All right, Ron, thank you very much for taking the time to join this call.

So, yeah, if you could please introduce yourself, your organization, and your day-to-day responsibilities, we can get started there.

My name is Ron Ferguson. I’m vice president of Ferguson Associates. We’re a third-party logistics provider that does everything from transportation logistics to holding inventory, order fulfillment, pick-pack, and shipping, along with many other value-added services. One of those value-added services is chargeback avoidance in all of those realms. When dealing with retailers or any trade partner, there could be contractual obligations that, if not met, will result in chargebacks. This can take place in the transportation realm or inventory control, but most particularly for us, it’s in shipping to retailers. I’ve been doing this for 34 years, and chargebacks to retailers has always been and likely will always be a significant issue in the United States.

So you guys are basically trying to solve this problem for your customers, right? Ensuring that they don’t get any retailer chargebacks? If you could please share some specifics of those challenges—what were some of the specific challenges and how did you attempt to tackle them before?

The chargeback can be for several things, something as simple as not having a specifically mandated shipping label in the correct position on a box. The most pertinent way we’re affected by chargebacks is for shortage claims. If goods are shipped from the vendor to the retailer and the invoice doesn’t match what was actually received physically, a chargeback for a shortage will be generated. Mistakes happen, but as we move further into the digital age with digital scanning and checking, errors are less likely. However, as there’s a historic buildup of shortage claims, the next likely issue is some kind of problem in the retailer supply chain, which usually is theft. After many years of trying to absolve ourselves of shortage claims using our internal evidence of surveillance video and digital documentation, one of our customers, who happens to be a vendor to all the national retailers, sourced LoadProof to combat the issue and absolve ourselves of shortage claims.

Great, so you found out about LoadProof through one of your customers. How was it before LoadProof, and how is it after? Could you talk about some specific challenges that LoadProof addressed?

Quite simply, not all evidence collected as part of the regular process is digital. Worst case, team members might have to go back into months of aged documentation to find shipping documents or paper invoices. Even then, retailers might just thumb their nose at this evidence of correct quantities. However, LoadProof has put a digital tablet at each packing station, recording independent video files of every carton packed. With a simple 20-40 second video file, we can prove that every unit was in a specific carton. Each video file is named and tagged with critical info like the retailer name, store number, PO number, and our internal serial number. When a shortage chargeback comes up, the vendor can access the web-based video file and send it to the retailer as indisputable proof that what was billed was actually shipped. The onus now is on the retailer to find out where the goods are within their own supply chain.

Do you guys pay for the carrier, or does the retailer pay for the carrier?

Typically, in U.S. transportation terms with national retailers, the vendor pays for the freight to the retailer’s local distribution center. However, because we’re in a dense commercial zone here in central New Jersey, we’re in a transportation free zone. Retailers have partnerships with local carriers, making it more efficient if they control their own transportation. In that case, we’re lucky because of our location; the retailers are paying the actual transportation costs.

And they also have the contract with the carriers, so the trucks basically show up at your DC at the set time?

Correct. We access a web-based scheduling portal for the carrier and retailer, inputting the PO number, number of cartons, weight, and cube measurement. Then the retailer and transportation carrier tell us when the pickup will be made. This process is generally known as web tendering, where we tender the freight in advance to the carrier.

So you guys are tendering the freight to the carrier or to the retailer itself?

The carrier is technically an agent of the retailer. Legally, as soon as the goods are collected by the retailer’s agent, ownership goes to the retailer. We’re responsible for preparing the orders, tendering to the carrier, and ensuring the goods reach the tail end of their truck. Once the carrier counts and signs for the goods, the retailer takes possession, and the goods are in their supply chain.

So you guys are not even responsible for loading the truck; you just take it to the tail end?

That’s right. Many transportation providers prefer to avoid responsibility for the goods and use terms indicating they didn’t count the goods or load them; they’re just driving from point A to point B. However, we require every shipment to be counted and signed for. The retailer takes possession once the goods are signed for, and they’re in their supply chain.

It’s a good practice because retailers are doing dynamic routing and optimizing pickups from multiple vendors.

Exactly. However, accidents happen, and things can go missing. Our obligation is to have due diligence and show accuracy from preparation until tendering to the retailer. LoadProof allows us to do that effectively.

I’m curious—when you take it to the tail end of the truck, who is responsible for ensuring the goods are properly placed and secured?

We’re responsible for terms set out in the vendor agreement or routing instructions from the retailer, which spell out our obligations. Once the goods are prepared and tendered to the carrier, our obligations end there. It’s up to the transportation provider to ensure the goods are loaded properly.

What about using airbags, load bars, or strapping the goods?

That’s entirely up to the transportation provider to ensure that the goods are loaded safely. They must get from point A to point B in the same condition they were picked up.

How was it before LoadProof if someone called with a problem? How much time did you spend troubleshooting and going back to paper documents? How cumbersome was it?

