Revenue leakage isn’t always caused by massive macro changes; sometimes it’s the quiet, compounding erosion of profit that is difficult to track and that can be the real difference maker in your bottom line. 

While current macro issues like changing tariffs and rising freight costs make headlines, invalid retail deductions often add up in the background, quietly costing suppliers millions more each year. This is the “Margin Risk Hiding in Plain Sight.”

While retail deduction problems are nothing new for suppliers, we’ve noticed how cross-team collaboration is often the first thing to go when these larger issues become overwhelming. 

Siloed work, especially between finance and operations teams, can often lead to time-consuming and costly delays in root cause analysis and problem solving.

What may look like a deduction to Finance or a defect to Operations is actually one in the same. Having a cross-team functional process in place to align these issues and perform root cause analysis on them will move your organization from chaotic deduction management to strategic revenue recovery.

The Anatomy of Retail Deductions: Where Revenue Leakage Begins

The first step in tackling revenue loss begins with an understanding of how operational failures on the supplier and retailer side translate into financial penalties. 

What are these Costly Operational Failures?

In Walmart and Amazon, many suppliers refer to the larger deductions problem as “revenue leakage.” Anything from OSDs (Overages, Shortages, and Damages) to more esoteric ASN-related compliance charges, suppliers find that not being one hundred percent compliant with each of their retail partner’s policies will usually result in leakage of one kind or another.

Pricing Deductions at Walmart and Purchase Price Variance (PPV) deductions at Amazon 

Pricing deductions at Walmart, like Code 10s or Code 11s, are created when there are discrepancies between the retailer and the supplier’s understandings of costs and prices.

Code 10s are when there is a difference between the allowances on the purchase order or line level and the supplier’s invoice.

Code 11s are generated when there is a difference between item costs on a supplier invoice and the retailer’s purchase order. 

At Amazon, PPV occurs when the invoiced product cost doesn’t match the agreed contractual cost, or when the quantity received/invoiced is incorrect.

Finance and Operations Teams’ Approaches to Pricing Deductions

Finance Role: Flagging Code 11 claims (Walmart Pricing Claims) or the PPV defect on Amazon’s Financial Scorecard.

Operations Role: Ensuring catalog data for unit vs. pack quantity is consistent between the PO and the invoice is a crucial step to avoid PPV.

Shipping and Packaging Non-Compliance (Chargebacks)

Another common form of revenue leakage at Amazon and Walmart are compliance chargebacks. These cover anything from shipping and packaging to on time ASN shipment.

Walmart Supplier Deductions are often driven by programs like SQEP or OTIF. Suppliers have visibility and dispute capabilities for these programs in HighRadius. Issues include untimely shipments, PO accuracy, and more.

Amazon Vendor Chargebacks result from failure to comply with Amazon’s supply chain policies (e.g., SIPP, ASIN stickering). 

Shortage and Receiving Claims

Shortages and receiving claims are the result of the gap between what was invoiced and what the retailer claims to have received (e.g., Walmart’s Code 25: No merchandise received for invoice).

Also referred to as OSDs (Overages, Shortages, and Damages), these claims usually take up the greatest portion of revenue lost to deductions. These deductions are oftentimes recoverable as well, as many of them are the result of human error on one side or another, and they can sometimes be won back through the dispute channels that the retailers themselves have established.

Oftentimes the proof documentation (PODs, BOLs) for disputing these deductions live within the realm of Operations teams, but Finance teams don’t always have the visibility to perform validity checks on these deductions. 

Aligning teams to this discrepancy is the first step to stop revenue leakage.

The Case for Unified Deduction Management

Stopping revenue leakage at the source requires collaboration and strategy across teams. When everyone is on the same page, resolving these issues can become routine.

Connecting Siloed Ops and Finance Teams

Siloed costs multiply when teams are looking at the same problem from different perspectives. For example, Finance teams that are tracking revenue leakage can succeed in forecasting losses without making progress towards resolution. 

Sometimes Operations teams are unaware of issues because they don’t have good visibility into the fines, deductions, and chargebacks that finance teams have.

True deduction management best practices begin with joint root cause analysis. Operations can identify defect patterns (e.g., a specific fulfillment center causing damage) while Finance validates the cost of those defects. 

Unlocking Cross-Functional Visibility

One of the ways Walmart suppliers can align their Finance and Operations teams is by sharing visibility into each other’s data and reporting. Sharing Scintilla reports that would normally only make sense for internal team conversations can help other teams have greater visibility. 

Similarly, 1P suppliers at Amazon can utilize the Financial Scorecard dashboard as a single source of truth. It shows Finance issues detected in the supply chain, invoicing, or catalog activities. Both teams should review the defect rate regularly.

Revenue Recovery: Reclaiming Your Lost Margin

Reclaiming your revenue starts with communication and ends with automation. We’ve already talked a little about how sharing data and communicating can help. Now we’ll turn towards solutions that can empower your Finance and Ops teams. 

The Opportunity in Automated Revenue Recovery

The highest-performing suppliers realize an immediate opportunity in automated, risk-free audits to reveal recoverable revenue. This includes a historical lookback capability, allowing teams to analyze up to 2 years of historical data for shortages and accruals on Amazon, and a full 2-year lookback for claims at Walmart.

Navigating Amazon’s Dispute Timelines

Recovering Amazon Vendor Chargebacks is a complex process that usually requires multiple dispute attempts and careful timeline optimization. 

Amazon has a two-step dispute policy: a vendor can submit a dispute for the same chargeback twice through the Operational Performance dashboard before escalating the issue for further investigation. Crucially, the 24-month data retention period acts as a hard deadline for all recovery efforts.

When it comes to winning back Amazon revenue leakage, dispute timeliness is key. Suppliers need to do validity checks, revenue loss triage, proof document aggregation, and disputing all within narrow timeframes.

Navigating Walmart’s Claim Categories

At Walmart, the disputing process is complicated by the range of apps and platforms suppliers need to master in order to successfully dispute. Walmart pays back a high rate of deductions that the proof text shows are invalid. 

Strategic Deduction Management for Maximum Recovery

The most effective strategy involves end-to-end management of the recovery process, utilizing retailer-specific automation and expertise.

Fully-scaled deduction automation with groups like Carbon 6 and SupplyPike can save suppliers lots in time and money, sometimes making the difference between success and failure in major retailers like Walmart and Amazon (and more!). 

TL;DR — Revenue Recovery through Visibility and Automation

In recap, the beginning of the end for revenue leakage is the moment Finance and Operations commit to a shared view of operational data. This commitment transforms the entire deductions process from being a costly mess into a proactive revenue recovery team. 

From there, supplier teams can move on to strategic change: by viewing retail deductions not as inevitable financial penalties, but as predictable operational defects, enterprise suppliers can proactively protect their bottom line and turn recovery into a powerful strategic margin driver.