Challenges, problems, and triumphs
-- from a manufacturer's perspective.
Complaining About Short-Shipment Penalties
Who pays retail? The vendor?
by Name Withheld (October 6, 2008)
(Note: In the previous issue CLN published a report
(Note: CLN received a note from a major industry vendor.
He had received a letter from Jo-Ann, which he had attached in his
note to CLN. Here's the part of the Jo-Ann letter that
inspired him to write:
"Short Shipments: A short shipment penalty will be
automatically deducted from a Vendor's payment if the quantity of
any given Article received is short by more than 3%. The short
shipment penalty will be calculated as the total number of units
short multiplied by the retail price of that specific article.
Please note that the 3% tolerance is included in the total number of
units used for the calculation of short shipment penalty. For
example: Originally ordered 1,000 unties of an Article at a retail
of $4.99 but the Vendor shipped 950. Short shipment penalty would be
$249.50 (50 X $4.99). Short shipment penalties will be automatically
deducted from the Vendor's next payment, unless vendor reimbursement
has been received."
This is just another example of retailers making it more
difficult for vendors to make any money. It's amazing that they want
to charge the vendors the retail price on items that you short ship
them – not the margin that they make, but the full retail price.
A big part of having the products to ship them depends on their
ability to give us an accurate forecast of what they are going to
sell. We can't maintain an infinite amount of product in inventory
just in case the retailer underestimates how much he'll need.
Funny, I thought retailers were supposed to collect the retail
price from consumers, not their vendors.
At least they didn't start the letter with Dear Vendor Partners.
(Note: To read previous "Vinny" columns, click
on the titles in the right-hand column. To respond to this column or
comment on any other industry issues, email CLN at email@example.com.)