Launching and Surviving KeHe: Deductions and Cash Application for CPG Brands
Introduction: Getting Started with KeHE
The reality of launching with a national distributor can be a soul-crushing experience. Here’s our layout on how to survive and thrive on KeHE, and scale your retail business.
For quick background, KeHE is a national distributor for the natural channel, with 18 distribution centers, and serving more than 30,000 stores. Distributing with KeHE is often essential in driving retail growth for natural / organic brands given the retailer partnerships that KeHE has. On the flip side, managing the processes for payments, deductions, disputing, and accruals is complex, and often a black hole that CPG suppliers sink money into if approached without the proper strategy.
Building a foundation for success
- Complete KeHE Price Spec Form, including UPs, product dimensions, pallet configuration, and pricing.
- Complete your profile on RangeMe. KeHE will contact new suppliers through the platform after profile completion.
- Register on KeHE’s supplier portal and agree to the Terms of Use and Privacy Policy. We recommend using Google Chrome for the best experience.
- This portal will also contain important announcements, training documents, resources, and more.
- Upload all certifications, which must be current and not expired
- Create your invoicing process via EDI with third party service, SPS Commerce, to avoid delayed payments and reduce errors in pricing, quantity, timing, and invoice details.
- Know your sales point of contact; this will differ based on your geographical location and retailers. Here is the master list.
Costs with launching on KeHE
The initial launch into KeHE is going to send you in the red for a few months (and hopefully only a few…). Let’s go through the main costs related to launching.
- New Item Set-up: Suppliers are charged a per-SKU set-up fee for each facility in which items are activated. There’s a $50 initial setup into the database, and $50 for each warehouse, which is charged during the initial purchase order for each warehouse. There’s an additional one-time charge of $40 per SKU for product imaging.
- Introductory Allowances: KeHE has a minimum 15% off invoice allowance for each new item introduced to each warehouse.
- Initial Orders: KeHE requires a 6-month period for the sale of new items on initial POs for each warehouse, and the CPG supplier must accept the cost and provide full credit for any unsold items at KeHE’s landed cost. KeHE will not release payment for the initial PO until the opening inventory has been sold to retail customers. Therefore, we recommend that suppliers work with supply chain and forecasting team members to determine the appropriate initial order quantities.
- New@KeHE: This is a program for DC-specific new item launches with required PODs, aimed towards independent retailers. Sounds like a sweet program right? Look under the cover and you’ll realize that suppliers using this program must give 50% off in the first month of orders, and 25% off the second month, without being able to choose which retailers get the deal. KeHE can place large POs and charge back anything that doesn’t sell after 6 months, with a $0.29 handling fee per unit.
Ongoing Mandatory Costs
KeHE has several required charges that will carry throughout the lifetime of the brand.
- Payment Terms: 2% 10 days net 30 - the supplier will receive a 2% discount if paid within the first 10 days from the date of receipt of invoice at KeHE”s billing address or date when goods are available for sale, whichever comes later. All payments are due within 30 days.
- Freight allowances: When you use KeHE to ship goods from you, they will charge a freight allowance to support the cost. Freight allowances will vary, but are typically $0.25-$0.40 per lb.
- Percentage-based allowances: We recommend that suppliers build allowances for spoilage, returns, and merchandising, around 1% for each. If it ends up being more, KeHE will bill it.
- Connect BI: KeHE charges a flat 2% fee on sales for access to Connect BI, which provides sales reporting and business analytics data.
Discretionary Promotional Costs
There are many programs that KeHE offers to drive growth and sales in stores. Each of these costs need to be considered carefully, and it is important to understand the ROI with each investment.
Manufacturer Chargeback (MCB)
MCB’s are discounts that KeHE offers to the retailers, and passes the cost back to the brand. KeHE charges an additional 8% fee on the MCB amount (equal to Quantity Sold * MCB Amount * 8%), with a minimum fee of $65 per DC, processed bi-weekly.
Extra Performance (EP) Fee
When running a scan, ad, demo, and slotting promotion, KeHE will charge an EP equal to 8% per invoice, with a maximum of $500.
Other deduction claims
Unloading Discrepancy Report (UDR)
UDRs are generated by the Receiving Department if there are order issues such as shortages, overages, or damages. The supplier must respond within 48 hours to resolve the UDR, and attach a Bill of Lading and Packing Slip.
Purchase Order (PO) Opportunity
Suppliers should contact the Supply Planner on the PO form with any issues regarding pricing, pack size, or promotion. Email the PO form to vendorsupport@kehe.com with “PO Opportunity” in the subject line and CC your supply planner.
Disputes on KeHE
Oftentimes, there’s a large delta between the amount that you invoice for and the amount you receive. These are the deductions that KeHE has taken for various sales and operations related expenses. However, not all of these deductions are valid, and brands are able to dispute and win some dollars back.
To start a dispute, login to KeHE Connect and fill out the K-Solve form with as much detail as possible. Allow 21 days for resolution, and follow-up with the ticket number if there is no timely reply.
Frequently Asked Questions
1. What do the various promotion statuses mean?
Draft - the promotion was created by not submitted. It can be edited, submitted, or deleted.
Submitted - the promotion was submitted and awaiting approval. This can still be edited, re-submitted, or deleted.
Approved - the promotion has been submitted and approved by KeHE. This can still be edited, re-submitted, or deleted.
Rejected - the promotion was rejected by KeHE. This can be edited, re-submitted, or deleted.
Finalized - the promotion was submitted, approved by KeHE, and is locked for publication. No changes can be made
2. How do I get into KeHE?
There are two main ways, 1) being authorized by a key retailer (such as Keiojer, Erewhon), or 2) using the New@KeHE program.
3. How do I upload certifications during onboarding?
Log into your KeHE Connect portal, select “My Company”, then “Supplier Management”. Click “Documents” > Select “Other Documents” > Select “Choose File and Upload” > Click the dropdown arrow > Select Document Type
4. Any tips on how to understand what KeHE is going to pay you in a given month? I never know what value check is about to land on our desk each month.
For longer term cash/payment forecasting with KeHE, a good practice would be tracking the performance/execution dates associated with each deduction coming through, and over time you can analyze the lag between performance dates and chargeback date. This could vary by retailer, trade type, etc., but could be directional. You would then pair that with a trade forecast to determine how much you will get charged back, and when you'll get charged back. Along with that, you would need to deeply understand your days receivables for KeHE to understand how long it takes you to collect each invoice. Those combined could help project how much you will collect.
For shorter-term forecasting, it's useful to have insight into actual checks, prior to them hitting your bank, when possible. Confido pulls in checks once KeHe enters them into the portal, rather than when the deposits actually hit the bank.
5. Who do I contact if I have additional questions?
Contact your category manager or VendorSupport@KeHE.com.
Still confused?
Contact the deductions experts at Confido to learn more about automating the deductions, disputes, and cash application process with KeHE.