Over the next 1-2 years, you will see many major retailers changing their policies for how they accept shipments. Delivery policies, in general, are becoming stricter—and compliance with standards is becoming more challenging. Moreover, the costs of non-compliance are escalating rapidly.
“National retail brick and mortar retailers are feeling intense pressure to compete with online e-tailers, who offer millions of items at a very low price,” said Tim Haitz, Senior Vice President of Sales and Marketing at YRC Freight. “These e-tailers can deliver items quickly and cheaply, with lower overhead costs. As a result, brick and mortar retailers are seeking new ways to stay competitive and relevant with today’s consumers.”
One way national retailers are differentiating themselves is by providing products that are available to local consumers on the shelf “right now”—without having to wait 2 days for shipping.
“This is why so many retailers are now emphasizing fill rate with suppliers,” Haitz added. “They want to keep shelves full, so that if a customer walks in looking for a certain brand of TV, then that TV is always available and ready on the shelf.”
Brick and mortar retailers are also striving to keep prices as low as possible for customers, and using premier services like drive-thru pickup windows as an added convenience.
To reduce costs, they are reducing inventory in the supply chain and managing their warehouse associates’ time more precisely. That’s why so many retailers are moving toward shorter delivery windows, with higher chargebacks for non-compliance.
“Compliance metrics are changing so that big box retailers can be more competitive. It’s not a move to punish suppliers,” Haitz said. “The goal is to get exactly the right amount of product on the shelf, at exactly the right time. The ‘need to compete’ is driving huge changes that will affect suppliers throughout the entire industry.”
4 Critical Trends for Today’s Suppliers
Here are the 4 things you need to know about trends in shipping if you are delivering to major retailers across the U.S.
Smaller delivery windows
In today’s marketplace, many major retailers are significantly reducing their delivery windows. Instead of 3- or 4-day delivery windows, many national retailers are now moving to 1- or 2-day windows, creating challenges for suppliers.
“This helps retailers reduce inventory in the supply chain and schedule warehouse associates more efficiently,” Haitz said. “To make those really ‘tight’ delivery windows, look for a delivery service that offers 100% guaranteed shipping for a specific date/time, or that allows you to choose a multi-day delivery window.”
Most retailers impose a penalty—called a chargeback—whenever a supplier misses a delivery window. In the past, this has remained steady at around 3% of the total cost of goods sold.
However, retailers are now revising this policy—and many are increasing their chargeback penalties. Several major retailers are now raising their chargeback penalty to 5% of the total cost of goods sold. This means that whenever you miss a delivery window on a $10,000 shipment, you’ll be required to pay a penalty of $500—a steep increase from $300.
“With the newer, higher chargebacks, it’s worthwhile to invest in a guaranteed delivery service, which can actually save you money in the long run,” Haitz said. “For example, YRC Freight offers a 1-day guaranteed delivery service (by 5 p.m.) with our Time Critical Service, where you can actually choose the date of delivery.”
In addition to chargebacks, companies are also imposing stringent penalties for late release, incomplete POs, early delivery, and missing labels. “All of these issues can be prevented by using a good carrier with solid technology and experience in these areas,” Haitz said.
Higher compliance standards
Larger retailers are also changing their compliance standards, requiring suppliers to perform better in order to retain their shelf space position and status as a vendor. Most retailers use a scorecard system to measure compliance.
A scorecard is a simple tool to track supplier performance. Since some major retailers juggle as many as 10,000 suppliers and 100,000 SKUs, they need a quick, easy way to measure supplier performance.
Scorecards rate supplier performance in several areas—such as fill rate and on-time deliveries. Generally, the higher the scorecard number, the better (for example, 95% is better than 85%).
“Staying in compliance” on your scorecard means that you are performing well—and are in good standing—as a supplier. The more “in compliance” you are, the higher your scorecard number, and the fewer penalties you will receive. However, the requirements for staying in compliance are becoming tougher.
“A few years ago, retailers would expect you to stay at a reasonable level of compliance on your deliveries and fill rate—such as 90%,” Haitz said. “Today, however, retailers expect better performance, and some are switching to a 95% compliance rate or higher.”
One of the easiest ways to stay in compliance is to make sure that all of your deliveries are arriving “in-window.” This means that they arrive within the time window specified by the retailer (whether it’s 1-day, 2-day, or 3-day).
