Cinncinati-based grocery chain Kroger has joined Walmart in instituting a new policy that fines suppliers $500 for deliveries that past a two day window to any of the company’s 42 warehouses.
The tough new policy is meant to keep Kroger stores competitive by ensuring that products remain in stock quickly and keep customers from going to other retailers.
Robert Clark, senior vice president of merchandising for Kroger, commented, “It’s a massive opportunity from a financial and customer standpoint. If it was an occasional issue, it wouldn’t have been worth the time and effort [to police deliveries].”
Walmart began their program, called “On Time, In Full”, in August. Their policy requires shippers who provide full truckloads of fast turn goods to “deliver what we ordered 100 percent in full, on the must-arrive-by date 75 percent of the time.” Shippers who fail to comply with the On Time, In Full requirements are fined 3% of the value of the load.
“On Time, In Full” requires general merchandise suppliers to hit a two-day delivery window 75% of the time, while food suppliers need to deliver within a one-day window 75% of the time. But those standards will get tougher come February. Walmart will up the requirement to come in on time and in full 95% of the time.
Lost sales are a serious, legitimate issue for retailers. However, there is a question about how small suppliers, which often don’t have the money for pricey updates, will be able to meet the delivery demands. Although Walmart could cut them, they often represent niche brands which are popular with consumers.