Just months after tightening them, Walmart Inc. has relaxed deadlines for some supplier deliveries, easing pressure on manufacturers who are already grappling with a driver shortage.
The world’s largest retailer will now let shipments of food, household goods and health and beauty products arrive at regional distribution centers one day early, according to a memo from Chief Merchandising Officer Steve Bratspies obtained by Bloomberg News. Under rules instituted just last year, deliveries that came the day before they were due had been subject to fines, as they could create overstocks.
Walmart’s more generous stance comes as suppliers like General Mills Inc. and Hershey Co. grapple with a transportation shortage and new driving regulations that have sent shipping costs spiraling. Walmart handles the shipping for many of its suppliers through its own trucking fleet and other transport providers, and it rolled out the tighter delivery windows in August to reduce out-of-stock items and boost sales. Now, with deliveries at risk of coming late to its 4,700 U.S. stores, Walmart is easing up.
“This capacity crunch is real and it’s getting tighter,” said Colby Beland, vice president of sales and marketing at logistics provider CaseStack. “Walmart understands that, so they’re relaxing those windows so suppliers won’t have to take price increases.”
A Walmart spokesman said the company made the shift to simplify delivery requirements for suppliers who handle both food and slower-moving general merchandise products like electronics, hardware and apparel. The new rules had narrowed the on-time window for food and consumables like baby products and pet supplies to one day, compared with two days for general merchandise. Suppliers of food and sundries now have a “1-day early option,” according to the memo.
“We’re simply allowing the carrier to deliver a day earlier,” Bratspies said in the memo.
Taking a Toll
Walmart said the early-shipment option wasn’t related to the continuing trucker shortage, as it only applied to some of its distribution centers. Still, the capacity crunch is taking a toll.
One consultant who works with small and medium-sized Walmart suppliers said trucks to pick up clients’ orders are typically arriving two or three days late, prompting a flurry of emails and conference calls between vendors and Walmart’s transportation and replenishment managers.
When trucks do show up, there’s sometimes not enough space in the trailer for all the goods, said the consultant, who asked not to be named as the discussions with Walmart are private. Walmart works with more than 100,000 suppliers, and the larger ones are better equipped to deal with transportation shortages, which affect all retailers and consumer-product companies.
There Aren’t Enough Truckers, and That’s Pinching U.S. Profits
Walmart executives have said that higher prices to move goods weighed on its profit margins in the fourth quarter. And the problem has worsened in recent months as new federal regulations requiring most big rigs to record driver hours with electronic logging devices took effect. Surging demand and rough weather have also contributed to push trucking spot rates up 27% in the year through April 6, according to Truckstop.com.
“It’s a perfect storm, and I think it will keep raging for a bit,” Kevin Hill, founder of transportation data provider CarrierLists, said.
By Matthew Boyle