Deduction type
Fill-rate / service-level penalties
A penalty for shipping fewer units than were ordered — distinct from a shortage at receiving, and typically a percentage of the shorted value.
Mihir Naik · Founder, OverDeduct — deduction recovery for emerging & mid-market CPG brands
Last reviewed: August 4, 2026
Educational content — not legal, tax, or accounting advice. Verify deadlines and fee details against your current distributor agreement before disputing.
A fill-rate (service-level) penalty is charged when you ship fewer units than the buyer ordered. Unlike a shortage — which is about what was received — a fill-rate penalty is about the gap between ordered and shipped.
Distributors publish thresholds and fees: KeHE's compliance program applies a 3% fee on product shorted below a 98% fill-rate, and UNFI fines when fill rate stays below 95% for two-plus consecutive weeks. Genuine short-ships from stockouts are hard to reverse.
Fill-rate penalties are recoverable when they were calculated on a PO the buyer later amended or cancelled, or on an incorrect ordered quantity. The dispute usually comes down to producing the original and amended PO alongside your shipment confirmation.
Selling through KeHE? See how fill-rate / service-level penalties work at KeHE, including the specifics and how to dispute them in K-Solve.
Wondering how many fill-rate / service-level penalties you're actually being charged? Run a real remittance through the free deduction recovery analyzer to see every line categorized and what's realistically recoverable.
No file needed
Estimate what deductions are costing you
Answer a few quick questions and see how much your brand likely loses to deductions each year — and how much is realistically recoverable. Free and instant, based on published CPG benchmarks.
Frequently asked questions
What is a typical fill-rate penalty?
Distributors commonly charge about 3% of the value of the shorted product — KeHE at a 98% fill-rate threshold, UNFI when fill rate stays below 95% for two consecutive weeks. Thresholds and fees are set in your agreement.
How is a fill-rate penalty different from a shortage?
A shortage is about what the buyer received; a fill-rate penalty is about the gap between what you shipped and what was ordered. Both can appear on the same shipment, but they're separate deductions.
Other deduction types
- Shortage deductionsA charge for units the buyer says it didn't receive against your invoice — one of the most recoverable deduction types because it turns on delivery documentation.
- Manufacturer chargebacks (MCB)A promotional discount a distributor gives a retailer and bills back to the manufacturer — often with a processing fee on top.
- Pricing & deal discrepanciesShort-pays where the buyer paid a different price than invoiced, or applied a deal you didn't agree to — among the most recoverable deduction types.
- Co-op advertising (co-op) deductionsA deduction taken to recover advertising or marketing spend the buyer claims to have run on your behalf — recoverable when the spend wasn't approved, documented, or was billed twice.
- Returns / RTV deductionsA deduction for product the buyer returned — unsold, damaged, or non-conforming. Usually legitimate; recoverable mainly when the return wasn't authorized or was double-counted.
- Duplicate deductionsThe same deduction taken more than once — on one invoice, across invoices, or as both a chargeback and a short-pay. Highly recoverable because it's a pure paperwork error.
- Post-audit deductionsCharges raised by an auditor reviewing past invoices — often months after the transaction. Recoverable when the audit's claim is wrong, undocumented, or falls outside the dispute window.
- Unearned / unauthorized cash discount deductionsA prompt-payment (terms) discount the buyer took without actually earning it — paying late but still deducting the discount, or taking a rate it wasn't entitled to. Among the most recoverable deductions.
- Promotional billback / scan-down deductionsDeductions that recover promotional discounts — billbacks, scan-downs, off-invoice and temporary price reductions. Recoverable when unauthorized, mis-keyed to the wrong dates or SKUs, or billed more than once.
- Slotting / new-item / free-fill deductionsFees charged to place a new item — slotting, new-item, placement, and free-fill (free initial cases). Often contractual, but recoverable when duplicated, charged beyond the agreement, or taken for items never stocked.
- Spoilage / swell / unsaleables deductionsDeductions for damaged, expired, or unsellable product — spoilage, swell, and unsaleables. Usually valid within an agreed allowance; recoverable when they exceed the allowance, aren't documented, or are duplicated.
- Freight / backhaul / detention deductionsShipping-related deductions — backhaul allowances, detention, lumper fees, fuel, and freight-audit charges. Recoverable when applied on the wrong freight terms, at the wrong rate, or duplicated.