Wal-Mart to impose stiff fines against suppliers around merchandising errors

Walmart U.S. management recently unveiled a restructuring of its merchandising teams and at the same time instituted another Supplier Accountability Program which will impose stiff fines for supplier errors.

Talk Business & Politics received a memo sent to suppliers in the fragrance category on July 24. The memo states the restructuring of the merchandising teams within Wal-Mart has meant more responsibility for Wal-Mart employees. The memo said Wal-Mart is trying not to create re-work with its own teams and the new Supplier Accountability Program is aimed at getting the highest level of efficiency by reducing errors relating to product merchandising protocol.

“Any supplier errors causing re-work on the Walmart team, including but not limited to Item Creation, UPC Changes, Item Dimension Changes, Feature Presentation Paperwork, Price Change Forms, Return Authorization Errors, Modular/ProSpace Submissions through Retail Link, and Line Reviews will cause a supplier to be placed on the Supplier Accountability Program,” the memo states.

The fine structure for errors escalates quickly after the first mistake. Wal-Mart said the first time a supplier makes a mistake noted above it is considered a warning. But at the second offense the fine is $5,000 and the penalty doubles with each repeated offense committed within a 52-week period.

Three mistakes garners a $10,000 fine and the fourth time a mistake is made the cost is a whopping $20,000.

“Our expectation is that your teams are checking and double-checking these forms before they are submitted to Walmart to ensure accuracy with the information,” the memo stated.

(UPDATED) Wal-Mart corporate told Talk Business & Politics on Wednesday the memo was sent out as a reminder to suppliers that the program, which has been around for four years, will now be enforced.

While the fines look steep, Eric Howerton, CEO of WhyteSpyder, said Wal-Mart is trying to get the attention of suppliers about the importance of providing correct item data. He said store buyer teams don’t have the time to chase down missing UPC codes which happens more than one might think.

WhyteSpyder works with Wal-Mart and its suppliers, and Howerton said there is too much missing information involved. He said suppliers must realize the data requirements for an omnichannel retailer like Wal-Mart is going to be more complex because it goes a level deeper than pure online or in-store.

He said all the tech investments Wal-Mart is making will not work effectively unless suppliers have made sure all the data and merchandising protocol is correct, and that includes everything from item set-up to returns. He said as Wal-Mart begins to use more machines learning to help optimize business efficiency, the complete information from suppliers is key. Without it, the computer algorithms won’t work.

“The machines are just as good as the data that is entered,” Howerton said.

Howerton wasn’t the only person who works with Wal-Mart suppliers to applaud the effort by Wal-Mart.

“Suppliers must take the initiative to operate with excellence, avoiding errors and reworks that cost both companies time and money,” said Peggy Knight, an independent retail consultant based in Northwest Arkansas. “Buyers must focus on procuring the right products at the right time and at the right cost. This will lead the company to future growth and the ability to continue to offer their customers the value they expect from Walmart.”