business news in context, analysis with attitude

Yesterday, MNB took note of a Wall Street Journal report that companies such as Walmart and Kroger “are increasingly demanding their suppliers deliver on time, imposing fines for late shipments as they try to keep customers satisfied and better compete with online retailers like Amazon.”

This story generated a lot of email.

One MNB reader wrote:

Yes, there are at times supplier issues. But I can tell you from experience that the stores are just as much at fault.  They don’t order enough because the accountants are trying to keep inventory levels down and almost all of them have reduced labor to the point that many times merchandise in the back room doesn’t get out to the shelves.

Kroger is using a third party distributor for items not stocked in their own warehouses to order, deliver and stock the shelves.  If they don’t order enough(about 70% of the time) or don’t get to that store but twice a week there are out of stocks. And most store personnel won’t fill the shelves since the third party distributor is supposed to. Again a shortage of labor.

If it ain’t on the shelves you got no $ going through the till.

From another reader:

First let’s get one point out of the way.  Manufacturers want to sell product.  So do retailers.  To that end both are the same.

The problem arises that when manufacturers cannot get their product to the retailer because of 3rd party issues.  Trucking. There is a trucking shortage.  And there also is a bigger issue that trucking jobs are not being filled.  Couple that with the recent disasters, where truckers are paid top dollar to deliver into these areas and the already short supply of vehicles and drivers is sucking up any fluff.  Then add on the government regs for truckers and that slows things down even further.

So now the retailers are raising fines.,  Wow, that is really going to help.  As a manufacturer, I know for a fact that higher fines will NOT put wheels under a load.

Some solutions:

How about the retailers plan better?

How about the retailers allow other options such as DOT to come into their locations?

How about retailers give extended hours so more vehicles can get in? 

How about they pick up instead of asking for exorbitant rates to do so.?

All of these, I know, have been asked in the past, but to no avail.

This is not just a manufacturer issue.  It is an industry issue.  So retailers, why don’t you help come up with some solutions instead of always passing the buck.  Oh, one more point, do you think for one minute that the $75 billion in losses is solely owned by the retailer?  NO, it is not.

How many bill backs have manufacturers seen for lost sales and unsaleables?  Maybe the manufacturers should not guarantee product and let the retailer actually own what they “buy.”

MNB reader John Aune wrote:

With nearly 40 years in retail, warehouse and logistics I certainly understand the importance of on time delivery.  Unfortunately I think Kroger and Walmart got it wrong this time.

Once again their tough minded approach to correcting the problem will ultimately result in negatively impacting the consumer.  Any fines that are levied are always passed on to the consumer in higher cost of goods, and the idea that product would be removed from the shelf is punitive to the consumer more so than the retailer.  All in all it’s a lose-lose proposition.
Kroger and Walmart need to ask themselves how long do you make truckers wait for unloading when the dock is over-scheduled?  And do you pay the trucker a retention fee for wasting their time?
Retailers and wholesalers are quick to punish the food manufacture with fines that ultimately become a profit center for the retailer/wholesaler.
Despite the advances in technology and logistics companies are still asked to deliver goods on an antiquated overused highway system.  That will on occasion cause late deliveries.
I would propose that retailers and wholesalers work with food manufacturers to increase days’ supply on hand to avoid or at least mitigate the dreaded out of stock.  I’m sure they could devise a mutually agreeable settlement to extend payment terms or increase the cash discount as an incentive to move beyond just in time delivery.
Whatever the answer, it shouldn’t result in a punishment for the consumer.


From MNB reader Jerry Sternberg:

Therefore can one assume that a consumer that has taken the time out of their day to shop can fine the store for the out of stock? Just saying.

And from another reader:

I wish I had the clout to fine Kroger and Walmart every time I had to wait in a long checkout line … or when the price at the register was higher than the one on the shelf.  This is just another ploy to make it on the buy rather than on the sale.   In my view demanding these fines is a violation of the federal Robinson-Patman Act.  Unfortunately no one at the Federal Trade Commission seems to know that law exists.

And another:

One of the biggest issues at this time for the beef industry kc is folks carrying very little inventory and not managing their better moving products, it’s amazing everyday how many need next day delivery or a second day delivery for product they are now out of. As trucking has gotten much tighter these deliveries are not possible and then they blame the packers for out of stock , we can certainly do a better job but the retailers should look in the mirror.

We also had a story yesterday about how benefits are being reduced at some of the e-commerce companies being acquired by Walmart, prompting one MNB reader to write:

I urge you to find ANY acquisition where the line employees come out on top. Walmart you expect it but it happens everywhere. Bottom line, in the long-run, acquisitions mean the workers do more with less while the investors scoop off the profits. Unless some noble entity like Wegman’s, Costco or the like are the acquiring company - but they don’t typically acquire.
KC's View: