Walmart suppliers must deliver their shipments on time or face fines to the tune of 3 percent of the cost of goods sold, according to a new report.
Effective early next year, Walmart is requiring that all of its suppliers’ on-time and in-full (OTIF) shipments be 98 percent complete as part of the global retailer’s Supplier Quality Excellence Program (SQEP), Talk Business & Politics reported.
Suppliers now meet a 70 percent completion rate.
The 1 September memo from Walmart U.S. Chief Merchandising Officer Scott McCall was posted on the retailer’s supplier portal, the publication reported.
While Walmart offered suppliers an exemption from current OTIF requirements during the height of the COVID-19 pandemic, that exemption ended 17 August, according to Talk Business & Politics.
One supplier on a social media site that the move feels “very punitive and unnecessary” given “my carriers are getting pushed out days [to] weeks at a time right now because the Walmart DCs are behind.”
Walmart defended the action in a statement to Talk Business & Politics.
“The customer is at the center of everything we do and one of the best ways we can help them save time and money is by having the products they want, when they want them, both online and in stores,” the retailer said. “We appreciate our suppliers and the work they are doing to help improve availability by ensuring all the products we’ve ordered accurately arrive on time for the customer.”
While suppliers were originally told they had to meet the new OTIF requirements by 15 September, they will not be charged the late delivery fee until after 1 February, 2021, McCall and Greg Smith, Walmart’s executive vice president of supply chain logistics and transportation, said in a new memo quoted by Talk Business & Politics.
Last year, Walmart raised its OTIF requirements to 97.5 percent for food and consumables. However, Walmart said in March 2019 that OTIF shipments on food and consumables were still at a “dismal 40 percent,” according to the publication.
Walmart also laid off hundreds of employees, including those involved in in-store planning, logistics, merchandising, and real estate in late July.
“We are continuing on our journey to create an omnichannel organization within our Walmart U.S. business and we’re making some additional changes this week,” Walmart said in a statement to Bloomberg at the time.
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