Tackling the Top 8 Causes of Vendor Chargebacks With Integrated Apparel ERP and Warehouse Management

If you’re a wholesaler in the apparel or footwear industry, you know that chargebacks can pose a significant threat to your bottom line. Apparel retailers rely on you to provide consistent, quality products that match the order they’ve placed. Any deviation from that costs time and money. So, the ability to charge you back is their insurance policy. Your retailers use this “policy” so they don’t lose revenue because of an oversight on your end.

As an apparel wholesaler, your security comes from the rules in a Wholesale Purchase Agreement (also known as the Vendor Guideline). This document clearly outlines mutual expectations and ensures both parties understand and accept them. Unfortunately, these agreements cover every detail of every order, no matter how large, meaning companies of all sizes—from start-ups to global enterprises—still regularly encounter chargebacks.

Chargeback fees notoriously add up fast because there’s an opportunity for issues to occur at any step within the supply chain. These fees can account for up to 20% of an invoice, equating to tens of thousands of dollars of lost revenue. Charges like this have become so common many apparel wholesalers simply shrug them off as a necessary cost of doing business. But what if it didn’t have to be this way?

Tackling the root causes of chargebacks may seem like a daunting task. However, if you prioritize visibility across your operations and equip your teams with the right tools you can significantly minimize or even eliminate apparel chargebacks. An apparel-specific enterprise resource planning (ERP) solution with seamless warehouse management system (WMS) functionality is the most effective way to reduce these unwanted costs.

In this article, we’ll break down how to combat eight of the most common chargeback reasons and demonstrate that when you approach this issue strategically, minimizing and preventing chargeback costs can be simple.

1. Shortages

Sending less than what was ordered can often cost you more with chargebacks than if you shipped the entire order. What’s worse is if you intended to ship the entire order, but a portion of it actually shipped earlier than the rest. For many retailers, this is a big no-no and can result in a hefty chargeback.

What’s more, should the carton content label indicate less than what is physically in the box, this can also be considered a shortage—yet another chargeback. Shortage-related chargebacks are a surefire way of narrowing your margins and potentially damaging customer satisfaction. This is arguably the most common reason apparel wholesalers encounter chargebacks.

A WMS solution integrated with your ERP software automates procedures to eliminate the possibility of the above errors occurring. Together these software solutions provide real-time visibility of how many orders are received, packed, shipped and delivered as well as the status of inventory, including raw materials.

For instance, with Aptean’s integrated ERP software when you receive an order from a retailer, the order details are automatically available throughout your organization, including to the team involved in preparing that order. So, your warehouse personnel can see the number of units ordered in real time and ensure orders are packaged properly. With this immediate visibility, Aptean’s apparel ERP breaks down silos and ensures smooth communication—improving warehouse management and reducing the risk of shortage-based chargebacks.

2. Invalid Shipping Labels

As we’ve established, the communication between your customer order system and shipping label generation must be seamless. The product quantity and address information entered by the retailer must match what is printed. But one more crucial step is still needed to avoid shipping label-related chargebacks. You must comply with what every big box retailer requires—a shipping label with layouts that are exclusively their own and placement instructions that must be met.

Your apparel retail customers have strict guidelines outlining format expectations in the Wholesale Purchase Agreement and will likely require a GS1-128 (still widely known in the industry as the UCC-128) label, as it’s the global retail standard. As you know, these labels are broken down into zones. Each zone contains important text or barcode information and where you place these zones within the label is very important. As is the placement of the label on the package. If there is any error in placement, the package may not scan properly at their facility, delaying that retailer’s processing by hours or even days. This isn’t just an inconvenience; it’s justification for that retailer to send you an expensive chargeback.

Implementing industry-specific apparel ERP software integrated with WMS functionality gives you complete control over your printing preferences, saving you thousands of dollars. For example, Aptean’s fashion and apparel ERP ensures all customer order information is accurate and up to date, while WMS features handle label formats and placements as per retailer requirements. This integration ensures labels are printed correctly and placed appropriately, preventing scanning errors and costly chargebacks.

