Read this article to learn about:
- What overages are at Walmart and how they subtract from your bottom line
- How SPS Revenue Recovery can help help you get back more money by automating the overage billing process
What Is an Overage?
On-time and fill rate compliance are among the top challenges suppliers are facing in the modern supply chain ecosystem. Many retailers are increasing their standards and doling out fines to suppliers who fall short of expectations. However, fines aren't the only source of revenue loss for suppliers.
In an effort to avoid underfilled shipments, suppliers sometimes inadvertently overfill an order, which creates an overage, a loss of a different sort than a plain AP deduction. At times, Walmart may encounter challenges in accurately receiving goods, leading to potential discrepancies in their POs.
For example, if they receive item number 1 as item number 2 on the same PO, one item may be marked as over and another as short. In such instances, a shortage deduction would be applied. This PO would not show on overages. Alternatively, Walmart may accept goods from one PO onto an entirely different one, creating difficulties in pinpointing the exact receiving issue across multiple POs.
Some retailers fine suppliers for overages (see this related article for overages in Walmart's SQEP program), but, more often than not, overages result in revenue loss simply because retailers will receive extra product without paying for them.
Why Do Order Overages Matter?
Order overage is defined as the amount of product sent to a retailer in excess of what was invoiced. If a supplier invoices for 200 cases and the retailer receives 250 cases, the supplier would have a 50 case order overage. The supplier is meeting the retailer's order expectations, but most retailers will only pay for the number of cases that the supplier invoiced - not the amount received.
Walmart Billable Overages
While navigating the delicate balance between supplier and retailer expectations, suppliers should consider treating overages as an opportunity to recover lost revenue. Billable overages are regular overages that can be billed back to the retailer, recovering what's lost by invoicing the retailer itself for the extra goods shipped.
When detecting billable overages, various data sources, including invoices, payments, and receiving data, should be thoroughly examined. This is to pinpoint billing opportunities spanning the past two years of POs. This two-year timeframe is crucial, as it represents the window within which you can invoice for these overages. It's essential to note that these overages are identified using Walmart's own receiving data.
Shorting Distribution Centers
This issue is compounded if a supplier shorts one DC's order and sends an overage to another DC. This could be in error or to bolster DC's safety stock. Since one DC's order is shorted, fill rate compliance will drop, and the supplier will not be paid for the unfilled units. Additionally, the excess cases sent to the other DC will not act as a credit to forgive that compliance failure, nor will they be paid for when the PO is invoiced.
If the retailer thinks that the 50 extra cases from the example above were supposed to go to a different DC, the supplier could get hit with an overage compliance fine, and a shortage deduction, and have to swallow the loss of the 50 extra cases on top of that.
Potential Solutions
Some suppliers have found success recovering overages by simply invoicing the retailer for the extra goods. Typically, this will need to be a new invoice for the overage amount and must reference the original product order number specifically. Retailers occasionally reject these invoices, but depending on the amount of overage material, it is likely worthwhile to try.
Alternatively, for POs where a retailer mixed two items up upon receiving, resulting in a shortage and an overage, you can dispute the shortage to recover the amount due. At Walmart, you would dispute the shortage in APDP to recover shortage dollars.
How Can SPS Commerce Help?
Overages can be costly, varying based on the product and size of the supplier. The compliance fine, the items received left unpaid by the retailer, and the time it takes to research fine validity and submit a dispute (when applicable) all add up to a considerable amount of revenue loss.
SPS Revenue Recovery helps Walmart suppliers automate the identification and recovery of billable overages. Request a free audit to see the recoverable amount in your account.
