Are chargebacks necessary for supply chain collaboration?
According to a survey from Supply Chain Digest, both retailers and vendors rate their current levels of supply chain collaboration as strong. But 43 percent of retailers and 58 percent or vendors expect chargeback levels to rise over the next five years. Only 21 percent of each group predict chargebacks will decline.
While many vendors believe retailers use chargeback programs as a profit center, responses from retailers contradict that. Twenty-three percent of retailers admit their programs are “dollar-oriented,” while 35 percent say their programs are primarily focused on supply chain improvement. The plurality (42 percent) said the focus of their programs was a mix of improvement and dollar objectives.
Yet the study notes that both Target and Walmart announced programs in 2017 designed to reduce supply chain variability associated with vendor shipments, essentially tightening requirements and increasing penalties for underperformance. On-time and fill-rates are primary focuses. HEB and Kroger launched similar initiatives, a first for the grocery sector.
Both retailers and vendors agreed that the quality and available of data was the primary inhibitor to improved collaboration, although both felt their ability to collaborate was significantly better than their partners. Vendors also saw trust, the ability to share gains and ROI as bigger challenges to collaboration than retailers.
Probing the different aspects of retailer compliance programs on a scale of one (least satisfied) to seven (most satisfied), vendors’ biggest beef was the lack of detailed information on what triggered a chargeback (average score of 2.7). That was barely ahead of “Appropriateness of Chargeback Levels” (2.8) and “Timeliness of Communications” (3.1). Vendors had the least concern relative to the clarity of the rules (average of 3.7).
Supply Chain Digest wrote in the study, “We will note that the level of detail in communications about chargebacks and the timeliness of those communications is something that is very much in the control of retailers and can be improved with relatively little investment. We wish more of them would put some focus in these areas.”
- The State of Retailer-Vendor Supply Chain Relationships 2018 – Supply Chain Digest
- SCDigest’s Benchmark Study on the State of Retail-Vendor Supply Chain Relationships – Supply Chain Digest
DISCUSSION QUESTIONS: Are chargebacks a necessary evil for driving vendor compliance or do they undermine supply chain collaboration? Do you see improving data quality/availability, trust levels, tools or some other aspect as the best way to improve collaboration? What’s your overall take on chargebacks?