When selling to a customer can actually cost you money

We were delighted to receive an order from a new customer yesterday. Small order but in view of the size of the customer, we were congratulating ourselves on a job well done. We even agreed to the settlement terms. For the uninitiated, settlement terms are when you agree a discount on the payment due to you from the customer for the pleasure of him paying you money he actually owes you. This is of course on top of any discounts that you had already agreed with the buyer. If you ever have to negotiate with a large retailer, ensure that the settlement discount is discussed at the same time as the normal discount.

The common practice these days is for the buyer to then pass the PO handling to a more junior person in the department. You then get a long list of labelling and delivery rules i.e. the goods have to be packed in 3s by a person wearing green gloves on a Tuesday, the driver must wear a blue tie in a red spotted van and turn up on the door after having dully booked a slot that is rarely respected so the driver has to wait and guess who gets to pay waiting time…. I may exaggerate a little but certainly the last part is true.

Well today, the delivery instructions came and we could comply with all the paperwork and labelling without any real issues. But then came the last three pages…. You either use the carrier that the customer specifies. Carrier with whom we have no contract and therefore will pay through the nose for the goods to be delivered or agree to the following charges if something goes wrong with the delivery:

Reason for Charge

Charge Measure

Charge (exc. VAT)

Details of criteria

Cancellation/Amendment (less than 24 hours)

Per P/O, Per Delivery

€75.00

• Delivery slot cancelled/amended with less than 24 hours to arrival

Late Arrival, Non Arrival

Per P/O, Per Delivery

€125.00

• Vehicles failing to arrive within the agreed booking slot (timeframe is 30 minutes each side of the booking time)

Goods Not On Vehicle

Per P/O, Per Delivery

€125.00

• The booked in purchase order number is not on the vehicle

Rejections

Per P/O, Per Delivery

€125.00

• Damaged on arrival

• No/Incorrect PO number

• Mixed PO’s – driver is unable to split

• Incorrect PO delivery

Labelling

By Carton

€15.00

• No Label Displayed

• Label does not comply with proforma in vendor’s manual

Damages (Box or SKU Damage)

By Carton

€15.00

• Outer damaged (visible or suspected)

• Damage to product within box

Shortages

By P/O,Per Delivery

€45.00

• missing stock versus the delivery/packing note

Overs/Substitutes/Mispicks, Duplicate Orders, Out of Date

Sliding scale by volume

See below table

• Over delivery

• Missing stock vs the delivery note

• Delivery of wrong stock

• Substitute stock, unrequested goods

• Out of date stock

• Unrequested stock or end of line items

P/O Availability

By SKU Number

€15.00

• P/O closed

Mixed P/O, SKU, Style

Per P/O, Per Delivery

€30.00

• Mixed purchase orders on presentation of delivery

• Delivery of goods not booked in against booking slot

• Delivery of multiple styles of goods in a carton without separators

• A single carton contains more than one P.O.

• Delivery of mixed P/O’s

• Multiple P/O’s delivered under single P/O

No paperwork

Per P/O, Per Delivery

€60.00

• Packing note not supplied

Paperwork Presentation

Per P/O, Per Delivery

€50.00

• Paperwork missing P/O

• Paperwork illegible

• Wrong paperwork

• Paperwork not containing the booking reference

• Paperwork not containing P/O

• Box containing paperwork is not clearly marked

 

And also an admin charge of €75 per debit line….

So if our goods arrive 30 minutes later than booked, that is €125, if one of the boxes is damaged, another €125, and to manage those debits a further 2 x €75 for administration. This means that this delivery alone would actually cost us €400 payable to the customer. This is without counting the damaged goods that would obviously be our cost as well. And I was forgetting the carrier’s delivery costs. So, for an order worth £300, we could actually have to pay the customer for not receiving it….. I know that business is tough in the high street but I think that this is really taking the biscuit.

The buyer was really put out that when we refused this order…

1 comment for “When selling to a customer can actually cost you money

  1. June 16, 2011 at 3:18 pm

    For anyone reading this and thinking “surely not”, Thierry, is recounting the kind of issues that are an everyday challenge when dealing with big retailers.

    It is something that I’ve worked with for years and you need to know what your doing.

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