Volume 42, Issue 1 - January 2007


The Double Dip
Who Wins the Industry’s Back Order Game?
by Dez Farnady

Managing the back-order, the short shipment, the freight damage, the shop breakage and the scratched-from-handling are nightmares of the glass industry. And the worst part is paying for it. This all may seem simple for anyone who does not have to deal with several vendors, but since each has his own way of handling these damages, tracking and paying for a back order is anything but simple. 

Without describing all of the possible variations of the process, let’s just deal with a simple back-order. For whatever reason, one item is missing from a ten-item order when it arrives to your shop. The shipping documentation indicates one item “back-ordered.” When the invoice arrives a week later, it shows the ten items originally ordered. You are still waiting for the tenth item, the one original back-order, to arrive. 

Your company’s book-keeper sees the packing list attached to the ten-item invoice and sees the purchase order is for ten items and, since it looks like the same list, and, since she does not have to track the material in the shop, she pays the invoice. She probably just assumes that the missing item came in the next day. Since the book-keeper is tracking the money trail and not the product she figures you ordered ten and you got billed for ten so pay for ten. The shop has no glass for one frame. Those workers, unlike the book-keeper, don’t care about the paperwork so the order sits incomplete. Everyone goes about their business putting together the complete orders. And, one customer out there is still waiting patiently for his order to be completed. 

The Billing Game
Meanwhile “back at the ranch,” the vendor creates a brand new order to re-make the shipping breakage, or whatever it was that caused your back-order. A new tag is created for fabrication and shipping. This procedure automatically generates a new invoice. When the re-make is complete, it is shipped and billed automatically. You, the customer, are “double dipped.” Your shop receives the glass with a packing slip, happily completes the order and turns the paperwork into the office. OK, so you got a packing slip and maybe even an original purchase order number reference. You even got a new invoice that is matched up to what now is the back order packing slip and is ready to be paid again. The purchase order reference alone may be enough documentation. After all, the original paperwork has all been matched to the paperwork on the first shipment, hasn’t it? And now you’re set up for the “double dip.”

This fabricator or vendor does not like to ship anything on a no-charge invoice because it does not want to give away free product, since the whole problem was probably really not their fault anyway. To keep their paperwork straight they bill everything they ship. Maybe the customer screwed up, they think, so let’s bill him. And sometimes they are even right. But it does not matter because even if the customer can prove the “double dip” he is just issued a credit—if the customer catches the “double dip,” that is.

Since you pay your bills on time you pay the invoice and don’t bother to look to see if, in fact, you were only invoiced for what you received. You just proceed assuming that since they are billing you now they probably did not bill you before. You pay the back-order bill that may not even say it is a back order, thus completing the “double dip.” By the time the back order invoice arrives the original paperwork is long gone, along with the invoice and the packing slip that accompanied the first delivery. That first packing slip was the only evidence that actually documented the back order with the short shipment indicated on it. So the back order is now also completed, paid for and filed away with the paid invoices and you have been had. 

A Paper Chase
Sounds stupid, you say. What you should have done is perhaps kept an open copy of the original paperwork showing the back order or maybe short paid the invoice. But the other vendor’s back order was not billed. They only billed for the correct amount, for the actual material shipped. They will bill for the missing piece when they ship it. But then another vendor ships all its back orders on “no charge invoices.” You figure it out … I give up … again … 

Dez Farnady serves as general manager of Royalite Manufacturing Inc., a skylight manufacturer in San Carlos, Calif. His column appears monthly.
© Copyright 2007 Key Communications Inc. All rights reserved.
No reproduction of any type without expressed written permission.