Walmart’s Shipping Mandates: A Wake-up Call for Brands and Manufacturers
Walmart and its retail competitors are charging ahead to find new ways of minimizing inventory without sacrificing customer service. Already they have implemented the following measures:
Placing smaller orders at higher frequencies
Deploying new strategies to pool and optimize inventory across channels
Applying greater pressure on suppliers to deliver on-time with accuracy
Walmart’s new shipping mandates stipulate that suppliers need to hit a 1-2 day delivery window or face fines takes effect April 1st. The tightening shipment window isn’t the only pressure squeezing suppliers. The Wall Street Journal recently reported that:
“The tightened delivery window comes as freight costs are soaring for manufacturers and retailers. Many companies are scrambling to book transportation, particularly for time-sensitive deliveries, because demand has outstripped the supply of available trucks. Prices on the spot market, where shippers arrange last-minute transportation, are up more than 20% compared with this time last year. Fuel prices are also rising, adding to costs.”
Adding resources in the face of rising costs on multiple fronts is not the answer to improving customer service. This requires more than a band-aid; a long term solution is required. After all, this program, designed to minimize inventory while ensuring shelves are stocked, is likely to be replicated by other retailers who face the same challenges as Walmart. Serving customers and ensuring product availability, while minimizing costs, is paramount. For Walmart’s suppliers, this challenge becomes their own. How can a manufacturer meet Walmart’s needs, improve service levels, and still maintain profitability? It comes down to accurate logistics visibility and predictability. Unfortunately, these are attributes that have long been elusive for supply chain and logistics organizations.
Innovative brands and manufacturers have already begun looking at this challenge more dynamically by exploring the root cause. What’s hindered visibility, predictability, and operational efficiency is the lack of quality in underlying data such as EDI. Visibility and ETAs based on inaccurate or shoddy data result in outputs and predictions that are unreliable. Solving the Walmart shipping problem is about more than on-time deliveries. It’s about fixing the root problem that has long impeded supply chains - bad data.
Often, 10-20% of order status updates that arrive from partners are incorrect. These batches of bad data make their way into critical decisions along the supply chain that have direct impact on profitability and customer service. Insights into visibility and times of arrival are inaccurate. The ability to predict exceptions or truly understand exceptions and alerts are hindered. Untrustworthy data leads to inefficient execution, unreliable plans and excess inventory.
The stakes are only rising. Walmart’s fine for late delivery is 3% of cost of goods delayed. At that rate, brands and manufacturers can’t afford to miss a shipment window. The question is do they plan to ignore amounting pressures and continue as before or get ahead by investing in supply chain transformation measures? Time will tell.