3. EDI or ASN Errors

Anyone in the apparel industry who sells to big-box retailers has likely been faced with the huge volume of electronic data interchange (EDI) required. Not only can this be difficult and time-consuming to manage, it can also be very easy to make a mistake. This is all down to the intricate compliance details that must be met to avoid chargebacks.

All GS1-128 shipping labels each have a zone dedicated to an EDI barcode. This corresponds with the advanced shipment notice (ASN), which you must send to the retailer ahead of sending the package. Like the shipping label, the ASN also comes with its own strict set of rules—it must be formatted according to consumer specifications. And if that’s not enough, there is even a designated time frame in which it must be sent. Failure to comply with all this can land you a hefty chargeback—that's why you need specialized software to manage the process.

With integrated ERP, WMS and EDI functionality, avoiding this fee is simple. These solutions efficiently manage your business operations so that you can avoid hidden costs within your warehouse, ensuring precise tracking and streamlining shipping processes while storing all related data for ultimate traceability and reporting.

So, the next time your customer sets their EDI and ASN expectations, your apparel ERP software can automatically format and track these pieces in accordance with the agreed-upon terms. Meanwhile, the warehouse management system will help to minimize errors by ensuring accurate inventory data and a streamlined shipping process. Utilizing integrated systems means you can efficiently manage the flow and storage of materials in your warehouse.

4. Untimely Deliveries

When you contractually agree to a delivery date with a retailer, it can’t be treated like an estimate—it’s a commitment you must meet. Retailers use forecasting and sales projections to determine when to place orders and ensure goods are received before shelves are empty and revenue is lost. But they also want to avoid overstocking. Excessive stock means your clients must store those goods and pay for the storage as well. As a result, being early or late on your delivery deadline often entails chargebacks.

If your shipment arrives outside of the agreed delivery date, it forces your retailer to adjust their schedule, which can disrupt day-to-day operations and require staff reassignments. This disruption is particularly detrimental in a “Just-In-Time" ordering model.

An integrated apparel ERP and WMS solution can help you avoid this, offering visibility and tools to ensure timely deliveries. Demand forecasting and planning features of apparel ERP use past shipping and warehouse data to predict future processing timelines accurately so that you can make the necessary plans to get those shipments there on time—not a day early or an hour late.

A sophisticated platform also fosters coordination and communication between your warehouse and shipping teams. With real-time data on order status, inventory levels and deadlines, your teams will be able to work together to ensure orders are packed, shipped and delivered on the agreed-upon date. This level of synchronization reduces the risk of errors and safeguards your business from potential chargebacks due to untimely deliveries.

5. Damaged Packaging and Failure To Meet Specifications

A common cause of vendor chargebacks in the wholesale apparel industry is damaged packaging or products. When goods arrive at a retailer with torn, crushed or otherwise compromised packaging, it diminishes your products appearance, often even making your merchandise unsellable. Of course, this can lead to significant financial penalties for your organization, increasing the cost burden and straining your business relationships with your retail clients.

Another frequent cause of chargebacks is failure to meet packaging specifications. Some retailers provide detailed packaging guidelines, specifying everything from the materials used to the exact dimensions and labeling requirements. Non-compliance with these specifications can disrupt your retailer’s inventory management systems, causing delays and additional labor costs. Such incidents will affect your credibility and incur financial penalties.

A seamless apparel ERP and WMS solution offers automated compliance checks to ensure packaging meets all retailer specifications before shipment. With an ERP designed for apparel wholesalers, your organization can maintain detailed records of packaging requirements and integrate these guidelines into your order-processing workflows. This way, every order is packed correctly, and non-compliance risks are reduced. Meanwhile, warehouse management tools ensure product handling and packaging are done properly—facilitating precise labeling and barcode generation, aligning with retailer expectations and preventing chargebacks.

6. Shipping to the Wrong Location

Shipping to the wrong location is a common yet costly error. When a product is sent to an incorrect address, it disrupts your retailer's supply chain. To compensate, retailers can impose chargebacks. Mistakes like this often stem from miscommunication, data entry errors or outdated information.