It could be very stressful and chaotic, particularly because national retailers often won’t generate chargebacks for months after delivery. You might have paper documents stored away for long-term storage and suddenly face a chargeback. The financial responsibility can fall on different partners, so if there’s a shortage, customers will come back to us and demand proof that the shipment was not short. There could be many hours of research involved, leading to a lot of stress. Even with evidence, retailers could dismiss it and still charge back.

Now, how do you manage chargeback notices?

The chargebacks are managed by the brand, our customers. They receive these chargebacks, and when it’s related to distribution, like a shortage or damage, it used to fall to us to do the research. Now, all they need to know is the PO and carton information, and they can access the LoadProof file on the cloud. If they want to review it, they can do so quickly, but more likely, they’ll just retrieve the file and forward it to the retailer as proof that the goods were packed and tendered.

Have you had pretty good success with that?

Yes, the customers using LoadProof are managing shortage returns internally with very little effort.

Hopefully, all that stress and anxiety is gone, and life is better now.

It certainly helps, yes.

Thanks for the detailed explanation; that helps a lot. What were some of the challenges when implementing a system like LoadProof?

The technical challenge was integrating the LoadProof program with our warehouse management system. We found that not much was needed on our end; it was mainly a collaborative effort to determine what data needed to be attached to the video files. Once that was figured out, the implementation was smooth.

Um, uh, system the administrator of that worked closely with the load prooof developers to um develop the coding that would be contained within these individual video files. And I actually have very little um experience with what was involved there. Yeah, but as part of the management team, I know that um there was minimal effort involved that the load prooof application. Um, I think the load prooof team is very capable of customizing that to meet our needs, and um I would assume with any other users’ needs. You know, it’s based, and the app is developed by the load prooof team, so all the customization is in their hands. It’s not as if um you’re at the mercy of another developer. Everything being internal um and proprietary makes it much more simple and streamlined.

Great. And how was the, you know, um you know getting that um you know adapted by the end users? You know, obviously, right? I mean, you know, Bing is a complicated process, you know, in terms of the psychology of it. As you say, humans by nature are resistant to change until um it can be learned or proven that the change somehow benefits the user. Yep, so um I think the uh foremost important step was educating the users as to why this was being implemented and showing them what was the benefit to them. And so the benefit to all the users, obviously, is exonerating them from any kind of error at the point of picking or packing. If you have tangible video proof that you’re doing your job correctly, then that’s the definition of exoneration.

And so that was really the only, you know, psychological motivation that any of our team members needed to hear because the uh physical steps or the additional tasks required of them were really quite minimal. Again, it was almost entirely uh a digitized process where um the tablet processes are all triggered by scans of a very specific um developed barcodes. And once the barcode is scanned, the recording process begins; scanned again, the recording process ends. And then from there, once the video is captured, all of the uh pushing of the video uploading it to the cloud storage is all entirely automated.

Great, great. So once people realize that, hey, this is going to protect me, they adapted the solution, right? That’s right, of course. Yeah, great, great. Fantastic, fantastic. So, you know, very high level, right? If you could please talk about the dollar savings if that is, you know, possible, you know, and what are the tangible benefits that you guys got? I mean, I heard, or at least, you know, we tried to, right? I mean, obviously, we are very interested in the exact problem that we are solving. And I heard that, you know, there was even some kind of a cargo theft that was involved, and you know, we were know if you could please talk about some of that.

Yeah, well, um first of all, the biggest value um quite often on any investment, the biggest values are quite often intangible and they can’t be measured and are psychological but positively psychological in their impact. MH, and I would say that that likely was the biggest impact when uh our clients shared with all their retail partners this new tool that in fact was indisputable. And all of these video files could be made available to them, and as soon as that kind of um transparency was made evident to them, but also on the back side of that transparency is also a level of um confidence in that you’re welcome to charge us back for shortages, but please be rest assured we’re going to dispute them with this indisputable evidence.

And we had retail partners physically visit the facility. We showed them the process and um a few jaws dropped. Um, and you could see the wheels turning in their mind about this is a game changer. We’re going to have to tighten up in our own supply chain because these people now have upped their game with um professionalism and surveillance and this indisputable proof of their accuracy. So, you know, sending the message to the retail partners that um we have changed the game and we’ve changed the rules, and now um the ball’s in their court in terms of tightening up controls in their own supply chain, that’s priceless. You can’t put a value on that.

Yeah, um if we’re talking about actual uh financial consequences and um kind of reclaiming our financial health because of load proof, um it’s very difficult to quantify that too, but it’s into the hundreds of thousands of dollars. You know, the value of things that are shipped from third-party locations could be anything from um, you know, kitchen use sponges that are, you know, worth mere pennies to high-end luxury fragrances and HomeGoods, which a single unit could be, you know, six or $700 or jewelry. There are many applications for load prooof. If we’re talking about fine jewelry, you’re talking about many, many thousands of dollars. If you’re talking about uh complicated pieces of technology and microchips and things like that, the value is in the hundreds of thousands of dollars. Luxury auto parts, we’re talking about many thousands of dollars.

