What we'll cover:
What is Kohl's rollup process?
Why do they do it?
What impact does this have on deductions we receive?
What are the impacts outside of deductions?
As a supplier, what are some options I have to prevent Kohl's needing to rollup?
First up, chances are high you're here from a shortage deduction detail page in our app. If that's the case, hop on down to #3, Kohl's rollup process impact on deductions.
1. What is Kohl's rollup process?
Kohl's will sometimes roll purchase orders at a DC level up to the total PO level, "above" DCs. Rolling up DC-POs to total POs lets them try to reconcile inventory and costs faster and address perceived shortages and overages.
So if they think they're short inventory at DC 810 for PO 1234578-0810 and they think they're over inventory that has the same cost at DC 862 for PO 12345678-0862, they'll try to use the perceived overage at 862 to offset the perceived shortage at 810. And to do this, they have to "rollup" the DC-POs to the total PO level. When this happens, Kohl's will lose which DC an invoice and related deductions might be coming from. If you dispute a deduction related to a rolled up PO, it will take some manual research for Kohl's figure out which invoice and DC a deduction is related to.
2. Why does Kohl's do this rollup process?
We believe they're mostly doing this to try and pay suppliers as fast as they can. Generally, that's a good thing. Money now is better than money later, and suppliers would generally like to have their invoices paid sooner than later.
It's also likely Kohl's is doing this so that they can take advantage of cash discounts for paying early. So if you have payment terms that are 2/10 net 30, normally that means if Kohl's pays your invoice within 10 days, they get to take a 2% discount on what they have to pay. So if the bill was for $100, they would only have to pay $98 if they paid within 10 days. And the 30 is how long they have to pay the full amount if they miss that initial 10 day window for a discount. And then past 30 days, it's likely on the supplier to go to Kohl's requesting payment.
3. What impact do rollups have on deductions we receive?
For deductions, there are two main concerns with the rollup process:
As a result of the rollup process, Kohl's often generates deductions that they repay themselves. They might think they have a shortage, and so they issue a deduction, and then later they find inventory to account for it, and so they then repay the deduction to cancel it out.
Because this happens fairly regularly, for shortage deductions, we're putting an initial 30 day pause on disputing them in case Kohl's is going to repay them. 30 days after a shortage deduction has been generated, if it's not yet repaid, then we would recommend disputing if you think it's still invalid. We're doing this because we don't want to generate frivolous disputes that will only bog down Kohl's and their review process and cost suppliers more time for legitimate deductions that actually need disputing.
As mentioned above, Kohl's loses the DC a deduction and an invoice might be related to when they roll up to the total PO level. For disputing, you need proof. Ideally you only provide just the proof you need. That's easy when you know a deduction is for DC 862. But if you don't know the DC, you have to provide all the possible proof you can gather. Kohl's understands this is a result of their rollup process and it seems to be acceptable to them given it's the current state of affairs.
In our app, if you're dealing with a rollup-related deduction, you may see multiple BOLs or PODs and invoices instead of just one of each.
4. What do rollups impact outside of deductions?
As far as we know, Kohl's is only looking at item costs when reconciling POs across DCs (aka rolling up). So if you have two completely different items, perhaps different sizes, patterns, materials, or scents, and they happen to have the same cost, Kohl's might use a perceived overage on item A to reconcile a perceived shortage on item B, even though they're not the same item and may not be interchangeable from a store inventory or shopper point of view. Cost seems to be the only consideration, as long as they're on the same overall PO.
This has important implications:
Likely Kohl's finance and inventory systems are out of sync after they rollup.
What DCs and stores are expecting inventory-wise may be incorrect compared to what they receive.
Inventory on hand and sales reporting could also be impacted.
Inventory and sales being impacted means that forecasting and replenishment could also be impacted.
Forecasting and replenishment being impacted means that new purchase orders Kohl's is sending could also be muddied.
The above may not be immediately impactful if you're running a program that only has initial fulfillment and no replenishment. However, when reviewing the data after the program to plan for future programs, you may not be getting the most accurate data if there were rollups involved. That's bad for planning.
The above will be most impactful to replenishing suppliers. Items are getting tangled up in Kohl's system and manual effort, emails, calls, meetings, and lots of spreadsheets may be involved to straighten out the data and understand what happened so that future plans can be made on the most solid foundation possible.
5. What can suppliers do to prevent the rollup process?
Coming soon!
Stay tuned for more and for possible revisions to the above!