It’s getting tougher to be a supplier for Walmart, according to recent reports, as the shipping window for goods is tightening, reportedly from four days down to two. Concurrently, Walmart is reportedly also upping delivery compliance requirements in North America from 90 percent to 95 percent.
The good news? The changes will not go into effect before holiday 2016. The not-as-good news for suppliers? The changes go into effect pretty darn quickly in the year. Current estimates are for Feb. 2017.
Walmart first announced delivery compliance standards in 2010, which required items “must arrive by date” (MABD) for all merchandise from suppliers, who were given six months to comply. Current guidelines allow for delivery two days early or one day late, which creates a four-day window in total. If a supplier misses that period 10 percent or more of the time, it’s charged 3 percent of its quarterly invoice. Which, according to Andrew Lynch, co-founder and president of Zipline Logistics, can represent an absolute “massive hit” for suppliers.
And those hits may soon start coming more frequently since suppliers can not miss the now-shortened delivery window more than 5 percent of the time or risk the big hit on their invoice. Delivery will be permitted on the scheduled date or a day early — but not a single day late.
Quick shipping won’t solve the problem, according to Lynch, since express shipping services will run up costs nearly as much as missing the delivery window. Instead, he recommends suppliers bring together sourcing and production teams in order to ensure tighter coordination between manufacturing and logistics.
The new mandate will affect more than transportation arrangements. One Zipline client selling into Walmart plans to shift production of some items from Texas to Ohio, setting the stage for a more efficient delivery network serving all of its retailer accounts, Lynch said.