The segment of um consumer commodity industry that we’re serving is luxury personal care, and again you’re talking about significant price points. I would say the savings to all of our groups—my clients, myself as a 3PL—I would have to say that the savings and chargebacks that have been um either avoided or reversed clearly is in the hundreds of thousands of dollars. Great, fantastic, fantastic. So, from your perspective, right, as a 3PL vendor, as a vice president for this organization for such a long time, how has that made your relationship better with your customers, the brands, and the OEMs that you guys are supporting?

Um, it’s definitely strengthened it. In the past, again, as the people that are handling the goods, anytime there’s a problem with the goods—shortages or damages—of course, those issues are going to get bounced down to us. You know, ultimately we’re responsible for the care and handling of the goods, and we’ve spent many, many years attempting to exonerate ourselves, not just with our clients, but the much harder task is exonerating ourselves from the retailers.

Yeah, who um operate on a different plane, and uh quite honestly there’s a level of overconfidence or arrogance there because in their opinion, they have all the leverage in this economic relationship. Without the retailer, the vendor has no outlet for their goods. I could have a beautiful fragrance, but if I don’t have a place to sell it, my business is worthless. Yep, and so these national retail chains understand their import in this economic relationship, and unfortunately, it does quite often manifest itself in something of arrogance.

Yeah, um but you know, having, again, I keep using the term irrefutable evidence or indisputable evidence. Y having that tool and being able to produce this irrefutable video evidence um has given my clients more confidence in me. Yeah, um the confidence was always there, but now they can completely eliminate the fact that these shortage charges are stemming from um inaccuracy in my facility or even pilferage in my facility. Yep, now those thoughts are out of their mind completely. Y and they have the confidence to now bounce these um chargeback shortages or shortage chargebacks, bounce them back to the retailer with these video files and say here’s the evidence, please reverse this chargeback. Y So it’s strengthened our relationship with our clients, Y and I also think it’s strengthened our reputation with the retailers.

We’ve been in this business for uh 43 years. Wow, and I would have to say that now our reputation with the retailers um probably is as strong as ever because several of them have in fact admitted that they do have uh uh uh loss prevention issues in their own internal supply chain. Got it, got it, got it. Fantastic, that’s nice to hear. That’s nice to hear that you guys have, you know, strengthened that relationship and also, you know, made your reputation improved quite a bit.

This brings up another question. There’s always a tricky spot to be in here, right? Because you know, obviously, I mean, a retailer is a partner. I mean, you know, they have the uh, you know, shelf space and you guys are right. I mean, the OEM brand is, you know, renting that shelf space, and that’s a very, very important partner that’s helping them sell the product. So, you know, and you know, I mean, if I had a partner, I wouldn’t want to upset them, right? I want to have a solid, you know, relationship and I want to, you know, help them sell more and, you know, increase my revenue as well. I want to make that a win-win uh, you know, long-term partnership.

You know, so how has that changed? Because right now you’re, you know, um, how do you guys, you know, maintain that balance in terms of, hey retailer, you know, I love you as a partner because you’re helping me sell my product, but by the same token, you know, these unfair chargebacks, unfair, you know, um, you know, penalties and fines, you know, especially we did everything perfectly right. You know, it’s not fair. How do you have that conversation or, you know, how do you maintain that balance while you know maintaining that long-term partnership so you can sell more?

Yeah, as a third party, um, we don’t want to play any kind of role in that vendor to retailer relationship, and typically that relationship begins at a very high level with um, you know, ownership groups. They come together and say um you have a great product, we’d like to sell it in our stores. Exactly. And then the relationship then it trickles down into supply chain and, you know, everyone in the business ultimately has a vested interest in the success of that product.

Um, the biggest challenge for us um is, again, maintaining that delicate balance because we want to protect the financial interests of our clients, and we want to protect their reputation in their own supply chain. Um, but we also want to maintain a positive working relationship with the retailers. So, you know, that’s, um, that’s not something we take lightly. We are always in dialogue, and we always have an open channel of communication.

Um, I think by showing the retailers that we are making investments in technology like load proof, it helps to signal to them that we’re being proactive. We’re being responsible, and we are taking measures to ensure that the goods are being handled correctly, and that’s the only message that we ever want to put forth to the retailers. And I think they see that, and they appreciate that we are actually being proactive in the way we handle their goods.

So, um, I think that puts us in a better position to have that open dialogue about these issues, and we don’t want to put them in a corner because that would be unfair to them. You know, we want to present this technology as a solution that ultimately benefits everyone. And I think that’s the message that we continue to promote to our retail partners