Walmart Squeezes Suppliers Again, This Time With Fines

Image courtesy of Mike Mozart

It’s no secret that Walmart has had issues keeping shelves stocked in some stores, leading customers to head to competitors. While the company finally addressed the problem nearly two years ago, the big box retailer is taking additional steps to ensure customers have products to choose from when they visit, by holding suppliers accountable — financially — for shipments that show up before or after their intended arrival date.

Bloomberg, citing a Walmart presentation, reports that Walmart will soon roll out a new set of requirements for suppliers delivering full-truckloads of so-called “fast-turning” goods, such as groceries and paper towels, as a way to ensure stores are stocked and customers are happy.

Under the “On-Time, In-Full” initiative, which is intended to improve product availability at stores and efficiency with suppliers, Walmart will fine companies who deliver shipments late and early, as well as those that arrive packaged poorly.

The program aims to ensure suppliers are delivering orders 100% in full, and on-time 75% of the time. If not, there will be a price to pay.

Paying Up

Specifically, Bloomberg reports that shipments arriving late, early, or missing elements during a one month period will receive a fine equivalent to 3% of the entire shipment’s value.

While you might not think that having a shipment of paper towels arriving early would cause much of a problem, it does for Walmart. These unexpected deliveries cause an overstock, something the retailer is working to alleviate by uncluttering the backrooms of stores, Bloomberg reports.

Likewise, when products arrive late, Walmart shelves can remain bare, leading customers to look for their goods elsewhere. And that’s not convenient for anyone; customers have to trek to other retailers and Walmart loses money.  It’s a problem CEO Doug McMillon has been working to rectify in recent years by improving “on-shelf availability.”

To ensure that suppliers are fined properly and only for issues that they’re responsible for, Walmart has created a system that takes into consideration the reasons a shipment isn’t on time, Bloomberg reports.

Lofty Goals

The initiative aims to have 95% of Walmart’s suppliers delivering on-time, in-full (OTIF) by February.

Bloomberg reports that for some suppliers this could be difficult. For example, some of the retailer’s top 75 suppliers have had OTIF scores as low as 75%, and none have reached 95%.

A rep for Walmart tells Bloomberg that the retailer is “working closely” with vendors to reach the goals.

“We know that the when product we’ve ordered arrive on time, it results in happier customers,” the rep said.

This isn’t the first time Walmart has tried to squeeze suppliers this year. Back in February, the company pushed suppliers to drop their prices so the big box retailer could lower prices to remain competitive with rivals.