers pick up (i.e., collect suppliers). Suppliers will see these types of deductions as a “9” reason code.
Return Issues (RT)
Return Issues (RT) deductions are for issues surrounding returned items. Kroger has a returns and refunds policy in the case of customer dissatisfaction that is designed to keep suppliers compliant and engaged with their customers.
Examples of the different ways suppliers will see this code include:
DMQAUTH
ddd-V#####-ddd
mrd########
100#########
DDD-PS-######
ddd- F####
092-RE000000XXX
701-########
Shortage (SH)
Shortage (SH) deductions are pretty common in transactions with Kroger. Suppliers will see them under “4” or “6” Kroger deduction codes. These types of deductions appear as reason code “08” for Peyton’s invoices.
This code often indicates two circumstances:
Shortage of units
List cost issue
Shortage deductions are reasonably easy to dispute, as they require a copy of the invoice, either the Bill of Lading or POD, and relevant EDI documents showing that the supplier delivered the order in full.
Stop Payment (SP)
Stop Payment (SP) is only applicable where reissued checks are concerned. Typically, Kroger only honors this request for checks that suppliers haven’t received within 30 days. This kind of information is readily available on the Kroger program too.
However, suppliers have to check the document known as “Stop Payment” for all the information they need to submit this claim. The paper addresses all the nuances regarding such a request, which helps suppliers to avoid mistakes.
Wrong Vendor (WV)
Some vendors receive deductions or payments wrongly. Here, the Wrong Vendor (WV) deduction code refers to those whose Supplier ERP ID details are different from what’s in the system.
Kroger Deduction Codes Explained
Code | Description | Type | Definition |
2 | OI | Allowance taken from invoice as a manual correction for salvage, CoOp, Trade, or other Allowances due off invoice. | |
3 | LC | A deduction of the difference between the unit price of what was billed to Kroger vs. what Kroger expected to pay per unit. | |
4 | SH | Code 4 is one of two shortage deduction codes that Kroger uses, code 6 being the other. Kroger imposes this deduction when they receive fewer cases than what they were billed for. | |
5 | EV | Code 5s are deductions typically related to EDI noncompliance, especially regarding invoice submission to Kroger. This deduction will either be $250 or 1% of the total invoice amount, whichever is greater. | |
6 | SH | The code 6 deduction is a shortage related deduction, like code 4, from receiving fewer units than what Kroger billed. | |
7 | OV | Overpayment made above the gross amount of a supplier's invoice. | |
8 | SH or LC | This deduction is taken when there is a net total dollar difference between what Kroger expected to pay and what they were billed. Kroger automatically attempts to determine if this difference is unit-based (e.g., shortage deduction) or cost-based (e.g., list cost deduction), but if it cannot automatically determine the reason for the discrepancy, then a Code 8 deduction is taken. | |
9 | PU | The Code 9 pickup allowance is taken for freight charges for PO's picked up by Kroger carriers, i.e., Collect or Backhaul shipments from Kroger trucks. |
Understanding Kroger Deductions
It’s important to know that not all deductions from Kroger are accurate. Even when they appear valid, the original infraction prompting the deduction may have been applied in error. That explains why suppliers have to know not only the deductions but also the infractions.
If you feel like disputing, then you should follow your instincts. Fortunately, Kroger has enough personnel to handle such disputes.
Other than that, you could also get in touch with Kroger through DemandTec, an online service that Kroger works with to provide suppliers with information on deduction types. You should email vendorportal@kroger.com to register for DemandTec.
The email you send to the above address should contain some pertinent information. These include your company’s name, the name of your company’s contact person, email address, phone number, and mailing address.
After registering, you should now be in a position to access all details regarding the different Kroger deduction types. If you don’t understand, don’t hesitate to ask Kroger for clarification to prevent future deductions.
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