We've often referred to shortages as the untamed animal of the retail industry. Whether they're caused by poor packing practices, a lack of discrepancy and damage reporting by a transportation provider, or a lack of communication between trading partners, shortages tend to cause chaos and confusion when not properly addressed and controlled. This chaos and confusion slows the flow of merchandise through the supply chain and eats into profits.
At the recent RVCF Spring Conference in Clearwater Beach, we had four separate sessions in which the topic of shortages was discussed in depth, including:
- Supplier Only Open Forum
- Shortages from Theft & Prevention
- Managing Transportation Claims & Audits from a Legal Perspective
- Panel Session: Controlling Shortages
These sessions produced a number of valuable insights that merchandise suppliers can implement within their own organizations, whether that means exploring a new way of doing things or improving an existing practice. Here are several of the best suggestions we heard at the RVCF Spring Conference for reducing shortages.
Scan and Pack
The number one recommendation was to use the "scan and pack" method. Scan one unit and place it in the carton – one unit at a time, one carton at a time. It sounds so simple, but deviating from this method only increases the risk of error.
For example, suppose 12 identical units are being shipped. When you scan the same unit 12 times and pack all 12 items at the same time, errors are more likely. Also, if you work with multiple cartons at the same time, there's a greater risk of the wrong unit going in the wrong carton. You could end up with an overage of one unit in one carton and a shortage of one unit in the other. That would seem like a wash, but the likely scenario is that you'll be hit with chargebacks and the retailer will get one free unit.
"Count at First Break" Agreements
The retailer often pays for freight and requires the supplier to work with a certain transportation provider, but that doesn't mean the supplier can't communicate with the carrier. In fact, the supplier can and should speak with a carrier representative about what should be done to proactively address shipment issues before the shipment goes any farther.
A "count at first break" agreement with the local carrier facility says that the carrier should report any discrepancies in carton count or damage within 24-48 hours and stop that shipment. If a carton is missing or damaged, the issue can be rectified before you run into receiving problems on the backend. These problems lead to shortages and losses that can't be recovered.
Retailers are telling suppliers to put shipper load-and-counts and notations on bills of lading. Any shortages can then be blamed on the shipper load-and-counts. But the supplier can still give the driver the opportunity to count cartons. If the driver decides not to count cartons, don't let them sign shipper load-and-counts on bills of lading. If a shortage occurs, you need to be able to investigate the issue and file a claim if necessary. Carriers must understand that this is a requirement, and shipments won't be allowed to go out if proper procedures aren't followed.
Carton Tally Sheets on Dock
Procedures for verifying package count at loading should be established and enforced. When shippers stack cartons on the dock, they're stating the number of cartons against the corresponding purchase order. Loaders and supervisors should sign manifests and loading tallies and place them with the shipment when it leaves their facility. This makes it easy for both the driver and the retailer to count and agree, ensuring the shipment has been verified as complete three times.
Merchandise suppliers should invite retailers to their facility and vice versa. If a 3PL or consolidation center is involved, visit their facility as well to see how shipments are moving through the supply chain. This allows you to identify areas for improvement and make sure nothing is being done by any party that could increase the risk of shortages on the backend. If issues are identified, you can sit down and talk about ways to implement improvements and follow up to see if the situation has improved.
Suppliers should be doing random audits on shipments from overseas factories to make sure the number of cartons and units per carton match what the factory says is in the order. If everything matches up, cartons can continue to flow. If not, you can open more cartons to check for shortages, overages, substitutions, damage, etc. If you see a lot of errors, you can note the types of errors and frequency and address these issues with the factory. The increase in labor costs is likely to be dwarfed by the chargebacks you would receive for shortages resulting from the factory's mistakes.
Suppliers need to have a procedure in place for reporting problems to factories and charging them back when issues aren't addressed. If you need an extra level of auditing that goes beyond your own employees, bring in a third party that specializes in these types of audits.
The Big Takeaway
These sessions and the conference as a whole were major learning opportunities for everyone involved. During the panel discussion, we noticed that even the panelists, who were selected because their organizations are so effective at minimizing shortages, were taking notes on comments from each other.
There was so much productive back-and-forth discussion that continued after each session. Peers were able to discuss how they're addressing shortages and what their success rates are, and then determine how many people in the room are doing the same thing. We're happy to provide a recap after the fact in this newsletter, but there is so much value to be gained by being at a conference and speaking directly with peers and trading partners.
To get the full benefit, you have to be there. We strongly encourage industry professionals to attend the RVCF Fall Conference, October 14-17 at the Manchester Grand Hyatt San Diego in San Diego, CA.
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