Beginning in August, late or missing shipments during a one-month period will be subject to a fine of 3 percent of their value as part of a new policy to raise revenues.
Retail giant Wal-Mart Stores Inc. (Walmart) plans to fine its suppliers for deliveries that are early, late or missing.
Dubbed “On-Time, In-Full,” the program aims to add $1 billion to revenue by improving product availability at stores, due to pressure to raise wages, cut prices and competition with Amazon.
“One of the best ways Walmart can help customers save time and money is to have the merchandise they want on our shelves when they are shopping for it. To better meet those customer expectations, we are working with suppliers to improve their on-time and in-full delivery,” Kory Lundberg, a spokesperson for Wal-Mart, said in a statement to American Shipper. “A year ago we shared these same on-time and in-full delivery goals with suppliers and asked them to begin preparing. We will phase these changes in over the course of this year, working closely with our vendors to help reach these targets. We know that when products we’ve ordered arrive on time, it results in happier customers.”
The program will begin in August and will require full-truckload suppliers of fast-turning items, such as groceries and paper products, to “deliver what we ordered 100 percent in full, on the must-arrive-by date 75 percent of the time,” said Walmart. Early shipments create overstocks and will be fined, while items that are late or missing during a one-month period will be subject to a fine of 3 percent of their value.
“We hope we don’t have to collect any fees from suppliers. We would much rather have all the product we ordered delivered on time, so we can get it to our customers, when they are shopping for it,” said Lundberg. He said Walmart created a six-month phase-in period this year and had previously let suppliers know a year prior so both suppliers and the company could prepare.
Suppliers have until February 2018 to to deliver fast-turning items “on-time and in-full” (OTIF) 95 percent of the time. Walmart noted that “these on-time delivery expectations are similar to what many retailers already require of their suppliers.”
However, Walmart’s OTIF goals have yet to be met. OTIF scores for the retailer’s top 75 suppliers have been as low as 10 percent, according to a Bloomberg report. Yet, in some cases when a delivery problem will be Walmart’s fault, the fine may still be in play. Retailers have developed a scoring system that breaks down reasons for non-compliant deliveries and will fine suppliers only if they’re responsible. Even so, if suppliers disagree with the score, they are still subject to the outcome as disputes “will not be tolerated’’ by Walmart, said Bloomberg.
Correction: A previous version of this story indicated that deliveries would be subject to a fine if they were ill-packaged.