Kroger Co. is now fining suppliers hundreds of dollars for orders that arrive more than 2 days late.
The fines, which are now in effect at all of Kroger’s 42 warehouses, will charge suppliers $500 for every delivery that arrives more than 2 days after the scheduled delivery date.
According to The Wall Street Journal, Kroger Co. is enforcing tighter delivery windows as a way to keep their shelves better stocked in an attempt to compete with online retailers such as Amazon.
“It’s a massive opportunity from a financial and customer standpoint,” said senior vice president for merchandising at Kroger, Robert Clark.
10% of annual grocery sales are lost partially due to out of stock items, and the retailer’s newfound focus on timely deliveries could potentially offset that lost profit, helping them compete with the online market. Walmart began using similar policies over the summer, charging suppliers for early, late, and even improperly packed deliveries.
“The company eventually will fine for any shipment that isn’t received on the due day,” continued Clark.
Despite a push from retailers, it may be a challenge for some suppliers to consistently meet the on-time demands of Kroger, Walmart, or other retailers, as weather, technology, or changes in demand can affect the timeliness of a delivery.
In addition to unforeseeable circumstances, many warehouses may not have the proper resources or infrastructure to update technology to accommodate for the more precise delivery windows, explained Steve Matthesen, CEO of Acosta, Inc.
“Shipping complete orders on time is a completely reasonable request but… it’s harder than it sounds,” he said.
