The Four Rights of SQEP: How Walmart Measures Supplier Performance

Walmart’s Supplier Quality Excellence Program, commonly referred to as SQEP, is the framework Walmart uses to measure the performance of inbound suppliers across its United States supply chain. The program applies to shipments delivered to Walmart distribution centers, fulfillment centers, grocery networks, and eCommerce operations.

SQEP establishes a standardized method for evaluating whether a supplier shipment meets Walmart’s operational requirements on the first attempt, without requiring correction, rework, or manual intervention. Walmart refers to this standard as First Time Quality.

To determine whether First Time Quality has been achieved, Walmart evaluates each shipment against four defined performance criteria known as the Four Rights of SQEP:

• Right Item

• Right Condition

• Right Invoice

• Right Time

Each SQEP defect, compliance finding, or financial chargeback is assigned based on a failure to meet one or more of these four rights. Together, they form the foundation of how Walmart measures supplier execution.

Overview of Walmart’s Supplier Quality Excellence Program (SQEP)

SQEP was designed to improve inbound accuracy, reduce operational cost, and increase supply chain efficiency. Walmart’s supply chain relies heavily on automation, system-directed receiving, and precise labor planning. Any deviation from expected shipment standards introduces inefficiency, cost, and risk.

SQEP is not limited to packaging or documentation. It evaluates the complete inbound process, including item accuracy, physical condition, electronic data integrity, and delivery timing. Walmart applies SQEP consistently across its networks to ensure uniform execution regardless of product category or fulfillment channel.

Right Item: Purchase Order and Item Accuracy Requirements

Definition of Right Item in SQEP

Right Item requires that the physical products delivered to Walmart exactly match what was ordered on the purchase order and defined in Walmart’s item master data. This requirement applies at the item number, GTIN, vendor pack, and quantity levels.

Any discrepancy between the purchase order and the received shipment constitutes a Right Item failure.

Key Components of Right Item Compliance

Right Item compliance includes the following requirements:

• Shipment includes only items listed on the purchase order

• Quantities shipped match the purchase order exactly.

• Vendor pack configuration matches item setup.

• Items are active, authorized, and not restricted.d

• Items are not under recall or withdrawal. al

• Parent and child UPC relationships are correctly configured.

• Shipments are routed to the correct distribution network

Substitutions, overages, or unapproved changes are not permitted, even if they appear commercially reasonable.

How Walmart Identifies Right Item Defects

Walmart identifies Right Item defects through system-based reconciliation processes, including:

• Purchase order to receipt matching

• ASN line-level comparison

• Item file validation

• Allocation and routing checks

• Receiving exception handling

Common Right Item Defect Types

Typical Right Item defects include:

• Item not listed on the purchase order

• Overages or short shipments

• Incorrect vendor pack quantity

• Shipment against canceled purchase orders or lines

• Parent-child UPC mismatches

• Shipment of recalled or restricted items

• Shipment to an incorrect distribution center type

Right Condition: Packaging, Pallet, and Load Quality Standards

Definition of Right Condition in SQEP

Right Condition requires that all products arrive in a state that allows immediate processing through Walmart facilities without rework, safety risk, or operational disruption. This applies to the product, its packaging, labeling, palletization, and load securement.

Right Condition is the most comprehensive and operationally intensive component of SQEP.

Areas Covered Under the Right Conditions

Right Condition includes compliance across multiple operational standards:

• Case integrity and corrugate strength

• Packaging, construction,n and unit securement

• Barcode format, placement, and readability

• Case markings and labeling accuracy

• Pallet quality, size, and construction

• Pallet build standards, including height and overhang

• Load stability and segregation

• Automation eligibility requirements

• Required ISTA transit testing

• Hazardous material and lithium battery markings

A shipment may be correct in item and quantity but still fail SQEP due to a single condition-related noncompliance.

How Walmart Detects Right Condition Failures

Right Condition defects are identified through:

• Automated scanning and conveyor exceptions

• Visual inspections during receiving

• Load safety evaluations at dock doors

• Rework activity tracking

• Automation exception reporting

• Inbound quality audits

Common Right Condition Defect Types

Examples include:

• Missing or unreadable barcodes

• Incorrect barcode format or placement

• Weak, crushed, or bulging cases

• Loose shrink wrap or exposed product

• Selling units not secured within cases

• Non-compliant or damaged pallets

• Pallet overhang or excessive height

• Shifted or unstable loads

• Missing or covered hazmat markings

• Repackaging or relabeling was performed by Walmart

Each defect increases labor requirements and disrupts distribution flow.

Right Invoice: ASN and Financial Data Accuracy Requirements

Definition of Right Invoice in SQEP

Right Invoice requires that the electronic and financial documentation associated with a shipment accurately reflect the physical shipment Walmart receives. This right is enforced primarily through EDI compliance, particularly the Advanced Ship Notice.

