Wal-Mart to Fine Suppliers for Late Deliveries

Wal-Mart will require 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. More specifically, Wal-Mart executives plan to announce at an annual conference this week that large suppliers fulfill orders within a specified one- or two-day window 85 percent of the time or face a fine of 3 percent of the cost of delayed goods,  according to Reuters. Previously, suppliers had to hit a 75 percent threshold to avoid fines. For smaller suppliers the on-time threshold will move to 50 percent, up from 33 percent. The change will take effect in April.

Nearly 4,000 suppliers are expected to attend the suppliers meeting in Bentonville, Ark., where Wal-Mart will also for the first time widely share with suppliers its On Shelf Customer Availability (OSCA) data, which had only been accessible internally. This data displays 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 data, which will become available throughout the year, will help with on-time delivery.

Total Retail's Take: The supplier guidelines Wal-Mart plans to introduce are no surprise, really. In February, Wal-Mart executives told suppliers more accurate delivery times would be a focus going forward, and the retailer first introduced fines for inaccurate deliveries last year. Wal-Mart hopes to add $1 billion of revenue by improving product availability at stores. The move just makes good business sense: A more precise delivery window, which this initiative will encourage, helps Wal-Mart keep shelves stocked and the flow of products more predictable, while reducing inventory. 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.