DATE: April 15, Kellwood Suppliers. Kellwood Distribution. SUBJECT: Charge-backs for Violation of Packaging, Routing and Documentation Standards

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1 DATE: April 15, 2005 TO: FROM: Kellwood Suppliers Kellwood Distribution SUBJECT: Charge-backs for Violation of Packaging, Routing and Documentation Standards COPY TO: Divisional Sourcing Executives Dear Valued Kellwood Supplier, As you are aware, your support is important to maintain and improve supply chain performance so that we remain competitive and meet our customer s expectations. In order to maintain the levels of accuracy and timeliness required by our customers, we have developed standards for packaging, freight routing, and documentation that you will be expected to meet. Most of these standards are not new, but they are sometimes overlooked. Beginning with shipments from you factory after Sep 1, 2005, Kellwood will issue charge backs for violation of these standards as noted on the attached chart. (Chargeback Schedule Packaging, Routing, Documentation Violations). Prior to July, we will send a memo to you detailing any chargeback that would have been taken, so that you can review them with your staff, and apply corrective action. After receipt of shipment, Kellwood Distribution Centers will report any discrepancies to Accounts Payable, and the appropriate deductions will be taken. Your company will be sent a copy of the charge back. It is our hope that we never have to take deductions for non-compliance. Our goal is to speed your products through our warehouse and on to the customer so that both of our businesses can continue to grow. If you have any questions, please direct them to your sourcing executive. Thank you for your continued cooperation and support. Regards, Thomas F. Austin, Jr. President, Kellwood Operating Services Division

2 GARMENT MADE SECONDS: Charge back the factory at 1/2 standard cost. CHARGEBACK PROCEDURES SHORTAGES (GARMENTS INVOICED & PAID FOR BUT NOT ON CONTAINER): Charge back the factory at standard cost, unless DDP. If DDP shipment charge back DDP cost. QUALITY PROBLEMS: Extra time it takes to repair, repress, or refurbish substandard quality garments to be charged back to the factory at $25.00/hour. See the following matrices for details of the Chargebacks for Violation of Packaging, Routing, and Documentation Standards.

3 Factory Name: Container #: Business Segment: Factory Code: Distribution Center: Debit Memo #: Date Received / Audited: Business Unit Contact: Spec s Chargeback Expense - $ s per Occurrences Chargeback No. Non-Compliance Issue (Violation) Reference Unit Carton Container Shipment Units Cartons Containers Shipments $ s Notes UPC Compliance 1 Retail Customer UPC Ticket or Label does not meet specification Product $ 0.50 Refer Compliance Standards Section I.1 a. Missing on the garment $ - b. Incorrect format, content, location, color code, etc. $ - c. Does not match human readable information $ - d. Not readable by scanner $ - 2 Kellwood UPC Label on polybag does not meet specification Distribution $ 0.50 Refer Compliance Standards Section I.2 a. Missing on the garment $ - b. Incorrect format, content, location, color code, etc. $ - c. Does not match human readable information $ - d. Not readable by scanner $ - Product Packaging $ Packaging does not meet specification - missing, wrong, or damaged Product a. Hanger $ - b. Polybag $ - c. Hang Tag $ - d. Product Fold $ - e. Etc. - Note $ - Refer Compliance Standards Section II Cartons Compliance 4 Carton does not meet specifications $ 5.00 $ $ - Refer Compliance Standards Section III a. Size (dimensions) Product $ - b. Weight exceeds 40 lbs. maximum Distribution $ - c. Improperly sealed - (boat shipment) secured with Distribution $ - strapping or staples. Air shipments - strapping acceptable. d. Missing Carton or GOH Batch Labels - shipping and / Distribution $ - or content label e. Carton or GOH Batch Labels have incorrect format, Distribution $ - content, location, etc. f. Carton or GOH Batch Label not readable by scanner Distribution $ - g. Carton Printed Markings (Side & End) not as Distribution $ - specified - missing or incorrect info. h. Damaged or bulging carton requiring repacking Distribution $ - 5 Carton contents do not match vendor carton label / markings Distribution $ ClaimsProcedures.xls Distribution Chargebacks Page 1 of 3

4 a. Shortage (no payment for goods) $ - b. Overage (no payment for goods) $ - c. Wrong SKU (no payment for goods) $ - 6 Mixed SKU in carton other than Pre-packs Distribution $ $ - Shipping Compliance 7 Required documents missing for the shipment / container(s) a. Bill of Lading b. Packing List c. Commercial Invoice d. Etc. - Note e. Missing documents resulted in delay clearing the shipment Imports / $ $ - Refer Compliance Standards Section IV.1 $ 1, $ - 8 Advanced Shipping Notices (ASN s) Distribution $ $ - Refer Compliance Standards Section IV.2 a. Not submitted by vendor within 10 days after the BOL date or before shipment arrives at the Distribution Center b. Electronic ASN (if required) not submitted by the vendor 9 Actual Quantity Received does not match ASN / Packing List quantity by container a. Invoked only if total variance exceeds 0.5% for each container (more than 5 errors per 1000 pieces) 10 Incorrect Packing List - wrong or insufficient detail by SKU Distribution $ $ - Refer Compliance Standards Section IV.3 Distribution $ $ - Refer Compliance Standards Section IV.4 11 Container not loaded correctly per specifications Distribution $ $ - Refer Compliance Standards Sections V, VI 12 Routing Instructions not followed - wrong carrier, etc. Imports / $ $ - Plus Freight Cost incurred by Kellwood 13 Unapproved Air Freight Imports / (Shipment should have been ocean, shipped by air) $ $ - 14 Merchandise shipped to wrong Distribution Center Imports / a. Received in Cartons $ 5.00 Plus Excess Cost $ - b. Received Goods-on-Hanger (not in cartons) $ 0.15 incurred by Kellwood $ - 100% Examination per Hour 15 For errors discovered during inbound statistical audits requiring 100% examination, the vendor will be charged an hourly rate for Distribution Center extra handling in addition to the non-compliance charge noted above. Plus Freight Cost incurred by Kellwood Distribution $ $ - 14-ClaimsProcedures.xls Distribution Chargebacks Page 2 of 3

5 Total $ - 14-ClaimsProcedures.xls Distribution Chargebacks Page 3 of 3