In a recent letter to their suppliers (full letter here courtesy of ARC), Wal-Mart outlined a new policy about the enforcement of the MABD (must arrive by date). The gist of the policy is that all purchase orders (POs) must arrive within a four day window preceding the MABD. If a supplier is out of compliance over a period of time, they will be subject to a fine which equates to 3% of the cost of goods sold (COGS). How is that for a chargeback? While it is common place for retailers to have some chargebacks in place if certain conditions are not met (labels, timing, packaging, etc.), this new program raises the risk and cost exposure to shipping to Wal-Mart. Wal-Mart’s go to market strategy is largely competing on price, and to achieve their price superiority they lean heavily on suppliers to lower their COGS so they can pass some of that savings onto consumers. Many suppliers will have no choice but to accept these terms since Wal-Mart represents so much of their business, but this new policy will make it less profitable to sell their wares to Wal-Mart.
I wonder if Wal-Mart cannot see the proverbial forest for the trees when it comes to their extended supply chain costs? Anytime we chose to measure/manage/incent on a metric it is quite likely to improve. I have no doubt that the number of POs that arrive within the MABD window will increase, but at what cost? Just last Spring when Best Buy was reporting their Q1 financials they stated they lost potential sales because some vendors had simply not supplied the expected merchandise. I can see a similar situation unfold in the case of Wal-Mart. The more constraints that are introduced into a situation, the less the situation can be optimized. If the supplier has these strict delivery windows they might be less inclined or dis-incentivized to consolidate loads. This could result in out-of-stock conditions on the store shelf, something that clearly costs Wal-Mart money. To the degree this new policy raises the overall cost for the suppliers the less they will be able to work with Wal-Mart on additional price concessions or Wal-Mart could push them to the brink of bankruptcy, neither of which is a good outcome for Wal-Mart.
While I am all for management of key metrics, it is always important that the metrics enforced in one division/department support the overall corporate strategy otherwise a sub-optimal result is likely. This new policy is now in effect as of February 1, 2010. It will be interesting in the coming months to see the impact this has on Wal-Mart’s extended supply chain and if it goes the way of the RFID mandates…

HighJump Software was recently named to the annual Food Logistics 100. The FL100 is a listing of technology solution and service providers selected by the editorial staff of Food Logistics magazine that are helping food, beverage and CPG companies gain a competitive logistical advantage.
I choose to quote Wikipedia’s definition because it provided validation for the point I’m about make. The operative phrase in Wikipedia’s definition is ‘believed to be’… the best. Ah ha! That indicates a best practice may or may not be the best, or worst. Let me illustrate – Is it better to put peanut butter on both sides of the bread with the jelly on top of the pb or put all the peanut butter on one side of the bread and just jelly on the other when preparing a PB&J? Which would be considered the “best practice” for this task? Both methods achieve the desired outcome; neither requires significant extra effort, time, or materials and each is suitable to the maker’s personal preference and skill. In this case both methods can be considered a ‘best practice’.
Today HighJump announced that our latest route accounting system (RAS) has received certification with Anheuser-Busch InBev for use by their wholesalers. The result of this certification is that HighJump RouteCenter receives the highest level of compliance, Level 1 ISV – Strategic Partner. The news release:
Being in the handheld based solution business for quite awhile now, there is this voice in my head that keeps saying that there is more to the whole Smartphone thing than simply changing the device we capture our mobile sales, service and delivery transactions on. The fight for the mobile desk top is still raging on and there is no clear winner in sight. Open architectures that can span the operating systems will have a definite advantage. In the ruggedized space, at least for the near term, Microsoft rules the way. However, that cannot be said for what is being carried in the pockets of executives, sales people and even the man on the street.
Congratulations to Overstock.com, a HighJump WMS warehouse management system customer, for once again placing second in the
HighJump Software just announced the dates for Innovation 2010, which will take place at the
There is an interesting term I have heard over the years about people who do the actual direct store delivery job. It goes something like, “If you are smart enough to do the job you may be too smart to take it.” The implication is that to do a really good job you need to have a kind of personal discipline and commitment to success as well as skill with people and sales that are not often found in industries where there is such a physical component. I have had the pleasure of working with and meeting many superstars in this industry; they are truly one of a kind individuals and are very talented. There is a true disconnect between the incentives put in place for many of these talents and a kind of regimented distrust that is prevalent in the DSD industry.
HighJump Software today announced the appointment of Robert Martin as Vice President of Corporate Development. Martin will lead HighJump Software’s worldwide acquisition efforts.
Just when we thought we could call the Green Bay Packers playoff chances dead and anoint the Vikings as the class of the NFC….things change.
When reviewing supply chain best practices, visibility to inventory levels throughout the different nodes in your supply chain should be one of the practices your company has embraced. This allows your company to be more nimble and still meet customer service levels when supply chain disruptions and exceptions occur. RSM McGladrey recently released their 2009 Manufacturing and Wholesale Distribution
Five Smart Moves
Four Secrets of
The Dirty Little Secrets
Nine Telltale Signs