Wal-Mart Tightens Delivery Schedule for Suppliers -- Update
January 29 2018 - 7:48PM
Dow Jones News
By Sarah Nassauer and Jennifer Smith
Wal-Mart Stores Inc. plans to ask suppliers to deliver more
goods to warehouses exactly on time or face fines, another step in
the retailer's efforts to keep inventory low and shelves stocked as
it battles with Amazon.com Inc.
At an annual conference for suppliers this week, Wal-Mart
executives plan to announce that large suppliers need to deliver
full orders within a specified one- or two-day window 85% of the
time or face a fine of 3% of the cost of delayed goods, said Steve
Bratspies chief merchandising officer for Wal-Mart U.S., in an
interview Monday. Previously, suppliers had to hit a 75% threshold
to avoid fines. For smaller suppliers the on-time threshold will
move to 50%, up from 33%. The change will take effect in April.
"This is not a 'Hey, let's see how unreasonable we can be,'"
said Mr. Bratspies. "We need the product that the customer wants
when they want it." Wal-Mart would rather have the products on-time
than fine suppliers, said a spokesman.
As Wal-Mart, Kroger Co. and other retailers demand tighter
delivery windows, suppliers including Kraft Heinz Co. and Procter
& Gamble Co. have invested heavily to meet those requirements
and make their supply chains more flexible for online buyers. Last
February, Wal-Mart executives told suppliers more accurate delivery
times would be a focus going forward and first introduced fines for
inaccurate deliveries last year.
A more precise delivery window helps Wal-Mart keep shelves
stocked and the flow of products more predictable, while reducing
inventory, say executives. That goal has become increasingly
important to the world's largest retailer as it pushes to make
stores more profitable so it can marshal funds to boost online
efforts. In addition, accurate inventory data is more important to
retailers as they offer shoppers more ways to buy online and pick
up in store.
"They're trying to get as much inventory as possible off the
books," said Adrian Gonzalez, a supply-chain analyst and president
of research firm Adelante SCM. "They want to order more frequently
and in smaller quantities, and kind of accelerate that whole
process."
That strategy also increases the risk of products being out of
stock, and consumer disappointment, Mr. Gonzalez said. "Wal-Mart is
trying to balance that...while still making sure the product is on
the shelf."
Empty shelves or otherwise unsaleable products add up to some
$75 billion in lost sales a year, according to the Food Marketing
Institute, a trade organization.
Nearly 4,000 suppliers are expected to attend the meeting in
Bentonville, Ark., where Wal-Mart will outline plans to for the
first time widely share with suppliers data on which precise
products are on shelves at any given time and why products are out
of stock, as well as what products Wal-Mart plans to stock in each
store. The additional data, which will become available throughout
the year, will help with on-time delivery and "help our suppliers
become more efficient and help solve problems," Mr. Bratspies
said.
The tightened delivery window comes as freight costs are soaring
for manufacturers and retailers. Many companies are scrambling to
book transportation, particularly for time-sensitive deliveries,
because demand has outstripped the supply of available trucks.
Prices on the spot market, where shippers arrange last-minute
transportation, are up more than 20% compared with this time last
year. Fuel prices are also rising, adding to costs.
"Trying to find a truck in today's environment is next to
impossible," said Cathy Roberson, an analyst with Logistics Trends
& Insights LLC. "Fuel surcharges are going up and the suppliers
are going to have to pay all of this."
Write to Sarah Nassauer at sarah.nassauer@wsj.com and Jennifer
Smith at jennifer.smith@wsj.com
(END) Dow Jones Newswires
January 29, 2018 19:33 ET (00:33 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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