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One of the ways Walmart seeks to keep prices low for its customers is cutting supply chain costs. For example, Walmart launched the On Time In Full (OTIF) initiative to streamline supplier shipments and ensure all product ordered is received. Shortly after OTIF, Walmart launched another program that focuses on the quality of supplier shipments: SQEP.
In this article, we’ll look at what SQEP measures, how to stay compliant with Walmart standards, and discuss monetary fines when suppliers fail to meet the guidelines.
What is Walmart SQEP?
Walmart SQEP stands for the Supplier Quality Excellence Program. The program was launched in 2021 as a way to improve supply chain practices and keep costs low.
By measuring supplier performance under the SQEP guidelines, Walmart focuses on enhancing supply chain in four areas:
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- Purchase Order Accuracy
- Barcode and Labeling Compliance
- Packaging, Pallet, and Load Compliance
- Scheduling and Transportation Compliance
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Walmart sets SQEP goals for suppliers and provides tools and scorecards to track peformance. If a supplier fails to meet the SQEP goal in one of the above areas, chargebacks are issued.
The Four Phases of Walmart SQEP
Walmart rolled out each of the above SQEP areas in separate phases. Each area of SQEP holds Walmart suppliers accountable to specific supply chain compliance guidelines:
1. Purchase Order (PO) Accuracy and Advance Ship Notice (ASN) Accountability
Walmart suppliers are measured on many areas of the PO and ASN compliance process. Some of the issues that can result in chargebacks include:
Missing ASN – ASN label is not placed on case
No ASN Downloaded – ASN could not be downloaded or was not sent
ASN Mismatch – quantity on ASN and quantity received do not match
Item Not on PO – items on purchase order do not match items received
Canceled PO – suppliers can not ship against a canceled purchase order
Overage errors – POs shipped exceeded the quantity ordered
Poor Images – inaccurate pictures/item descriptions on Walmart.com listings
Item Setup Information – item information inaccurate or incomplete
Parent-Child UPC inaccuracy – child UPC not linked to parent UPC
Canceled Line adherence – shipping against a line item after canceled
Allocation issues – sort vs. non-sort or product assigned to wrong store
Wrong Pack quantity – quantity shipped does not match quantity on purchase order
Recall or Withdrawal shipments – items in shipment are recalled or withdrawn
Not Walmart Freight – shipment received by Walmart was freight for another retailer
2. Labeling and Barcode Accuracy
Verifying shipping labels are accurate is a critical step to successful deliveries. Walmart’s SQEP holds suppliers accountable in three areas of compliance:
Barcode Compliance – the required number of barcodes must be on the delivery and in correct working order
Label Compliance – labels on each shipment must be accurate and include the required information (item numbers, descriptions, vendor stock numbers, etc.)
Hazmat Compliance – all required hazmat labeling must be fully visible and placed on shipments as specified
3. Pallet, Packaging, and Load Quality
This part of Walmart SQEP focuses on the stability, safety, and quality of shipping boxes and pallets. The goal is to prevent damage, delays, and any added costs in the suppy chain.
Suppliers will be issued a chargeback if Walmart finds issues with:
Basic Packaging Compliance – this includes improperly sized cases, bad perforations, weak packaging, loose wrapping, and missing trays
Pallet Quality – pallets that are the wrong size or non-compliant
Pallet Labeling – incorrect markings on the pallet or missing labels
Pallet Build – incorrect tier stacking, overhang, or pallet stacked too high
Pallet Securement – pallets is missing trays for bagged items or is wrapped poorly
Load Segregation – bad grouping of items or improper separation of different PO types
Load Stability – non-palletized freight or unstable freight that shifted in transport
4. Scheduling and Transportation
This final phase of SQEP has not been launched. Though the name suggests it will focus on transportation compliance, it is still under review by Walmart at this time.
How much is an SQEP chargeback or penalty?
Once Walmart has verified the accuracy of the supplier’s shipment to a store or distribution center, any issues will receive a monetary penalty.
