Walmart is increasing the pressure on its suppliers as the retailer tries to offer quicker deliveries to consumers.
The retailer has sent out a Sept. 1 memo requiring that “that on-time and in-full (OTIF) shipments must be 98% complete effective Sept. 15,” according to Talk Business & Politics (TB&P). “Suppliers not meeting the new guidance will be fined 3% of the cost of goods. The guidance gives suppliers, who now meet a 70% completion rate, little time to adjust.”
Walmart didn't deny the report and offered a statement in response to it.
“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 all 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.”
The new direction to suppliers comes as Walmart emerges from supply chain issues earlier in the pandemic. "We had a significant level of in-stock issues that happened late in the first quarter and early in the second quarter but we do think that our inventory levels are now normalizing," said Walmart U.S. CEO John Furner when discussion Q2 earnings with investors and analysts. "We do still have pockets of in-stock issues that are both related to the supply chain and then other factors that have been caused by the pandemic."
Walmart recently revealed the launch of Walmart+, its attempt to create an Amazon Prime-like membership offering for its customers.
Available to all customers on Sept. 15, membership will cost $98 annually, or $12.95 per month, and includes a 15-day free trial period. Going forward, the retailer plans to introduce a range of services and offerings as further member benefits. The benefits are in addition to Walmart’s existing customer offerings, including free curbside pickup and next-day and two-day delivery. The company will continue to provide delivery options with a per-delivery transaction fee so customers can select the service they prefer.
In addition to its online presence, the service draws on more than 4,700 stores, including 2,700 locations that offer delivery as quickly as the same day. Walmart+ members get unlimited free delivery from stores, fuel discounts and access to time-saving shopping tools.
According to the TB&P report, the recent Walmart memo “sent shockwaves through the supplier community,” mainly because of the looming Sept. 15 deadline. The retailer reportedly launched its OTIF standards in 2017 and has steadily raised them over the past three years or so.
Bentonville, Arkansas-based Walmart operates more than 11,300 stores under 58 banners in 27 countries, and e-commerce websites, employing 2.2 million-plus associates worldwide. Walmart U.S. is No. 1 on The PG 100, Progressive Grocer’s list of the top food and consumables retailers in North America.