You Cannot Model Walmart SQEP Exposure. You Can Only Dispute It.

Walmart's Supplier Quality Excellence Program has been live since 2021. It has never published the rate it charges you under it. Not for Phase 1, not for Phase 2, not for any of the four.

More than 100,000 suppliers were told about it in a memo from Walmart US's chief merchandise officer Scott McCall and supply-chain EVP Greg Smith, reported by Talk Business & Politics on 4 September 2020. Every specific detail of that programme is six years old, and the one number that would let you budget for it is the one they kept.

You cannot model your SQEP exposure. You can only detect the charge and dispute it.

That the two programmes run in parallel, and why noticing only one of them costs you, is in OTIF and SQEP, which are not the same thing. This is what the second one measures.

The four phases, and what each one measures

Talk Business & Politics, 4 September 2020, described the programme as four phases with a defects-per-million score attached to it. The phase detail is from the supplier-requirements guidance SPS Commerce published and last updated 14 August 2025.

Walmart said in 2020 that no SQEP charges would be implemented until after 1 February 2021, and that from that date non-compliant items would be "charged through a reimbursement process". The Inbound Quality Portal folded into a dedicated SQEP portal on 2 November 2020.

Phase 2 is where a label becomes a delivery failure

Phases 1 and 3 are defects you can find in your own building. Phase 2 moves money somewhere else.

SQEP Phase 2 measures whether the distribution centre can receive the case by scanning it. That is a physical test, not a document test. A GS1-128 that fails on print quality, size, position or white space is a receiving delay, and a receiving delay inside an in-full measurement is an OTIF miss on the same truck.

The same carton can therefore cost twice: once as an SQEP barcode defect, and again as the in-full failure that barcode caused. How the label is built, and why the SSCC-18 on it has to match the EDI 856 exactly, is in GS1-128 and the SSCC.

That is also why SQEP labelling charges are the hardest kind to reverse. Our portal reference records Walmart's reason code for a non-compliant or unscannable GS1-128 label, WM-LBL, as not usually disputable. A label either scans or it does not, and there is no document that turns a physical non-compliance into a bookkeeping correction.

Defects per million is a rate, and a rate is normalised

The unit matters more than the label on it. Defects per million divides your defects by your volume and scales by a million. Volume sits in the denominator, so the score does not improve as you grow and it does not decay because you are small. Ten defects against a small base is a worse score than ten defects against a large one, and both suppliers land on the same part of the scale.

A small supplier is not absolved by being small. A large one is not protected by being large. What you have is a rate that moves with your volume, not a number that shrinks with it.

What is not in the public record is the denominator Walmart divides by, cases, units or shipments, or the score at which it starts charging. Both sit on the same non-public side of the wall as the rate.

The rate was never published, and that is the operational cost

No rate card for any of the four phases exists in any public source, and Walmart's own filings do not carry one: a full-text search of Walmart's SEC filings for "OTIF", run on 26 September 2026, returns zero hits. The percentage people quote about Walmart penalties, 3% of cost of goods, is the OTIF rate. It is not an SQEP rate.

Build a forecast and there is nothing to put in it. No per-unit rate to apply to a shipment value, no per-defect amount to multiply by volume, no threshold to model against. Two operations are available to you: find the charge after it lands, and file before the window shuts.

A reimbursement process is not a deduction line on a remittance advice. Walmart's 2020 wording was money made good to Walmart, which is an accounts-receivable balance. Our portal reference records HighRadius as the tool holding money suppliers owe to Walmart, against an AP deduction where Walmart holds money back from your invoice. SPS Commerce's retail EDI glossary defines a chargeback as a separate invoice for a specific infraction which, if unpaid, is deducted from future payments. The money leaves on a later settlement, not beside the invoice it belongs to. A three-way match will not surface it. It surfaces when the cash is short, and by then the shipment it relates to is old news.

Where an SQEP dispute is actually filed

This is the part that catches out a team who has only ever dealt with OTIF.

SQEP is a compliance chargeback, and compliance chargebacks are AR deductions. They go to HighRadius, not to Retail Link's AP Disputes Portal. Our portal reference records the window as roughly 30 days counted from invoicing, with access requested separately by email to HiRadCS@walmart.com, and a filing in APDP auto-denied while the clock keeps running. Both queues, both clocks and the auto-denial are set out in filing in the right queue.

A supplier who has only ever filed in APDP has never filed an SQEP dispute at all.

The evidence SQEP wants sits on the SQEP and ASN side of the matrix rather than the OTIF side: ASN transmission log with timestamp, EDI 856 confirmation, carrier SSCC scan records. The same guidance requires records to be retained for at least six years.

The grace period is an OTIF grace period

New Walmart suppliers get a three-month grace period before OTIF fines apply. Our record states it for OTIF and is silent on whether it extends to SQEP, so do not plan a Phase 2 dispute around it.

That same record compiles the SQEP penalty as variable, per incident and per purchase order, depending on which phase it falls in. That is our reading of the portal guidance, not a Walmart publication.

An OTIF fine is 3% of cost of goods. The SQEP charge on that same carton has no published number behind it at all, only a 30-day window counted from the invoice date, on a queue you may not have access to yet. The clock does not pause while HiRadCS@walmart.com access is provisioned. Open it this week.