What’s more, the repercussions of incorrect shipping go beyond immediate financial penalties. The damage to your reputation can be far-reaching. Such errors can lead to a loss of trust with retailers, which could impact future business opportunities. In the long run, this means fewer contracts, reduced shelf space and even the loss of retail partnerships. Avoiding such chargebacks, and the errors that cause them, is crucial for maintaining strong, long-term relationships with retail clients.

Integrated apparel ERP and WMS systems offer real-time data synchronization across all departments, ensuring that the shipping information is always accurate and up to date. By automating data entry and order processing, you can reduce the likelihood of human errors. This technology also provides advanced tracking and reporting features that allow your team to monitor shipments closely and verify that products are being sent to the correct addresses. Not only does this save you costly chargebacks, it enhances overall operational efficiency and reliability—so you can reduce costs while improving customer experience.

7. Using the Wrong Carrier

Retailers often prefer carriers, especially for less-than-truckload (LTL) shipments. Many LTL carriers travel to major retail warehouses daily, while others only make weekly trips. But partnering with the wrong carrier can have serious consequences—orders may end up sitting at an LTL facility for days or even weeks, causing delays and missed delivery deadlines.

Such delays can disrupt your entire supply chain and burden your retailers too. Even if your planning and preparation are on par, your shipment might still be delayed if your carrier doesn’t make frequent trips to the retailer's warehouse. Delays like this can lead to missed due dates and chargebacks, significantly impacting your bottom line.

You can utilize an ERP for apparel wholesalers to help you avoid these carrier issues. The system can provide real-time visibility of your supply chain and store past carrier data and even integrate with transportation management systems (TMS) to help you select the best carrier. All of this helps you ensure timely deliveries and reduces the risk of delays.

With a seamless solution, you can track carrier performance, make informed decisions and avoid carriers that have caused issues in the past. By integrating these tools into your operations, you can ensure smoother deliveries, minimize chargebacks and maintain strong relationships with your retail partners.

8. Delivering Incorrect Products

Your retailers submit purchase orders for a specific product based on customer demand or available inventory space. When you deliver an entirely different product, it can cause stock imbalances, missed sales opportunities and additional administrative work, negatively impacting your retailers’ operations.

Incorrect product shipments to retailers often result from data inconsistencies, manual errors in order processing and a lack of real-time inventory visibility. These inaccuracies can cost you an arm and a leg to cover the costs incurred by retailers, reducing your profitability and damaging business relationships.

Apparel ERP software integrated with a WMS helps you address these issues by enhancing data accuracy and automating inventory management. ERP systems centralize and synchronize data across departments, maximizing consistency and reducing errors. This means you can accurately manage your stock levels to meet order demands with ease. WMS even provides real-time visibility into stock levels, ensuring the correct products are picked, packed and shipped.

Together, these systems enhance communication and coordination across your apparel supply chain so that your teams can inform retailers of stock issues promptly and adjust orders accordingly. This reduces the likelihood of incorrect shipments or unnecessary chargebacks.

Say Goodbye to Vendor Chargebacks Once and for All

Avoiding vendor chargebacks is key to maintaining profitability and smooth operations in the apparel industry. The first step to minimizing these charges is creating a chargeback defense plan with your supply chain and warehouse managers with regular reassessments to ensure it aligns with your company's evolving needs.

Next, implementing industry-specific ERP and WMS solutions is crucial in helping you effectively identify causes of chargebacks and address them before they escalate to significant expenses.

In particular, with Aptean’s integrated apparel software, your team will have valuable features at their fingertips to monitor and identify potential issues. When you pair key resources with Aptean’s invaluable tools, not only do chargebacks become more preventable, you also streamline processes, gain real-time supply chain visibility and improve customer service.

Aptean’s apparel ERP and WMS solutions are designed to meet the unique needs of the apparel and footwear industry—ensuring seamless integration and enhanced performance is our goal. By investing in these solutions, you’ll streamline your operations and see a significant return on investment through reduced chargebacks and improved operational efficiency.

Take the first step towards eliminating chargebacks and optimizing your supply chain with Aptean’s apparel software solutions. Get in touch with our experts to learn more.