Last month, Wal-Mart introduced a new policy in which they penalize suppliers for delivering merchandise too far in advance. This means that manufacturers will be under increasing pressure to deliver their goods within the required 4-day window, as part of a company-wide program called “On-Time, In-Full”. Items that are late or missing during a one-month period will incur a fine of 3 percent of their value. Early shipments get fined, too, because they create overstocks.
Tightening deadlines and delivery policies show the importance of managing and optimizing the flow of products throughout the supply chain. Wal-Mart is now in a position where they must reduce inventory, and de-clutter warehouses and store back rooms across their 4,700 US locations – where surplus product often had to be stored in cargo trailers parked behind their stores.
With a vast logistics network of over 150 distribution centres across the US, the scale of Wal-Mart’s network dwarfs that of any other retailer in the US and they’re often the biggest customers for most of their suppliers. While penalties for late or missing deliveries are a standard across the industry, these tougher regulations for early deliveries outside the required window, or those that are partially complete, aim to generate an additional $1bn dollar worth of revenue for Wal-Mart.
This is a great example of how retailers need to optimize delivery visibility and control across the entire supply chain – from the first mile, to the last. Transparency and visibility of the process is key to being able to effectively manage the operation and create business efficiencies. However, initiatives such as this one can only work if partners are on board – all vendors, drivers, delivery partners, and warehouse managers need to be aligned to ensure shops are stocked, warehouses neat, and customers happy.