Suppliers with shipments that do not meet SQEP requirements may expect:
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- a $200 chargeback per PO
- an additional $1 charge for each impacted case associated with that PO
- a $25 charge for every ASN that does not have the proper attachment
Can Walmart suppliers dispute SQEP chargebacks?
Walmart suppliers are encouraged to dispute any charges they feel are not accurate. In fact, many SQEP disputes are successfully overturned. Walmart has systems and processes in place for suppliers to dispute chargebacks.
If you have questions on what documentation is needed to dispute an SQEP penalty or how long it takes, check out our article on Understanding Walmart Chargebacks and Deductions.
Walmart SQEP Frequently Asked Questions (FAQs)
Q: Why did Walmart launch SQEP?
A: Walmart created SQEP to eliminate common supply chain problems like mislabeled cartons, incorrect packaging, and missing documentation. These issues cause delays and extra costs. SQEP helps suppliers deliver product correctly the first time.
Q: How does SQEP benefit suppliers?
A: While SQEP comes with compliance requirements, it benefits suppliers by reducing costly returns, chargebacks, and shipping errors. It strengthens supplier performance scores and helps maintain a good relationship with Walmart.
Q: How is SQEP different from OTIF?
A: OTIF (On Time In Full) measures when product arrives and how much of it is delivered. SQEP measures how correctly it arrives, including packaging, labeling, and documentation accuracy. OTIF and SQEP cover both delivery performance and quality.
Q: What is considered an SQEP defect?
A: SQEP defects are any issues that violate Walmart’s compliance standards, such as:
- Incorrect or missing labels
- Damaged or non-compliant packaging
- Inaccurate purchase order details
- Wrong pallet configuration
- Missing or incorrect shipping documents
Q: How do suppliers monitor SQEP performance?
A: Suppliers can log in to Walmart’s Retail Link SQEP portal to review defect reports. This tool provides visibility into errors, root causes, and financial impact so suppliers can take corrective action.
Q: What are the most common SQEP errors suppliers make?
A: Some of the most frequent SQEP issues include:
- Barcode or label that can’t be scanned
- Overweight or non-compliant cartons
- Mismatched pack counts
- Pallets that don’t meet Walmart’s guidelines
- Incorrect data on the ASN (Advanced Shipping Notice)
Q: How can suppliers reduce SQEP fines?
A: To minimize SQEP penalties, suppliers should:
- Train staff on Walmart’s compliance manuals
- Run internal packaging and labeling audits
- Use Walmart-approved labeling systems
- Monitor defect reports weekly
- Correct issues immediately at the root cause
Q: How does Walmart communicate SQEP updates?
A: Walmart posts SQEP updates in Retail Link and often shares changes via supplier webinars, help center resources, and buyer communications. Suppliers should review these updates regularly to stay compliant.
Q: Is SQEP mandatory for all Walmart suppliers?
A: Yes. Every supplier, whether direct import, domestic, or drop-ship vendor, must comply with SQEP standards. Walmart enforces these requirements across all categories to maintain consistency in its supply chain.
Q: What tools can suppliers use to stay compliant?
A: Suppliers can use resources inside Retail Link such as:
- SQEP Portal (view defect reports)
- Packaging Manual (Walmart’s official compliance guide)
- EDI tools (ensure accurate purchase order data)
- Walmart Supplier Help Center (support and training)
Q: Where can suppliers get help with SQEP compliance?
A: Suppliers can access Walmart’s Supplier Help Center, attend SQEP webinars, or work with the team at 5G who specialize in Walmart compliance. Many suppliers also partner with logistics and packaging companies that understand Walmart’s requirements.
Learn More From 5G!
Ready to reduce or eliminate those SQEP fines? The supply chain and finance teams at 5G are dedicated to improving your supply chain and researching your previous chargebacks. We’ll do the work to reclaim money owed to you and add those profits back to your bottom line.
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