On February 1, 2021, Walmart rolled out a program to ensure a "defect-free" supply chain called the Supplier Quality Excellence Program (SQEP). Unlike On Time In Full (OTIF) metrics, SQEP affects all Walmart suppliers, including e-commerce and omnichannel. SQEP standards constantly evolve - suppliers should check Retail Link and Supplier One for updates, as Walmart updates manuals and guides as often as twice yearly.

SQEP focuses on the "four rights": right item, right condition, right invoice, and right time. The program rolled out in phases addressing different supply chain standards: document accuracy, barcodes and labeling, and packaging, pallet, and load quality.

Document Accuracy

All Walmart suppliers must maintain an electronic data interchange (EDI) connection using the AS2 standard with consistent, accurate documentation per SQEP. Walmart defines document accuracy at two levels: purchase order (PO/EDI 850) accuracy and Advance Ship Notice (ASN/EDI 856) accuracy, ensuring shipment contents align with associated documents before reaching distribution centers.

SQEP defects for document accuracy include:

Fine Structure - Document Accuracy

ASN Not Downloaded (DSDC and Pharmacy): $200 flat fee per defective PO

All other departments: $25 flat fee per defective PO

All other document inaccuracies: $200 per defect + $1 per case

Example: A PO with 12 cases having 1 rework defect and 1 inaccurate ASN = $412 = [$200 × 2] + ($1 × 12)

Barcodes and Labeling

Phase 2 of SQEP involved barcodes and package labeling, with three defect areas: barcode compliance, label compliance, and hazardous materials (Hazmat) compliance.

Fine Structure - Barcodes and Labeling

Inspection-found defects: $200 administrative fee per defect per PO + $1 per package with defects

Automation-found defects: $1 per case with defects

Example: 9 packages with 1 barcode defect on 3 cases and 1 labeling defect on 6 cases = $409 = [$200 × 2] + [$1 × 9]

Barcode Compliance

Walmart uses RFID scanners at distribution centers, making proper barcoding essential. Barcode sub-defects include:

Labeling Compliance

Labeling compliance ensures shipment labels are clear, accurate, and informative. The defect appears as "General Case Marking Compliance" on SQEP scorecards. Sub-defects vary by merchandise alignment or shipping network.

Hazardous Materials (Hazmat) Compliance

Hazmat compliance helps Walmart associates handle delicate or volatile items safely. Sub-defects include:

Packaging, Pallet, and Load Quality

Phase 3 of SQEP addresses packaging, pallet, and loading standards including edge crush test (ECT) compliance, pallet labeling, and load separation by PO. Three main defect categories exist: Packaging, Palleting, and Loading.

Packaging Compliance

Fine Structure - Packaging

$200 per defect per PO + $1 per item

Example: 1 PO with 9 cases where 3 have weak packaging, 3 are oversized, and 3 have loose wrap = $609 = [$200 × 3] + [$1 × 9]

Palleting Compliance

Correct palletization prevents product damage and shortage or damage deductions. Pallets must have correct labels and sizing.

Fine Structure - Palleting

$200 per defect per PO + $4 per item or pallet

Example: 4-pallet PO where 2 overhang and 2 are poor quality = $416 = [$200 × 2] + [$4 × 4]

Load Quality Compliance

Standards address "right condition" and "right item" aspects, covering freight stability during transit and load segregation on trailers.

Fine Structure - Load Quality

$200 per defect per PO + $20 per item or load

Example: 3-PO trailer where 1 pallet falls, 1 mixes DA/SS, and 1 DA pallet is in nose = $620 = [$200 × 3] + ($20 × 1)

Tips on Staying Compliant

Defect fines accumulate quickly. However, SQEP chargebacks are disputable in High Radius. Compliance recommendations:

About Vendormint

Vendormint's managed team helps suppliers navigate SQEP and other Walmart compliance programs - identifying invalid chargebacks, managing disputes through High Radius, and providing ongoing compliance monitoring so you can focus on growing your business.