August 2004 | How-To | Ten Tips

Avoiding Transportation Chargebacks

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Chargebacks are a fact of life that manufacturers have to deal with. For many of these shippers, how they get the product to their customers' door is no longer under their control. Consignees and their routing guides are king.

If shippers don't comply with routing guide instructions, they pay, and pay big. Between five and 15 percent of all manufacturers' invoices are affected by chargeback deductions, which can translate into a two- to 10-percent loss of a manufacturers' total revenue, according to the Credit Research Foundation, a financial industry group tracking credit issues.

Here are 10 tips to help you avoid chargebacks when shipping to your customers, courtesy of Harold B. Friedman, senior vice president, global corporate development for Data2Logistics LLC, a freight bill audit and payment company based in Fort Myers, Fla.

1. Be proactive. Make sure you have a clear understanding of what is being demanded of you as a shipper. Get a hard copy document that identifies your customer's preferred and secondary carrier based on regions of the country.

2. Regularly check out your customers' web sites for routing guide changes. A printed routing guide is great, but you really need to check your receivers' web sites to monitor the status of carriers and any changes the receivers have made.

3. Encourage your customers to provide an interactive web tool. It makes life easier if you can identify the carrier your customer wants you to use based on specific origin and destination ZIP codes, weight, product, and level of service required. Accessing this online makes the process much easier.

4. Keep the lines of communication open. Touch base with your customers regularly. Ask if there have been any changes to routing guides or carrier pricing and negotiation, and let them know your concerns.

5. Negotiate disputed compliance issues up front, before they become a problem. If you have a problem with a customer's requirement, address it up front. Get your concerns out in the open before you encounter the problem in shipping.

6. Create a compliance team within your organization. Designate a group of people, including sales and advertising reps, and representatives from the credit, customer service, EDI, shipping, and returns departments to examine customer routing guides and compliance manuals. If your company can't manage such a group, designate one person to review customer manuals to see if you can meet their shipping requirements.

7. Don't be stubborn. Sometimes solving a compliance issue can make your company more efficient. Use your customers' requirements as a way to improve your processes and enhance your own company's productivity and efficiencies.

8. Review your company's current chargeback situation. Prioritize your chargebacks and find out where the bulk of the costs are coming from. After you can determine the top three problems that are causing you to pay chargebacks, look to address those issues with the relevant employees.

9. Take care of chargeback situations head on. Organize a meeting with the customer who is charging you the most, or the one with the shipping instructions you have the most difficulty complying with. Get to know what customers want and why they require it.

10. Assign a cost to a rule. Make sure your employees understand the financial consequences of not complying with a customer's routing guide. They need to know that a certain amount of money will be deducted from an invoice if they do not meet the customer's shipping requirements. If you don't educate your employees on just how much money is being charged for their mistakes they may not take routing guide compliance too seriously.

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