Wal-Mart Adjusts Inbound-Freight Initiative

Wal-Mart Adjusts Inbound-Freight Initiative

Wal-Mart said it has learned to treat each supplier uniquely and when to let vendors run their own transportation since taking control of inbound logistics from its suppliers 18 months ago.

“We’ve learned a lot,” said Greg Forbis, the retailer’s senior director, inbound general merchandise transportation.

Wal-Mart launched a program in mid-2010 to take over deliveries of inbound freight where they saw opportunities to do the work better than vendors could do under prepaid freight terms. The shift by the world’s largest retailer to increased use of freight-collect terms sent shock waves through the transportation industry.

Wal-Mart has had to realize that “every supplier is unique and there’s not one cookie-cutter format that fits everything,” Forbis said at the annual conference of the Council of Supply Chain Management Professionals.

"We’ve got some fantastic suppliers but when we sit down across the table with them and they walk through their supply chain, it kind of makes you scratch your head,” he said.

“In a lot of cases it’s because they’ve bought companies over time and really haven’t had a chance to re-engineer their networks.”

On the other hand, some suppliers had efficient transportation operations that Wal-Mart was hard-pressed to improve. “One of the key learnings was that we weren’t as good as they were in some cases,” Forbis said.

Recognizing this, Wal-Mart has focused on smaller suppliers where the retailer can bring its scale and expertise to bear.

Wal-Mart launched its new inbound freight program to reduce costs, leverage the retailer’s logistics skills and scales, improve visibility and control of its merchandise, and improve environmental sustainability by things like reducing trucks’ deadhead miles.

The change from prepaid to collect terms has benefited suppliers by cutting costs, allowing suppliers to focus on core competencies, reducing suppliers’ exposure to fuel prices and other cost variables, and improving cash flow, Forbis said.

In many cases, Wal-Mart kept its suppliers’ carrier base intact. “We’ve gained some new carriers. We’ve grown some new relationships with carriers,” Forbis said.

Wal-Mart’s discussions with suppliers on changes to its inbound transportation were “a very open book,” with discussions of how to reduce costs and improve supply networks, he said. “Some wanted to share, some didn’t want to share. Those that didn’t want to share, we just kind of move on and go to the next supplier and say, ‘What are our opportunities?’”

-- Contact Joseph Bonney at jbonney@joc.com. Follow him on Twitter @josephbonney.