How Food Consolidation to Walmart Helps Solve the Greatest Compliance Challenges

Be careful what you wish for: for food or beverage suppliers, selling to Walmart can be a major volume booster, but it can also bring major compliance challenges.

Compared to other options available to sellers, such as less-than-truckload (LTL) shipping, full truckload shipping (if there’s sufficient volume), or opting for Walmart's "shipping collect" service, where Walmart manages transportation, a food consolidation program offers significant advantages when delivering to Walmart.

One of the primary reasons for choosing retail consolidation is minimizing cost. ODW has found that our retail consolidation programs save customers 20% - 30%. That’s considerable considering the challenging margins with which food and beverage suppliers operate.

There are a host of other reasons to embrace a distribution strategy that is tailor-made for Walmart vendor compliance. In this post, Ryan Stitzel, Senior Director of Optimization at ODW Logistics and Dusty Martin, Director of Operations at ODW Logistics, share insights on how success depends heavily on a food and beverage supplier’s ability to follow Walmart’s rules.

Walmart Compliance

The rules and requirements for Walmart are laid out in their 399-page Supply Chain Standards. Instructions are comprehensive, specific and come with penalties for noncompliance. For some food suppliers, fines can add up to thousands of dollars per month.

What makes their routing guide especially challenging is that there are on-time standards as well as in-full standards (OTIF) that cover everything from purchase orders to proper shrink-wrapping.

Walmart’s rules aren’t strict for the sake of being strict; there’s a reason for their requirements. Running an efficient supply chain helps Walmart fulfill their mission of keeping their prices low and shelves full. Food is an essential focus of that mission.

In-Full Risks

You need more than a list of rules to succeed with Walmart. You need to know the compliance hazards before they happen. Here are the top five in-full risks for food and beverage suppliers according to Ryan and Dusty.

1. Labeling mistakes are common. Walmart wants to automate as much of their process as possible. Incorrect labeling and packaging slow their process. In a lot of cases you have to have specific labeling on each side and in the right position so their automated systems can read them and your shipment can be transited down to the right network.
2. Documentation mistakes – especially on invoices, packing lists, certificates of origin, and quality inspections – are common. Accurate and detailed information is required for every shipment. If your internal automated processes are perpetuating errors, it can rack up penalties.
3. Regulatory requirements can lead Walmart to reject shipments. Walmart enforces regulations designed to protect food and ensure sanitary conditions. Suppliers are responsible for complying with FDA regulations regarding care and labeling.
4. Damage to products is the cause of many fines from Walmart. A continuous improvement program that mitigates damage is essential. If damages are frequent, suppliers need to institute overpacking measures like packing cases in protective cases.
5. Equipment mistakes include using trailers that are not food grade. It’s best to use a carrier pool that only hauls food. Carriers that haul commodities like recycling need to clean and dry their trailer before transporting food. Walmart will reject shipments that arrive in equipment that is not up to standards of cleanliness.

On-Time Challenges

With Walmart, you can get in just as much trouble for delivering too early as for delivering too late. The delivery window for Walmart for a live unload is the day-of minus a day. So you can get there one day early, and if you have a “dropped equipment program,” you can get in two days early. However if you drop your trailer three days ahead of the delivery date, you get dinged just as much as you would if you showed up a day late.

ODW has found that getting freight from multiple suppliers together to meet delivery windows is best achieved by focusing on must-arrive-by-date (MABD).

ODW’s food consolidation to Walmart is MADB-driven. Ryan explains, “From the transportation side of things, we work with our pool captain and our relationships over at Walmart to establish the order review dates, transit times and processing times. Those are the three buckets that really make up the full lead time with Walmart. Once we establish those, we know when that MABD is going to be and work backwards.”

With the MABDs set, ODW’s transportation management system (TMS) then groups suppliers with the same cadence (lead time) and builds out the trailer load. After that, the order transfers to ODW’s warehouse management system (WMS) to initiate picking and packing.

The alternative is a reactive order fulfillment process that creates OTIF risk. “Some suppliers like to leave their options wide open for when orders come in, but you don’t want to be shipping to every single distribution center (DC) every day. It increases costs because of the amount of effort to manage fluctuations in volumes, order points, and just the flow through the warehouse all the way up to the transportation and shipping piece,” adds Dusty.

Walmart Fines

Walmart requires suppliers to achieve 90% on-time performance and 95% in-full performance or Walmart or they will fine you 3% of the cost of goods sold (COGS) of the non-compliant cases shipped to the distribution centers.

It’s easy to see how fines can mount for suppliers and eat into profit margins. Mistakes also bring reputational risk if you become known as a supplier who consistently misses delivery windows or shows up with mislabeled or improperly packaged shipments.

Managing the risks requires commitment to fine-tuned and continually updated processes.

A system of safeguards is also required. In addition to Walmart’s routing guide, ODW maintains a supplemental routing guide for Walmart to fill in information gaps and document food and beverage-specific insights. ODW also performs continuous Acceptable Quality Level (AQL) audits on food and beverage orders going to Walmart. And after the fact, ODW has systems in place to help shippers issue a timely response when they need to dispute a fine.

The Insider Advantage

Walmart is a massive organization, and even something as simple as shipping products to two different departments within a store can become a complex task. Knowing the right contacts within the company is essential. Having an established relationship with Walmart makes securing delivery appointments easier and ensures you receive updates to routing guides or other changes—often well ahead of time.

Ryan observes that establishing a relationship with Walmart can help you align lead times and other cadences. “The reality is, if you can be open with Walmart and say, ‘Hey, here are my challenges,’ they're willing to listen and understand. If I need to adjust a lead time from seven days to eight days and my success rate is going to move from 60% to 90% without OTIF fines, they are completely on board for that. But it takes that relationship to be able to open those opportunities up,” Ryan explains.

Relationships and communication matter. “Don't be afraid to cross-functionally collaborate with Walmart. They want you to be successful too,” Dusty adds. “When you don't have that relationship and open communication, mistakes disrupt their supply chain as much as they disrupt yours.”

The Walmart Way

You could learn to do anything on the internet today – including learning to comply with Walmart’s Supply Chain Standards. But that doesn’t mean you should. Managing your own order fulfillment to Walmart joins a long list of activities that are best left to experts with the experience, tools and commitment required to do it right.

Walmart represents an incomparable selling opportunity. Why risk mistakes that erode your bottom line and reputation?

Talk to an ODW team member about what a Walmart consolidation program – or a wider retail consolidation program – would look like for you.