Retailers like Walmart and Target are evaluating supply chains this year and demanding more from suppliers, who will have to be quicker and more focused to meet new requirements.

Why Are Retailers Turning Up the Heat?

The wave of changes underway speeds the time it takes for products to hit store shelves, which helps retailers miss fewer sales, maintain leaner inventories, cater to online shoppers, and ultimately stay ahead of competitors. Additionally, a faster, more efficient supply chain will help superstores address the complexities that come with keeping perishable food and beverage products fresh and in stock at all times (Supply Chain Brain).

Fire in the Belly: Two Retailers Leading the Charge

Let’s take a look at how Walmart and Target have gotten tougher on their vendors in the past year.

Price-leader Walmart is renowned for requiring suppliers to cut prices and provide extra services, and then passing savings on to customers. Part of an initiative introduced in 2010, streamlining the supply chain extends this approach by allowing Walmart to stock shelves just-in-time and avoid extra costs. The newest round of changes takes effect next month and tightens potential delivery windows from four days to two while upping compliance requirements from 90 percent to 95 percent. That means that deliveries must arrive on the agreed-upon date, or the day before, 95 percent of the time or Walmart will assess a 3% fine on quarterly invoices (Supply Chain Brain).

Walmart is not alone. Target is investing more than $5 billion in infrastructure changes to address issues that arose when stores began selling fresh groceries several years ago. A complete overhaul of the supply chain, this effort to increase speed and hold less inventory includes stricter warehouse delivery deadlines and stiff compliance penalties. Target suppliers must now provide a single arrival date for shipments to warehouses and will no longer receive a grace period for late deliveries. Fines for late deliveries, formerly 1 percent to 3 percent of the order total, will swell to 5 percent in addition to new penalties under consideration, such as escalating fines of up to $10,000 for inaccurate product information (Reuters).

Dousing the Flames

Both Walmart and Target intend to work with suppliers and offer flexibility during the transitions, but suppliers will bear the brunt of costs. While these supply chain restrictions ask a great deal of suppliers, most agree that the benefits from working with these and other top retailers still outweigh the costs.

To effectively manage the changes, Walmart and Target suppliers should begin repositioning for the future:

  • Call for tighter coordination between manufacturing and logistics/transportation functions
  • Work with carriers and 3PLs to establish updated requirements and transit-time expectations
  • Make sure you’re partnering with highly vetted carriers that have proven retail delivery experience and solid on-time track records
  • Analyze or build out new routing guides to minimize the risk of service failure that comes with having too few carriers

Today more than ever, success as a supplier requires focus and flexibility, especially when the heat is on. Capstone understands that noncompliance with retail requirements is costly. We have extensive experience with on-time deliveries into the largest big-box retailers and grocery chains in North America. Whether you require expedited solutions, surge capacity, project capacity, or DSD, we’ll help you avoid chargebacks and maintain positive relationships with your customers.