Vendors procure inventory from suppliers. The inventory is procured usually against Purchase Orders (POs) which have information about the products ordered, quantity, delivery time, etc. When a supplier fails to fulfill the terms agreed on a PO, a chargeback is caused. It is because suppliers are making vendors spend more time dealing with an order, disrupting the supply chain and resulting in unnecessary costs.
To compensate for the vendor’s losses, chargebacks are imposed – a lose-lose situation for both the vendors and suppliers.
For big enterprises facing large volumes of chargebacks can affect their bottom-line performance and leave customers feeling dissatisfied/cheated. For startups, chargebacks can result in loss of sales/opportunities.