“The more in compliance you are, the better negotiating position you’ll be in with that retailer,” Haitz added. “With a higher compliance score, you are generally in a better position to discuss pricing, shelf space, and other contract terms.”
More special product rollouts
Special product rollouts are used for seasonal displays, store launches, and new product launches. As retailers compete with each other to deliver exclusive product launches, improve brand awareness, and increase the use of customer-friendly seasonal displays, the number of special rollouts is also increasing.
“Special product rollouts can be challenging to coordinate,” Haitz said. “But they also offer a unique opportunity to really ‘shine’ with a major retail client.”
Successfully delivering a special product rollout requires extensive planning, sensitivity to the retailer’s logistics system, knowledge of their culture, precise timing, and large capacity management.
“We recommend partnering with a shipping company that has experience doing single-day, multi-point national rollouts,” Haitz said. “Make sure they have electronic reports or EDI tracking, so that you can track progress until every box is delivered on time.”
“Work with the account executive at your carrier to let them know the number of products, type of products, store locations, and delivery window dates to create a comprehensive, detailed project plan that keeps you on track,” he added.
Choosing the right shipping partner
“Today, when shipping to a major retailer, deliveries need to be as precise as possible,” Haitz said. “It’s more important than ever to choose the right shipping partner.”
Based on his 31 years in the shipping industry, Haitz recommends evaluating the following criteria when choosing a shipping partner:
- Experience. Look for a carrier with at least 5+ years’ experience delivering to major national retailers, Haitz said. You’ll avoid expensive mistakes if you select a carrier that is already experienced with navigating that retailer’s complex distribution system. “They should also have electronic tracking and receiving systems established, which will make reporting much easier,” he adds.
- Achievement. Has the carrier won any awards from customers for outstanding delivery performance from a major retailer? “This tells you that the carrier understands a retailer’s needs and demanding service levels, and can perform accordingly,” Haitz said. “For example, YRC Freight has been selected 7 times as Walmart’s LTL Carrier of the Year. Other retailers give similar annual awards to carriers for excellent performance.”
- Guarantee. Choose a carrier who offers a 100% guarantee that your delivery will arrive on a specific day.
- Coverage. Make sure your carrier has adequate national coverage, including Mexico and Canada (if necessary).
- Technology. Look for website ordering capability, online reporting and shipment status, and EDI tracking.
- Customer service. No matter who you choose, make sure they have 24/7 customer account service available—by web, phone, or email.
- Capacity. Does the carrier have a large enough number of trucks, distribution centers, and dock staff to handle unexpected surges in delivery, seasons, or inventory? “You’ll need ‘deep’ capacity to handle surges smoothly and easily,” Haitz said. “If your carrier is already having difficulty managing your normal day-to-day shipping load, then they do not have the depth to handle peak periods for a major retailer, such as Christmas season.”
- Special projects. Ask about the carrier’s experience with special projects. Have they ever successfully delivered a new product/store rollout? How many stores were involved? How many products? “Promotional end caps, seasonal product rollouts, and new product launches must often be timed to the hour, which requires extensive planning and experience,” Haitz said.
- Consultation. “When you’re shipping to a major national retailer, you’re in the big leagues,” Haitz said. “This is not the time to hire an ‘order-taker’ for the cheapest price. This relationship could be the ticket to growing your business in a whole new way.” Look for a partner who can advise you on ways to save money, avoid chargebacks, and improve your scorecard.
Get the YRC Freight Advantage
YRC Freight has 15,000 vehicles and 250 distribution centers throughout North America, ready to handle your orders—24/7. We deliver 11 million shipments safely each year, and have been the original LTL carrier since 1924.
YRC Freight makes it easy to ship to major national retailers with our:
- Time-Critical Service—with a 100% delivery window guarantee for 5 p.m. delivery
- Accelerated Service—non-guaranteed shipments arrive 1-2 days faster than Standard
- Guaranteed Multiday Window—to help meet delivery windows
- Dedicated account service teams—experienced working with major national retailers
- Special projects coordination—for seasonal, promotional, new product rollouts, store openings
- Initial ship-day planning and coordination—to plan/choose the most economical service from the beginning
- Easy-access reports and status—through EDI, website
- White glove service—when you need “special care” delivery