Artificial intelligence has the capacity to delve deeper than ever before into the complexities of interactions between retailers and suppliers — including financial transactions. This can be and should be a good thing; but according to a company helping suppliers manage the process with large retailers, AI appears to be tipping the scales in retailers' favor when it comes to chargebacks against suppliers. Dallas Counts, COO of Vendormint, puts it this way: "You get a PO for goods, ship them, bill for them, get paid. There's a lot of points in that process that can break down." Vendormint works with suppliers across the country using AI-driven analytics and compliance strategies to effectively recover lost revenue and prevent future disruptions. From a supply chain perspective, end-to-end visibility between P2P (Procure-to-Pay) and O2C (Order-to-Cash) processes requires transaction flow management through EDI (Electronic Data Interchange) standards such as EDIFACT and ANSI X12.
Counts adds: "What's pitched as efficiency on the retail side is quietly becoming a major margin leak for suppliers." Typically, a retailer issues chargebacks based on what it claims to have received — reducing the price it actually pays for goods received — which can result from a real error, such as a miscount at the receiving dock. Depending on the vertical, these chargebacks, known as "deductions," typically range from 3–8%. Another issue is tracking early payment discounts that suppliers offer retailers if they pay within a certain period, for example a 2% discount if payment arrives within 30 days. Counts notes: "Sometimes, the retailer may take the 2% and not pay within that time frame." AI helps monitor exact payment terms and events without needing to search through endless spreadsheets. From a supply chain perspective, in addition to standard payment terms such as net 30, net 60, and 2/10 net 30, the OTIF (On-Time In-Full) penalties applied by major retailers like Walmart, Amazon, Target, Costco, Kroger, and Home Depot in their vendor agreements, along with cube utilization, ASN (Advance Shipping Notice) accuracy, and compliance rates, directly impact supplier margins.
Suppliers and retailers always accept that there will be damage and returns, and these can be addressed with an allowance in a contract rather than splitting hairs. But typically, when chargebacks balloon beyond the accepted allowance, there is an audit process that usually covers the preceding 12 months and often results in resetting the allowance amount in the next contract to zero. AI makes the audit process faster, easier, and more accurate. Some situations are more nuanced. Counts describes a case where an item exists in the store, but the same product is coming out in a new, seasonal color. Sometimes retailers don't want to hold that old inventory, so they mark it down to zero damage and discard it, which leads to a chargeback. AI-driven monitoring can quickly show a supplier that everything is moving at 1.5%, but when the new product arrives, the level spikes, and the retailer is responsible for that spike. From a supply chain perspective, the impact of SKU rationalization and category management decisions on the supplier side is managed through RGA (Return Goods Authorization) and markdown allowance contract clauses. RTV (Return to Vendor) operations constitute a significant line item in reverse logistics costs.
Warehouses are becoming more sophisticated and automated and may provide more accurate data trails, but loading dock operations tend to be more opaque, according to Counts, which is why shortages and overages can end up being disputed. Counts says: "You have to play detective." He adds: "It's an investigation and the document trails aren't always easy to follow." Vendormint uses AI to help read bills of lading, packing lists, proofs of delivery, and more. From a supply chain perspective, automated reading of BOL (Bill of Lading), POD (Proof of Delivery), and packing slip documents using OCR + NLP technology represents concrete supply chain applications in the document AI field. Vendormint positions itself in the deduction management market, which is tracked by iNymbus, Recoupable, Vendor Compliance Federation, and Spend Matters. Ultimately, Counts' views clearly demonstrate that AI is simultaneously empowering both retailers' chargeback capabilities and suppliers' defensive tools.
Key Takeaways:
1. Vendormint manages chargebacks with AI-driven analytics.
2. Chargeback deductions typically range from 3–8%.
3. Early payment discount abuse is a separate revenue leak source.
4. Seasonal color changes can lead to artificial spikes in chargebacks.
5. BOL, POD, and packing lists are automatically read by AI.
