Wal-Mart to tell suppliers: Deliver on time or face fines


Wal-Mart Stores Inc. plans to ask suppliers to deliver more goods to warehouses exactly on time or face fines, another step in the retailer’s efforts to keep inventory low and shelves stocked as it battles with Amazon.com Inc.

At an annual conference for suppliers this week, Wal-Mart

WMT, +1.07%

 executives plan to announce that large suppliers need to deliver full orders within a specified one- or two-day window 85% of the time or face a fine of 3% of the cost of delayed goods, said Steve Bratspies chief merchandising officer for Wal-Mart U.S., in an interview Monday. Previously, suppliers had to hit a 75% threshold to avoid fines. For smaller suppliers the on-time threshold will move to 50%, up from 33%. The change will take effect in April.

“This is not a ‘Hey, let’s see how unreasonable we can be,’” said Bratspies. “We need the product that the customer wants when they want it.” Wal-Mart would rather have the products on-time than fine suppliers, said a spokesman.

As Wal-Mart, Kroger Co.

KR, +1.49%

 and other retailers demand tighter delivery windows, suppliers including Kraft Heinz Co.

KHC, -1.22%

 and Procter & Gamble Co.

PG, -0.99%

 have invested heavily to meet those requirements and make their supply chains more flexible for online buyers. Last February, Wal-Mart executives told suppliers more accurate delivery times would be a focus going forward and first introduced fines for inaccurate deliveries last year.

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An expanded version of this report appears on WSJ.com.

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