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Purchase Order Confirmation Rates: Navigating Amazon’s New Chargebacks

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Photo appears courtesy of Wendy.

Amazon recently announced a new type of chargeback that will initially impact Hardlines’ Vendor Central suppliers. While this might not seem to apply to you or your other trading relationships today, Amazon more and more (like Walmart in the past) is a bellwether when it comes to making demands on suppliers. The never-ceasing effort to bring customers robust selection at competitive prices in a hurry puts the responsibility squarely on distributors and manufacturers to fill orders and maintain proper levels of inventory to support demand.

Your purchase order confirmation rate is the rate at which you accept or backorder the units ordered. Amazon is looking for your PO Acknowledgement (POA or EDI 855) to accept or backorder at least 80% of the quantity for each item they order. Failure to do so will result in a chargeback of 3% of the cost of goods sold for each item you are not either accepting or back-ordering.

You can reject fulfilling any item but the type of POA rejection code you use will either result in a chargeback (“soft” rejects) or may adversely impact Amazon’s ability to order the item in the future (“hard” rejects.)

Here’s the list:

EDI POA Codes   Vendor Central Acknowledgment Codes Hard/Soft Reject
AC Accepted: In Stock N/A
IB Backordered N/A
BA Backordered: Not yet available N/A
BX Backordered: Not yet published N/A
BR Backordered: To be printed N/A
IR Cancelled: Temporarily out of stock Soft reject
CA Cancelled: Not yet available Soft reject
CQ Cancelled: Does not meet minimum Soft reject
OS Cancelled: Out of stock Soft reject
IR Cancelled: Temporarily out of stock Soft reject
CK Cancelled: Permanently out of stock Hard reject
CX Cancelled: Never published Hard reject
CG Cancelled: No geographic rights Hard reject
CB Cancelled: Not our publication Hard reject
OP Cancelled: Out of print Hard reject
CP Discontinued: Obsolete Hard reject
KC Cancelled: Considering reprint Hard reject
R2 Cancelled: Invalid product information Soft reject (but no chargeback)
R3 Cancelled: Temporarily suspend orders Hard reject

Remember, an Excessive Backorder chargeback occurs if you POA backorder more than 10% of the units on Amazon POs in any given week. They will also assess the volume of products placed on backorder if you regularly enter a backorder code instead of fulfilling a purchase order. Skipping or issuing late POAs is not an option either due to other chargebacks like Unconfirmed PO Units or Late PO Acknowledgements. Fortunately, while Amazon is not famous for suppliers being able to discuss matters with actual Amazon personnel, with Vendor Central they do now have a much stronger platform in place for testing and self-monitoring, as well as many experienced and capable implementation partners like us.

To learn more about this new Amazon chargeback, sign into Vendor Central and click Help. Then navigate to Vendor Operational Performance (Chargebacks) > Chargeback – problem with PO > About Purchase Order Confirmation Rate. Non-compliance notifications start this week with the new chargebacks scheduled for January 30, 2017.

MOST IMPORTANTLY, for doing business with Amazon or any truly customer-centric trading partner, continue to prepare your business for real-time, lights out trading, specifically:

  • Integrate EDI or other B2B transactions directly with your systems for Order Entry / Inventory / Fulfillment
  • Adhere to DWIAD “A Day’s Work In A Day” for realizing all other aspects of transactional activity in your systems
  • Implement daily, accurate Inventory Advice Feeds like EDI 846s while incorporating reasonable calculations for safety stock
  • Involve operations and sales to relentlessly incorporate processes and policies that support eliminating Chargebacks
  • Leverage your hard-won learnings and hard-spent initial investments across the organization with as many partners as possible
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