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Weber Logistics

Vendor Compliance: From a 3PL Perspective
Scott Weiss, Weber Logistics

Whether you are currently utilizing the services of a 3PL or considering using the services of a 3PL in the future, you must seek to understand and define what the policy is of the 3PL in the event a chargeback does occur as a result of a clear service failure.

We recently led a discussion group at a 3PL summit where this topic was discussed amongst 25 3PL's and heard a variety of answers on this topic from our colleagues in the 3PL industry and can categorize the policies into five primary categories:

3PL #1:
The risk taker that will pay 100% of all chargebacks.
Example: You receive a $5,000 chargeback from a retailer for non-compliant labels. The 3PL researches and finds that all labels were in fact placed on the wrong side of the carton. The 3PL allows you to deduct $5,000 from a future invoice.

3PL #2:
The moderate risk taker that will waive the value of the services.
Example: You receive a $5,000 chargeback from a retailer for non-compliant labels. There were a total of 5,000 cartons and 5,000 labels generated and not properly applied by the 3PL. The handling charge for each carton is $$0.50 and the per label charge is $0.22. The 3PL provides you with a credit on the invoice of $2,500 ($5,000 cartons x $0.50) and $1,100 ($0.22 x 5,000) = $3,600.

3PL #3:
The moderate risk taker that will pay a certain amount of the chargebacks but with a cap on the annual amount.
Example: You receive four separate $5,000 chargebacks from a retailer for non-compliant labels. The 3PL researches and finds that all labels were in fact placed on the wrong side of the carton. The 3PL caps their annual chargeback payment at $15,000. The 3PL allows you to deduct $15,000 from a future invoice. The annual cap amount has been reached and does not assume any financial liability for future chargebacks.

3PL #4:
The moderate conservative that will pay a flat chargeback deduction of $x after 2 chargebacks have been received for the same service issue.
Example: Over the course of a few weeks, you receive three separate $5,000 chargebacks from a retailer for non-compliant labels. The 3PL researches and finds that all labels were in fact placed on the wrong side of the carton. The 3PL assumes no liability for the first two chargebacks but provides you with a credit on the invoice of $500 due to a third infraction of the same issue.

3PL #5:
The conservative that will pay 0% of all chargebacks.
Examples: You receive a $5,000 chargeback from a retailer for non-compliant labels. The 3PL researches and finds that all labels were in fact placed on the wrong side of the carton. The 3PL does not assume any financial liability.

Which policy is best for you is the next step for your consideration. At first glance, it would seem like any customer would jump at the chance to be with the 3PL that tells you they will pay 100% of all chargebacks that result from service failures. But not so fast. Next month we will review the pros and cons of each policy.


Scott Weiss is an expert on the West Coast logistics market and has been in the 3PL industry for over 16 years. He is Vice President of Client Solutions for Weber Logistics, The West Coast Logistics Leader. In business since 1924, Weber is a family owned third party logistics provider that operates twenty distribution centers and over six million square feet of warehouse space throughout the West Coast. Included in its services are a comprehensive in-house routing guide compliance program for order fulfillment to all major retailers and e-commerce fulfillment. Scott can be reached at sweiss@weberlogistics.com.

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