Some Walmart suppliers hit with new charges related to freight handling

The rising cost of fuel and transportation has pushed Walmart to begin charging suppliers a pickup fee for freight the retail giant handles on their behalf. The suppliers are known as “Collect” versus the “Prepaid” option they are given.

The memo was sent to Collect suppliers last week. Talk Business & Politics received a copy of a Walmart memo which stated effective Aug. 1 all Collect suppliers will share transportation cost accountability through a Collect Pickup charge and a fuel surcharge. The Collect Pickup charge is a monthly department-specific deduction calculated as a percent of the Cost of Goods received across Walmart U.S.

“The customer is at the center of everything we do at Walmart, and we continue to look for ways to bring them everyday low prices and deepen our relationship. It’s also critical we remain diligent in reducing expenses where we can in order to deliver for our customers,” said Chris Nicholas, chief operating officer at Walmart U.S.

He said significant transportation cost increases over the past few years reached a tipping point and it’s time suppliers share the cost burden. Collect suppliers allow Walmart to pick up and ship their goods to Walmart distribution centers. The transportation cost is factored into the order total, and Walmart typically collects transportation costs from the supplier. Suppliers who handle their own shipments to Walmart distribution centers negotiate their own rates and pay them independently of Walmart.

Walmart will begin charging a fuel surcharge based on freight movements and real-time fuel costs. The real-time pricing replaces a system that created a lag in charges of a month or more. Walmart said suppliers who use the Collect option will begin seeing freight charge deductions from their invoices beginning in September for August’s services.

Walmart said it would also evaluate the trailer utilization rate of the Collect suppliers looking for efficient shipment alignments to reduce transportation expenses where possible.

Last month, Walmart U.S. CEO John Furner said the company would need to pass on the costs of higher fuel or shipping to “to fairly price and protect the margins where appropriate.”

The announcement also comes on the heels of Walmart’s lackluster first-quarter earnings results and lower profit guidance related to higher labor costs and $160 million higher fuel costs than expected in the period. Since May, diesel prices have risen to a U.S. average of $5.716 per gallon this week. A year ago, U.S. diesel prices averaged $3.25 per gallon.