Overview: $100M Problem Rooted in Visibility Gaps Across the Supply Chain
Our client, a well-known name in the condiment aisle, came to us facing a massive business problem: a lack of real-time visibility into their supply chain. When shipments to major retailers like big-box stores were late, incomplete, or damaged, retailers responded by issuing deductions—fees taken directly off the invoice amounts. In 2022 alone, these deductions hit $95M, and by 2023, they grew to $100M. The company’s outdated manual process meant they could only validate $5M of these claims, leading to $95M in losses that year that were accepted without question.
This was not only a financial drain but a glaring operational gap that left them with zero control over revenue leakage and no way to contest these deductions. If a shipment delay wasn’t due to the company’s error but, say, an issue with a third-party carrier, they had no system in place to prove it. Retailers could deduct payment amounts as they saw fit, and without a mechanism to validate claims, the company was left to absorb these costs.
Challenge: Legacy Processes Can’t Keep Up with Modern Problems
The company’s legacy approach to handling deductions was a manual process using email chains and disconnected spreadsheets scattered across different teams. When retailers flagged issues, each case had to be tracked down individually. Agents wasted hours gathering information from various systems, often leading to delayed responses or incomplete data. By the time they could validate a claim, it was often too late to dispute it.
The situation became even more challenging as big retailers ramped up their automation for issuing deductions. The company had no automated system to counteract these claims, leaving them constantly reacting to disputes instead of proactively managing them. They needed a solution that could give them visibility into their supply chain, allow for faster dispute resolution, and reduce revenue loss.
Solution: Implementing an Integrated Dispute Management System with JSM
Praecipio developed a solution using Jira Service Management (JSM) to overhaul the company’s claims and deductions management process. The goal was to bring all deduction-related information into a single, centralized location and create a unified process that could scale. JSM became the gateway through which all claims flowed, allowing the company to track and validate claims in real-time. Each claim was automatically imported into JSM as a Jira issue, cataloging all the necessary details—deduction amounts, shipment dates, carriers involved, and retailer specifics.
This new system brought all relevant parties and their email correspondence into a single location, giving our client the visibility needed to either validate or successfully dispute a claim for late/damaged product. For each new claim, this information was brought together to live under a single Jira issue, allowing agents to discuss with retailers and distributors to seek the appropriate resolution, all from within Jira Service Management.
Key elements of the solution included:
- Automated Claim Imports: All retailer deduction claims are first imported as Jira issues, complete with deduction amounts, shipment details, carriers, and the retailers involved, creating a clear, dutiable trail.
- Centralized Communication: JSM was configured to handle all email communication, capturing every correspondence between the company, the retailers, and any third-party carriers directly within each Jira ticket, eliminating the chaos of email threads. Praecipio took our automation one step further by templatizing some correspondence with common distributors and retailers, allowing agents to act on common requests for information without manually composing or sending those messages.
- Visibility & Reporting: JSM’s reporting capabilities allowed the company to see trends in deductions, identify the most common issues, and address the process gaps that were causing these disputes in the first place.
The solution was designed to improve visibility and traceability, ensuring that no deduction went unchecked, giving the company the tools to dispute claims with confidence.
Results: A Fully Solved $100M Problem
We delivered a robust solution that streamlined dispute management and provided full visibility into the supply chain, giving the company the tools they needed to proactively manage and validate retailer deductions. Our work empowered their teams to handle their $100M problem by taking a disjointed manual process and turning it into an efficient, automated workflow. As a result, they were set up to validate far more than the $5M they previously managed, positioning them to recover millions in lost revenue each year.
- Increased Validation Capacity: Enabled the company to validate significantly more than the previous $5M worth of deductions annually.
- Potential Revenue Recovery: Positioned the company to recover millions in lost revenue by contesting and disproving invalid retailer deductions.
- Time Savings: Eliminated hundreds of hours spent on manual data gathering, allowing teams to focus on resolving disputes faster.
- Operational Efficiency: Reduced processing time for validating deductions from days to minutes with automated tracking and centralized communication.
- Expanded Adoption: The solution’s success led to adoption by six other teams for similar process optimizations, showcasing the scalability of the approach.
Beyond just solving this specific issue, our approach sparked interest across the organization, leading to other departments adopting JSM to address their process challenges. Six additional teams began leveraging JSM for similar use cases, demonstrating our solution’s flexibility and value beyond its initial use case. This engagement proved that tackling visibility issues within supply chain operations can have far-reaching benefits and establish a foundation for greater operational efficiency and control.
