Lost in Translation: When Distribution Centers Misinterpret Overages and Shortages, Suppliers Lose Millions

Consumers don't generally consider the logistics and complexities involved in the supply chain when they place an item into their physical or virtual shopping cart. But when shelves are empty or "out of stock" appears after clicking on an item online, people want answers. Big box retailers have rolled out a series of initiatives to keep vendors accountable for delivery times and order fulfillment by issuing penalties based on performance. Despite their best efforts, vendors find themselves losing millions of dollars due to perceived receiving discrepancies. Frank Matarazzo, Owner and CEO of Fusion Transport has witnessed firsthand how critical mistakes on the receiving end, such as misread purchase orders and miscalculated inventory are unduly harming vendors and trucking companies.

RUTHERFORD, N.J., June 10, 2024 /PRNewswire-PRWeb/ -- Things just aren't adding up in the world of shipping and receiving. The number of warehouses in the United States has grown from approximately 14,600 in 2007 to 22,000 in 2023 in response to changing dynamics in the commerce and distribution industries, such as economic trends, the surge of eCommerce, and other shifts in consumer behavior. (1) Walmart is the biggest retailer in the U.S., comprising nearly one-fourth of the global retail industry; (2) boasting 210 distribution centers (DCs), each of which is at least one million square feet, with each unloading and shipping a minimum of 200 trailers a day. (3) Amazon and Costco round out the top three retailers in the U.S., with Target coming in ninth. (4) The National Retail Federation predicts retail sales will increase 2.5% to 3.5% in 2024, reaching approximately $5.25 trillion. (5) The logistics of inventory tracking, record-keeping, and billing in such a chaotic and fast-moving supply-chain environment is bound to have its challenges. Frank Matarazzo, Owner and CEO of Fusion Transport, observes, "Purchase order [PO] disputes regarding shipment overages and shortages cost vendors and trucking companies millions upon millions of dollars each year. The industry must first recognize that a problem exists when receiving shipments and reconciling purchase orders to what is actually delivered and then agree upon effective solutions that mutually benefit suppliers and retailers."

On-time and fill-rate compliance is where the rubber meets the road in the supply chain gauntlet. Overages and shortages, as their names suggest, occur when the supplier has delivered too much or too little product when judged against the original retailer's PO. Many retailers are issuing fines to suppliers when there are perceived PO discrepancies. Walmart's Supplier Quality Excellence Program's (SQEP) fine structure is $200 per PO per defect and $1 per unit handled, (5) which can add up quickly, leaving vendors underwater. Aside from excessive fines, vendors also lose revenue when retailers choose to keep any excess product without returning it or reimbursing the vendor.

It is common for retailers to issue multiple types of purchase orders to their vendors weekly. To distinguish them, vendors typically deliver multiple pallets, one for each type of order, and they arrive at the DC on the same date and at the same time. Matarazzo explains, "In the case of a mismatched PO, one pallet from the same vendor might be found to be 100 units over and the other 100 units short due to receiving product against the wrong purchase order. It's not too big of a deal when you are dealing with cans of soup, but when you are dealing with laptop computers, it can be financially devastating to a supplier."

Chain of custody monitoring is one method of proactively addressing the root causes of the problem. By using detailed documentation and taking photographs at every stage of the process, from picking the product, building the order, staging, loading, and unloading, vendors have clear evidence of how the shipment was ultimately received. Freight should be transacted on the dock with a bill of lading that confirms the details and accuracy of each shipment. However, truck drivers are frequently not allowed on the dock to oversee delivery leading to a lack of transparency, which corrupts the proper chain of custody.
Many distribution centers are under pressure to meet time constraints when unloading and counting a shipment. If they reach their time limit, one workaround is to sign off on a bill of lading as receiving "0" or "STC, Said to Contain or Subject to Count," assuring the driver that it will all work out in the receiving process. This is clearly not an ideal situation for anyone.

Fusion Transport has 40 years of experience providing full-truckload and less-than-truckload (LTL) services that save their clients time, money, and hassle when moving freight. As the leader in tech-driven freight management solutions, Fusion Transport's platform integrates assistance with analytics, tracking financials, managing inventory, and maintaining CRM systems, streamlining and automating processes for faster and more accurate tracking of supplies and inventory to reduce cost and improve shipping performance.
Matarazzo advises, "With better collaboration and communication between retailers, suppliers, and the trucking industry, these shipping and receiving challenges can easily become opportunities to make the supply chain more transparent and less complex."

About Fusion Transport
Freight industry visionary Frank Matarazzo responded to the complex challenges of shipping logistics, consumer demands, and the need for advanced supply chain solutions by creating Fusion Transport. Emerging from two third-party logistics brokerages and based in Rutherford, NJ, Fusion Transport has become a pivotal force in retail consolidation and is now a leader in technology-driven freight management solutions. With over 40 years of expertise, the company is revolutionizing the North American less-than-truckload (LTL) network through a technology-based approach that not only meets market demands but also reduces the inefficiencies typically seen in traditional LTL carrier networks. This innovative strategy offers a more streamlined and cost-effective option for shipping merchandise in LTL quantities across the country, epitomizing the disruptive, customer-focused ethos of Fusion Transport. For more information, visit their website at https://www.fusiontransport.com/.

References:

1. Schneider, Will. "Exploring the Number of Warehouses in the U.S. from 2007-2023." Warehousing and Fulfillment | Find the Best Warehousing and Fulfillment Services, 7 Feb. 2024, warehousingandfulfillment.com/warehousing-and-fulfillment-resources/exploring-the-number-of-warehouses-in-the-us-from-2007-2023/.
2. Marcus Lu Article/Editing: "Ranked: The Biggest Retailers in the U.S. by Revenue." Visual Capitalist, 24 Nov. 2023, visualcapitalist.com/biggest-retailers-in-the-us/#:~:text=Ranked%3A%20America's%20Biggest%20Retailers,global%20sales%20crossing%20%24600%20billion.
3. "Walmart's Supply Chain: A Detailed Look at How They Manage It." Vector, withvector.com/resource/walmarts-supply-chain-a-detailed-look-at-how-they-manage-it/. Accessed 22 May 2024.
4. Tumisang Bogwasi 2X Award-Winning Entrepreneur | Empowering Brands to Generate Leads, et al. "The Biggest USA Retail Companies in 2024." Brimco, 14 May 2024, brimco.io/the-biggest-usa-retail-companies/.
5. "NRF Forecasts Retail Sales to Reach at Least $5.23 Trillion in 2024." NRF, 20 Mar. 2024, nrf.com/media-center/press-releases/nrf-forecasts-retail-sales-reach-least-523-trillion-2024.
6. "Walmart's New SQEP Program: 3 Things for Suppliers to Know." Harvest Group, 13 Dec. 2022, harvestgroup.com/walmarts-new-sqep-program/.

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