Retail giant squeezes suppliers into tighter delivery window.
Walmart, the world’s largest retailer, is famous for wanting to control every aspect of the process of getting goods onto its shelves and into consumers’ shopping carts. Starting in February, they ratcheted up the pressure on their suppliers, implementing tough new controls on delivery of goods to their distribution centers.
The changes to Walmart’s on-time delivery standards for its vendors significantly impact how these thousands of suppliers approach logistics processes with the Bentonville, Arkansas-based retailer. Walmart now requires its suppliers (shippers) to meet a two-day shipping window instead of its previous four-day window, as well as raising its required compliance rate from 90 percent to 95 percent.
For non-compliant deliveries, Walmart’s suppliers pay a fee of 3 percent of the cost of goods, a charge which has been in effect since 2010. The 3 percent “tax” also applies to suppliers when less than 95 percent of merchandise cases are received within the must arrive by date (MABD) delivery window. Penalties apply to shipments that arrive too early, as well as too late, but suppliers are not charged it they cancel purchase orders prior to the MABD.
The impetus for these types of changes over the years, said a corporate release from Walmart, is part of an effort to “streamline its supply chain and cut costs,” adding that “stores are no longer acting as warehouses, with too much inventory in back stock rooms or in trailers behind stores. Walmart wants merchandise to arrive in stores just in time to restock shelves and serve customers.”
Walmart is not alone in establishing these types of mandates. Target also announced its plan to tighten deadlines for warehouse deliveries last May, with fines for late deliveries increasing and penalties up to $10,000 for inaccuracies in product information, said Reuters.
For executives tightly focused on producing and selling their product line, investing time in meeting consignees’ exacting requirements can be a maddening and costly distraction – just one more reason it pays to work with supply chain professionals to keep goods flowing to their destination.