Walmart is once again using its retail might to drive up its own profits at the expense of others, this time taking aim at commercial carriers with new financial penalties for early and late deliveries.
The retail giant has already instituted the new policy, which it calls “On-Time, In-Full” with the intention of squeezing its suppliers for an extra $1 billion in annual revenue, primarily by keeping Walmart shelves stocked.
According to Bloomberg, Walmart’s new policy hits carriers and shippers with fees if they fall to deliver within a window of time set by the retailer. If carriers are out of that window, either by being too early or late, more than 25 percent of the time, Walmart will dock them with three percent of the invoice value of the load delivered.
Walmart will ramp up the pressure even more in February when it will require carriers to make “On-Time, In-Full” deliveries 95 percent of the time. Again, suppliers who fall out of Walmart’s window will have 3 percent of the full invoice value of loads delivered out of time withheld.
The fee will be levied against whichever entity – either the shipper or supplier – Walmart deems to be at fault.
Kendall Trainor, a Wal-Mart senior director of operations support and supplier collaboration, told Bloomberg “variability is the No. 1 killer of the supply chain.”
According to Bloomberg, “Those variations can be extreme: [On-Time, In-Full] scores for Wal-Mart’s top 75 suppliers – including Procter & Gamble Co. and Unilever – had been as low as 10 percent … and not one had reached the 95 percent long-term target.”
In some cases a problem will be Walmart’s fault, so the retailer has developed a scoring system that breaks down reasons for non-compliant deliveries and will fine suppliers only if they’re responsible. According to Bloomberg, “if suppliers don’t agree with the fine, too bad: Disputes ‘will not be tolerated,’ Wal-Mart says.”
While the new policy is expected to create ripples throughout the supply chain, it could also create enormous burdens on carriers and drivers to beat delays at all costs. Is it unreasonable to estimate that accidents, road construction, weather delays, and other unexpected highway setbacks can delay a carrier 5 percent of the time, if not more?
The effects of Walmart’s new policy on commercial carrier and highway safety should be closely watched by the Federal Motor Carrier Safety Administration (FMCSA) and other U.S. regulators. And Walmart and its executives should be held accountable to the fullest extent of the law for any adverse effects its intense pressure on suppliers and carriers threatens.