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TORONTO -- Beginning yesterday, Loblaw Cos. Ltd., which has been struggling to streamline its supply chain, reportedly began imposing $1,000 fines on any suppliers that deliver goods late or otherwise impede the flow of products to its shelves.
The fines are part of Loblaw's efforts to reduce costs and boost its bottom line ahead of an invasion of Wal-Mart supercenters north of the border this fall. Wal-Mart already fines its suppliers for lateness and other delivery issues.
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"It's a very hard-nosed approach, but it needs to be like this," Richard Talbot of Talbot Consultants International told the Toronto Globe and Mail. "We'll see a ripple effect if others aren't doing it. . . .Tough love -- that's what is needed."
Loblaw appointed former Wal-Mart exec Peter McMahon to overhaul its supply chain, but McMahon is leaving at the end of the year, citing family reasons. Before he goes, however, McMahon is instituting the fines, with particular attention to those suppliers that fail to make deliveries, and those that err in shipping products, which Loblaw will refuse to accept. Additionally, the grocer's distribution centers will send back goods delivered in improper condition.
The fines will be levied on shipments to Loblaw's DCs in central and eastern Canada, encompassing the province of Ontario, where Wal-Mart is set to debut its Canadian supercenters and Loblaw is opening its own supercenter format with a big assortment of nonfoods to compete with the megaretailer.