Digital technology to facilitate the management of disputes and logistics penalties

On October 19, 2021, the Egalim 2 law came into force. If it aims to protect the remuneration of farmers, it naturally impacts the agri-food supply chain upstream and downstream. The law modifies the commercial relations between suppliers and distributors on various subjects, including the important one of logistics penalties.

In the retail sector, traditionally, buyers sign contracts with their suppliers to ensure the supply of products at fixed prices. In order to improve the logistics organization and the management of the resulting supplies, these contracts mention the possibility of setting up logistics penalties relating in particular to service rates (ratio between ordered products and conforming delivered products), delivery time and punctuality or even the quality of the delivery (breakage, non-conforming pallets…).

Provide a legislative framework for logistics penalties

In order to regulate precisely these penalties, the Egalim 2 law brings new provisions. Among them, article L. 441-17. specifies that “the penalties imposed on the supplier by the distributor cannot exceed an amount corresponding to a percentage of the purchase price of the products concerned”, that the refusal or return of goods is prohibited “except in the case of non-conformity of the goods or non-compliance with the delivery date”, that “proof of the breach must be provided by the distributor by any means” and that “only situations that have led to stock-outs can justify the application of logistics penalties. By way of derogation, the distributor may impose logistics penalties in other cases if it demonstrates and documents in writing the existence of a prejudice”. Finally, Article L. 441-18 also emphasizes that “in case of non-performance of a contractual commitment by the distributor, the supplier may impose penalties.”

A collaborative solution dedicated to distributors and their suppliers

Although the law now provides the best possible framework for the subject, it is still complex for distributors and suppliers to understand and implement. On a daily basis, this dispute management, managed manually via an Excel file, leads to a significant loss of time and budget. Especially since, in the event of a dispute, penalty invoices must be justified by supporting documents. These hazards not only generate a significant amount of data to manage but also and above all time-consuming administrative back and forth, leading to a blocking of penalty invoice payments. So, in order to facilitate the management of these logistic penalties, digital tools have been developed. These tools, such as the Fluid-e solution, provide distributors with the means to automate the follow-up of penalties and to document possible failures in a transparent manner between all the stakeholders of the supply chain. Connected to the TMS, and more specifically to the order management and delivery appointment planning modules in the warehouse, this solution enables traceability and data sharing between suppliers and distributors.

A digital tool to facilitate the management of logistics penalties

Through a dedicated collaborative portal, users are initially able to calculate all types of penalties and organize their management by market. The tool interfaces in parallel with their internal applications and systems, whether it is a WMS or a commercial management software, in order to note the discrepancies on orders.

Via a workflow, they can manage the work and decision process and respect the rights of the participants as well as the scenarios for handling penalties. The tool also offers the possibility to publish the calculations to the suppliers concerned on the portal, to obtain their agreement within a given timeframe or to allow them to contest the penalty and to document this last action. A system for sending alerts to suppliers completes the collaboration between stakeholders. Finally, the solution generates invoicing elements related to penalties and provides KPIs and indicators for supply chain management, procurement and warehouse managers.

A software and administrative, financial and human benefits

From these multiple functionalities, several administrative, financial and human benefits emerge. While a digital penalty management solution makes it possible to explain, share, and detail the calculation of penalties applied, in concrete terms, a tool such as Fluid-e also offers high administrative productivity in the management of disputes, as well as an improvement in cash flow through faster collection. Users have noted a return on investment of three months after implementing the solution.

Finally, this portal, which is collaborative by nature, facilitates exchanges and establishes a healthier and more transparent relationship between the parties involved in the contract.