Many of you have heard of MADD (Mothers Against Drunk Drivers) but how many of you have heard of MABD? Well, if you are a shipper that supplies products to Wal-Mart or other retailers, you should learn as much about “Must Arrive By Date” as soon as possible. As of last week, U.S. companies shipping goods to Wal-Mart distribution centers must begin to deliver within a four-day window leading up to a MABD date. The requirement will initially apply to suppliers that ship prepaid and truckload freight to Wal-Mart DC’s.
The monthly benchmark is being set at 90 percent. Those companies that fall short of this target will be assessed a “reimbursement” charge that equates to 3 percent of cost of goods sold. It is worth noting that the penalty applies to shipments arriving prior to or after the 4 day window.
Wal-Mart’s initiative will be widely scrutinized for several reasons. Wal-Mart has been described by Jack Ampuja, president of Supply Chain Optimizers of Buffalo, New York as “a supply chain company masquerading as a retail company.” Historically Wal-Mart has used its procurement and distribution expertise to overtake and overwhelm its smaller and less efficient competitors. As the company grew, Wal-Mart has become the industry leader in supply chain innovations and best practices. The latest program follows a long list of other new processes including vendor-supplier collaboration, inventory planning, RFID, continuous replenishment, packaging cost reductions, worldwide sustainability product indices and others. The sheer size and power of Wal-Mart and their intense follow through have allowed them to continue to be an industry leader in supply chain practices.
Wal-Mart’s suppliers will have to adjust their order processing and shipping schedules to meet Wal-Mart’s deadlines. As a result these shippers will be applying pressure on their carrier partners to expedite freight movements. They will have to re-evaluate their lead times and more closely monitor carrier performance to ensure they do not put their Wal-Mart business in jeopardy. Carriers will have to revisit route plans and transit times to ensure they are realistic and achievable on a consistent basis.
Of course shippers can take themselves “off the hook” by turning over the carrier selection, routing and inbound rate negotiations to Wal-Mart. Wal-Mart would then be able to optimize its large volumes to build better loads. It could give these volumes to for hire carriers or its own fleet of 7200 tractors.
The Wal-Mart initiative may serve as a stimulus to many companies across North America to re-evaluate the possibility of disaggregating product purchasing from inbound freight management. It may provide these shippers with the opportunity to better leverage their total freight volumes and drive more round trip and continuous move planning.
To meet Wal-Mart’s requirements, some carriers (e.g. Averitt Express, ABF Freight) have pages on their web sites designed to facilitate MABD compliance. ABF created an online MABD compliance planner that helps shippers plan production and shipping schedules for each order based on its MABD. The system can automatically flag Wal-Mart shipments for expedited service.
Clearly Wal-Mart’s latest supply chain undertaking could have profound implications for shippers and carriers. It will cause many companies to reassess their carrier capabilities and performance. It will encourage retailers and companies in other industries to carefully monitor the success of Wal-Mart’s program and consider adopting similar initiatives that can drive more cost savings out of their inbound freight expenditures.
Dan Goodwill, President, Dan Goodwill & Associates Inc. has over 30 years of experience in the logistics and transportation industries in both Canada and the United States. Dan has held executive level positions in the industry including President of Yellow Transportation’s Canada division, President of Clarke Logistics (Canada’s largest Intermodal Marketing Company), General Manager of the Railfast division of TNT and Vice President, Sales & Marketing, TNT Overland Express.
Goodwill is currently a consultant to manufacturers and distributors, helping them improve their transportation processes and save millions of dollars in freight spend. Mr. Goodwill also provides consulting services to investors, vendors to the trucking industry, transportation and logistics organizations. All posts by Dan Goodwill