Calling Amazon’s receiving process complex is like calling the Pacific Ocean big. Both statements are true, but they can only begin to describe reality. And unfortunately for Amazon vendors, this vast receiving complexity can turn a single overage into a laundry list of headaches (including more overages).
We estimate that the average Amazon vendor is losing ~1% of their gross merchandise value to overages, but most vendors don’t address the issue due to a lack of data visibility. And the few vendors that have made attempts to address overages report low recovery success and even an increase in new shortage claims.
The good news? According to SPS Revenue Recovery Product Manager Ash Hamidi, the SPS team has built new logic where the overage invoices we create are automatically queued for payment in Amazon Vendor Central.
But before we get to the SPS solution, let’s dig into the details of what’s currently happening.
Amazon Overages
Amazon overages are typically the result of the retailer receiving more product than was agreed upon by the vendor on a particular purchase order. When overages occur, Amazon will either create over-received units that can be invoiced or attempt to match the additional units to other invoices that have shortages.
However, Hamidi says overages can also occur even when Amazon doesn’t receive more product than was agreed upon.
“In an ideal world, all freight that’s received at a distribution center would scan correctly the first time,” he continues. “Unfortunately, some freight scans incorrectly or can’t be scanned at all — a scenario that creates problem freight that can’t be easily tied to an order.”
For example, let’s imagine you’re a blanket vendor who receives a PO for 10 red blankets, but you accidentally send 11. Amazon receives 11 red blankets, but you only invoice for 10. Amazon now has one extra red blanket it may sit on indefinitely, or its matching algorithm may kick in and try to find a place for the extra red blanket to go.
Perhaps a completely different PO requests 10 blue blankets, but Amazon is only able to scan nine of the blue blankets correctly. When you send an invoice for 10 blue blankets, Amazon may use the extra red blanket from the other PO to pay for the missing blue blanket.
As far as the original invoice is concerned, you see that you’ve been paid for all 10 blue blankets — even though that doesn’t reflect reality.
Furthermore, if Amazon finds and receives the missing blue blanket a few weeks later, it won’t be able to be matched against its original invoice, as it’s already been filled by a rogue red blanket. This un-invoiced blue blanket will then either sit indefinitely or be picked up by the matching algorithm to fill another shortage, and so on.
Again — complex. And regardless of how any overage is created or dealt with, the vendor can expect an overage PO chargeback.
Related Reading: What Are Amazon’s Compliance Chargebacks?
Amazon Smart Match
The matching algorithm that passively addresses Amazon shortages and overages (and sometimes creates them) is called Smart Match. Designed to help vendors get paid faster, it doesn’t always address receiving issues at the root.
In other words, when a shortage is paid back via Smart Match, it doesn’t necessarily mean Amazon found the specific items from the specific shipment for the specific invoice. Instead, Amazon most likely found something similar and is using it to pay the vendor back (e.g., subbing a red blanket for a blue one).
Hamidi says Smart Match can muddle the receiving process across multiple variables:
Across orders: A shortage on one order might be paid back and “erased” by Smart Match when problem goods are received on a future order. But in doing so, a shortage is artificially created on that new order where the additional goods came from to pay for the Smart Match.
Across DCs/locations: Problem freight in one location can be used to Smart Match funds to pay back a shortage for something received at a totally different location.
Across Amazon Standard Identification Numbers (ASINs): Freight for one ASIN may even be used to pay for a shortage of a completely different/unrelated ASIN if the unit prices match (or are at least close).
“By muddling data, Smart Match can take one real problem and turn it into a cascade of problems of its own making,” says Hamidi.
This ever-worsening cycle of overages and shortages can cause:
Order accuracy compliance chargebacks because orders are being mistakenly received as over or short.
Lower vendor scores at certain locations where orders are being mistakenly labeled as over or short, which in turn lowers the vendor’s place in line for receiving. (A lower place in line means your goods sit waiting on the truck longer before they’re unloaded, potentially leading to even more issues.)
ASIN chargebacks because certain ASINs are mistakenly identified as over or short.
Artificial peaks and valleys in order variance because orders are constantly showing over/short. This interferes with Amazon’s demand planning algorithm, which heavily weights variance in past orders, causing Amazon’s order forecasts to be less accurate, even for goods with steady actual sales.
Related Reading: How ‘Smart’ is Amazon’s Smart Match technology?
Invoicing for Amazon Overages
Let’s return to the blanket vendor scenario where you accidentally send 11 red blankets instead of 10. What if, instead of that red blanket either sitting indefinitely or being subject to Smart Match, you were able to send an overage invoice for that exact blanket? The SPS Revenue Recovery team has worked with several Amazon vendors to reverse engineer Amazon’s Goods Received Not Invoiced (GRNI) table to do just that, kicking off a different kind of cascade.
Our Amazon overage invoicing solution will help vendors like you:
Get paid. If you’re getting an overage chargeback, you should at least get paid for that merchandise. Our software does this for you automatically in Amazon Vendor Central.
Stop the cascade of shortages and overages. Invoicing for overages essentially helps Smart Match work smarter, so that it pairs red blankets with red blanket invoices and blue blankets with blue blanket invoices.
Improve data accuracy. With Smart Match connecting disparate POs, invoices, DCs, and products, you can't trust that your data is accurate.
Get better. More accurate data improves your visibility into actual process issues you can fix.
Several Revenue Recovery customers have already kick-started the good kind of cascade. “During the testing process, we submitted nearly 50 invoices across a handful of Amazon vendors of various sizes and products,” Hamidi notes. “We saw a success rate of 100%, and more than $150,000 was instantly queued for payment and later paid by Amazon.”
Next Steps
The testing phase is almost complete, which means launch day will be here soon. Here’s what you can do in the meantime:
Current Revenue Recovery for Amazon customers: Stay tuned! We’ll let you know when you can start invoicing (and getting paid) for overages using our solution.
Not yet a Revenue Recovery for Amazon customer? Start here. You’ll find an overview of how SPS uses automation, guided workflows, and proven expertise to resolve deductions faster, prevent repeat losses, and protect your margins at Amazon and more. You can even request a free audit to receive an estimate of how much you could recover.