Right Invoice focuses on data integrity rather than physical handling.

Core Right Invoice Requirements

Right Invoice compliance includes:

• Accurate EDI 856 Advanced Ship Notices

• Complete ASN data structures

• Correct item identifiers and quantities

• Alignment between ASN, purchase order, and receipt

• Timely ASN transmission before arrival

How Walmart Measures Right Invoice Compliance

Right Invoice performance is evaluated through:

• EDI transaction validation

• ASN receipt and download confirmation

• Comparison of ASN data to physical receipt

• Monitoring of EDI error messages and corrections

Common Right Invoice Defect Types

Typical defects include:

• ASN not received or not downloaded

• ASN with missing or invalid data elements

• ASN quantity mismatches

• Missing SSCC labels linked to ASN data.

• Invoice quantities do not match the receipt

Right Time: Delivery Scheduling and Arrival Compliance

Definition of Right Time in SQEP

Right Time requires that shipments arrive exactly as scheduled, within the assigned delivery window, and with proper appointment confirmation.

Both early and late arrivals are considered noncompliant unless prior authorization has been granted.

Elements of Right Time Compliance

Right Time includes:

• Appointment scheduling adherence

• On-time arrival at the facility gate

• Alignment between ASN timing and physical arrival

• Carrier compliance with delivery windows

How Walmart Measures Right Time Performance

Right Time performance is monitored through:

• Appointment scheduling systems

• Gate arrival timestamps

• ASN timestamp comparison

• Carrier performance tracking

Common Right Time Defect Types

Examples include:

• Missed or late appointments

• Unscheduled deliveries

• Early arrivals without approval

• ASN submitted after arrival

• Carrier failure to meet delivery windows

SQEP Non-Compliance Fines and Financial Accountability

Walmart enforces the Supplier Quality Excellence Program through a structured system of financial accountability designed to recover costs created by supplier non-compliance. SQEP fines are intended to offset additional labor, processing, and administrative effort when shipments fail to meet inbound standards.

Fines are applied when a shipment does not achieve First Time Quality due to failure in one or more of the Four Rights of SQEP.

How SQEP Fines Are Triggered

SQEP fines are triggered when defects are identified during inbound receiving. Defects may be detected through system validations, physical inspections, automation exceptions, or rework performed at the distribution center.

A single shipment may generate multiple defects if it fails across more than one right. Defects may be assessed at the purchase order level or at the unit or case level, depending on the issue.

Categories of SQEP Fines

SQEP fines generally align with the Four Rights framework:

• Right Item Related Fines: Applied when shipments do not match the purchase order or item setup, such as overages, short shipments, items not on the purchase order, or incorrect vendor pack quantities.

• Right Condition Related Fines: Applied when product, packaging, pallets, or loads fail to meet Walmart’s physical standards, often resulting in rework such as relabeling, repackaging, or pallet correction.

• Right Invoice Related Fines: Applied when ASNs or invoices are inaccurate, incomplete, or not received on time.

• Right Time Related Fines: Applied when shipments miss scheduled delivery windows or arrive without proper authorization.

Financial Structure and Limits

SQEP fines typically include:

• A fixed administrative charge at the purchase order level

• A variable handling charge based on affected units, cases, or pallets

Dollar amounts may vary by defect type and distribution network. In most cases, Walmart applies a cap at the purchase order level to limit total deductions relative to the cost of goods sold.

Visibility, Disputes, and Ongoing Impact

Suppliers can review SQEP defects and fines through Retail Link, including defect type, impacted purchase orders, and quantities. Disputes may be submitted through Walmart’s standard deduction dispute process with appropriate supporting documentation.

Repeated SQEP failures may result in increased oversight, corrective action requirements, or changes to receiving or routing processes. As a result, SQEP fines should be viewed as indicators of underlying execution issues rather than isolated financial events.

How iNymbus Helps Suppliers Manage SQEP Fines

SQEP compliance issues often surface as chargebacks and deductions after shipment. Even suppliers with strong operational controls must review and dispute deductions that result from data discrepancies, receiving errors, or system-related issues.

Managing Walmart deductions manually typically requires:

• Gathering invoices, purchase orders, and proof of delivery

• Navigating Walmart portals and dispute workflows

• Meeting strict submission timelines

• Tracking case status and outcomes

As SQEP enforcement increases, this workload can quickly exceed what manual processes can support.

iNymbus helps suppliers manage SQEP-related deductions through automation. Using Robotic Process Automation, iNymbus supports:

• Centralized collection of required documentation

• Accurate and timely dispute submission

• Ongoing tracking of open and resolved cases

• Identification of issues requiring immediate attention

By automating these steps, suppliers reduce manual effort, improve recovery consistency, and manage SQEP financial impacts without adding headcount.