Walmart has reportedly been looking to reduce supply chain costs for several years by requiring lower prices from its suppliers. But the retail chain’s most recent demands have its suppliers fighting back, according to reports from Bloomberg published Thursday (Sept. 10).
Walmart reportedly notified its suppliers last June of new, higher product storage fees and changes to its payment schedule that allow the company to pay its suppliers on longer terms. The retailer said the changes to supplier contracts are part of its effort to streamline operations and make the supply chain more efficient by placing all suppliers on the same terms.
But several suppliers have reportedly hired lawyers to combat the changes, Bloomberg said. Two large suppliers, which asked not to be identified, told reporters they have refused to accept the contract alterations, while one supplier sent an executive to try to reverse the changes by meeting with Walmart at its Arkansas headquarters.
Reports said the suppliers claim the new contract terms will hurt their bottom line and are now vying for a better deal.
“Any established supplier doing business with Walmart is already offering by all means the lowest price possible,” said Carol Spieckerman in an interview with the publication. Spieckerman reportedly works with multiple Walmart suppliers; she added that the new fees imposed by Walmart “certainly sting.”
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Another advisor, Kantar Retail Senior Vice President Leon Nicholas, told reporters that the contract changes were a surprise because Walmart has traditionally looked to avoid such extra fees for its suppliers.
“What is so shocking this round is that they are being aggressive in not asking suppliers to take costs out of the system so the supplier can lower prices but instead adding cost into the system,” Nicholas said. “It looks as though they are trying to have it both ways and trying to pad their own margins where they are facing cost pressure.”
The corporation reportedly sent letters to its suppliers in the U.S. earlier in the summer notifying them of the changes, which include payment terms based on how quickly inventory moves. Reports said that not all of Walmart’s 10,000 suppliers will see higher charges because some were already paying extra to use Walmart warehouses.