January 31, 2018 – Wal-Mart Stores Inc. (Walmart) 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, Walmart 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 Walmart U.S. 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.

A more precise delivery window helps Walmart 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.

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.

Source: CIFFA