Executive Briefings

Wal-Mart Will Punish Its Suppliers for Delivering Early

Long known for squeezing its vast network of suppliers, Wal-Mart Stores Inc. is about to step up the pressure.

Wal-Mart Will Punish Its Suppliers for Delivering Early

The focus this time is delivery scheduling, and the company's not messing around. Two days late? That'll earn you a fine. One day early? That's a fine, too. Right on-time but goods aren't packed properly? You guessed it - fined.

The program, labeled "On-Time, In-Full,’" aims to add $1bn to revenue by improving product availability at stores, according to slides from a presentation obtained by Bloomberg, and it underscores the urgency Wal-Mart feels as it raises wages, cuts prices and confronts a powerhouse rival in Amazon.com Inc. that’s poised to grow with its planned purchase of Whole Foods Markets Inc.

“Wal-Mart has to find efficiencies wherever it can,’’ says Laura Kennedy, an analyst at Kantar Retail. “They’re trying to squeeze and squeeze and squeeze.’’

The initiative builds on progress Wal-Mart has made in reducing inventory and tidying its 4,700 U.S. stores after the back rooms became so cluttered it often stored surplus products in cargo trailers parked out back.

Wal-Mart isn’t the first big retailer to tighten the deadline for vendor deliveries. Target Corp. implemented a similar policy last year as part of a broader supply-chain overhaul. But Wal-Mart’s vast logistics network of more than 150 U.S. distribution centers dwarfs that of any other retailer, and the company typically accounts for a sizable chunk of its suppliers’ sales: 27 percent for bleach maker Clorox Co., for instance.

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The focus this time is delivery scheduling, and the company's not messing around. Two days late? That'll earn you a fine. One day early? That's a fine, too. Right on-time but goods aren't packed properly? You guessed it - fined.

The program, labeled "On-Time, In-Full,’" aims to add $1bn to revenue by improving product availability at stores, according to slides from a presentation obtained by Bloomberg, and it underscores the urgency Wal-Mart feels as it raises wages, cuts prices and confronts a powerhouse rival in Amazon.com Inc. that’s poised to grow with its planned purchase of Whole Foods Markets Inc.

“Wal-Mart has to find efficiencies wherever it can,’’ says Laura Kennedy, an analyst at Kantar Retail. “They’re trying to squeeze and squeeze and squeeze.’’

The initiative builds on progress Wal-Mart has made in reducing inventory and tidying its 4,700 U.S. stores after the back rooms became so cluttered it often stored surplus products in cargo trailers parked out back.

Wal-Mart isn’t the first big retailer to tighten the deadline for vendor deliveries. Target Corp. implemented a similar policy last year as part of a broader supply-chain overhaul. But Wal-Mart’s vast logistics network of more than 150 U.S. distribution centers dwarfs that of any other retailer, and the company typically accounts for a sizable chunk of its suppliers’ sales: 27 percent for bleach maker Clorox Co., for instance.

Read Full Article

Wal-Mart Will Punish Its Suppliers for Delivering Early