How to Avoid Walmart Deduction Penalties

Even more so than other retail giants, Walmart enforces a strict Walmart deduction system by infringing, chargebacks, and penalties on its suppliers for various infractions. To streamline and expedite the resolution of these deductions and disputes, automation technologies, including Bots, are increasingly employed to interact with Walmart’s Supplier Center, minimizing manual effort and accelerating the resolution process.

In February 2024, Walmart announced an easing of some penalties by reducing its OTIF benchmarks from 98% to 90% “on time” and 95% “in full.” Vendors that fall short of these benchmarks face penalties of 3% of the cost of goods for the shortfall. However, by employing an effective management process, your organization can avoid many, if not all, of these Walmart Deductions.

Using the Walmart Supplier Center

Effective use of Walmart’s Supplier Center is essential for managing and reducing Walmart deduction issues. Walmart’s Supplier Center is a comprehensive online platform designed to enhance collaboration and communication between Walmart and its suppliers. Beyond serving as a centralized repository for essential information, the Supplier Center is crucial in streamlining various aspects of the supplier-retailer relationship, including resolving deductions, chargebacks, and disputes.

Walmart Supplier Center Features Related to Deduction Resolution:

Key features of the Walmart Supplier Center designed to help suppliers handle Walmart deduction challenges include:

1. Interactive Dashboards: The Supplier Center typically provides suppliers with interactive dashboards that offer real-time visibility into deduction-related data. These dashboards may include analytics and reporting tools to help suppliers monitor and analyze deductions over time.
2. Automated Communication Channels: The platform incorporates automated communication channels to expedite the resolution process. Suppliers can receive alerts, notifications, and messages related to deductions, enabling them to stay informed about issues that require attention.
3. Deduction Management Tools: Suppliers can access dedicated tools specifically designed for deduction management within the Supplier Center. These tools may include features for efficiently categorizing, tracking and resolving deductions.
4. Documentation and Case Management: The platform typically supports documenting relevant information about deductions, chargebacks, and disputes. Suppliers can create and manage cases, attaching supporting documentation and correspondence for a comprehensive view of each deduction scenario.
5. Resolution Workflows: Automated workflows are often integrated into the Supplier Center to guide suppliers through the steps required to resolve deductions. These workflows may include prompts for documentation submission, communication with Walmart’s teams, and other resolution-related actions.
6. Collaborative Spaces: The Supplier Center fosters collaboration between suppliers and Walmart’s teams involved in the deduction resolution process. Dedicated spaces for communication and collaboration help streamline discussions and ensure that all parties are aligned in addressing deduction issues.
7. Training and Resources: The Supplier Center may offer training modules and resources to empower suppliers in deduction resolution. These materials can include guidelines on best practices, explanations of common deduction types, and insights into Walmart’s expectations for compliance.

Suppliers must leverage the functionalities within Walmart’s Supplier Center to address and resolve deductions proactively. Regular interaction with the platform, staying informed about updates, and utilizing automation tools, including Bots, contribute to a more efficient and collaborative deduction resolution process. As features and functionalities may evolve, suppliers are encouraged to engage with the Supplier Center directly for the most current and tailored information.

Types of Walmart Deductions and Chargebacks

Deductions, in the context of Walmart’s operations, can take various forms, and a detailed list of Walmart deduction and allowance codes is provided at the end of this article. Common deduction types include shortages and damages, chargebacks for non-compliance, invoicing errors and discrepancies, returns and chargebacks, and OTIF (On-Time In-Full) charges. Below are common Walmart deduction categories along with actionable strategies to avoid them:

•   Walmart Shortage/Damages Deductions.
  These deductions occur when there are discrepancies in the quantity or condition of the delivered goods. Shortages and damages during transportation or handling are common reasons.
  Avoidance Strategies:
  • Ensure accurate and thorough documentation of shipments.
  • Use robust packaging to minimize the risk of damage during transit.
  • Implement quality control measures before shipping to identify and address potential issues.
• Walmart Chargebacks for Non-Compliance.
  Walmart may impose chargebacks for non-compliance with supplier requirements, including labeling, packaging, and shipping standards.
  Avoidance Strategies:
  • Familiarize yourself with Walmart’s vendor guidelines and compliance standards.
  • Regular audits of labeling and packaging minimize Walmart deduction penalties related to compliance.
  • Communicate with Walmart’s compliance team to address any potential issues proactively.
• Walmart Invoicing Errors and Discrepancies.
  Deductions may occur due to discrepancies in invoicing, such as pricing errors, inaccurate quantities, or mismatched product descriptions.
  Avoidance Strategies:
  • Implement rigorous checks in your invoicing process to catch errors before submission.
  • Careful invoice reconciliation with Walmart’s purchase orders prevents common Walmart deduction issues
  • Foster open communication with Walmart’s accounts payable team to address and resolve issues promptly.
• Walmart Returns and Chargebacks.
  Chargebacks related to returns can be imposed if returned products don’t meet specified criteria or if the return process does not comply with Walmart’s policies.
  Avoidance Strategies:
  • Understanding and aligning closely with Walmart’s return policies will significantly reduce Walmart deduction cases related to returns.
  • Provide accurate product information to minimize the likelihood of returns due to customer dissatisfaction.
  • Work closely with Walmart’s return processing team to address and rectify issues promptly.
• Walmart OTIF (On-Time In-Full) Charges.
  OTIF charges are incurred when suppliers fail to meet Walmart’s delivery standards, including delivering products on time and in the expected quantity.
  Avoidance Strategies:
  • Invest in robust logistics and supply chain management to ensure timely deliveries.
  • Utilize technology to track shipments and predict potential delays.
  • Advanced logistics management and timely communication help prevent OTIF-related Walmart deduction penalties.
  • Maintain open communication with Walmart to address any issues and collaborate on improving supply chain efficiency.

It’s important to note that the specific types of deductions and the processes for avoiding them can vary based on your specific agreement with Walmart, the nature of your products, and Walmart’s policies. Regular communication with your Walmart representative, staying informed about their policies, and maintaining a proactive approach to compliance can significantly help reduce and address deductions.

Carixa technology is specifically tailored to automate and simplify the Walmart deduction resolution process, minimizing manual intervention and errors, including RPA BOTS and automatic matching and reconciliation, with workflows to identify and recapture erroneous deductions. Further, Smyyth’s Deduction Teams perform “Audit & Recovery” projects to ensure no monies slip through the cracks due to excessive deductions.

Ready to streamline your Walmart deduction management? Schedule a personal consultation with our deduction experts to learn more.

Walmart Deduction and Chargeback Code List