Why is it so hard to be On Time and In Full?

By TJ Sangam, CEO of SupplyPike

In September 2020, Walmart introduced new On Time In Full (OTIF) standards. Regardless of merchandising alignment or shipping method, all Walmart suppliers must ship 98% of their cases on time and entirely fill 98% of all orders within a month.

These new goals rocked the supplier world, and companies all over scrambled to meet them. Trucking companies, 3PLs, and warehouses began working hard to meet these expectations and keep their customers.

Walmart maintained its fine schedule of 3% of the total COGS of non-compliant cases. Suppliers began to see their fines increase by the thousands. Some did not survive and either folded as a company or withdrew their Walmart business.

So, this raises a more profound question: Why is it so hard to be on time and in full? Let’s take a look at some scenarios.

LTL Shipping

Before September 2020, Walmart expected prepaid LTL suppliers (those who ship the product themselves in partial loads) to deliver 70% of their orders within the delivery window. This goal allowed smaller suppliers some leeway in getting their shipments to the retailer.

LTL shipping, however, is tricky. There are many moving parts, and retailers expect their suppliers to manage all of them. After all, retailers do not fine 3PLs or trucking companies for non-compliance. They fine the supplier.

One way to succeed as an LTL supplier is to create a lead time audit and find out how to deliver products within Walmart’s delivery window. Another way is to hold third-parties accountable by finding which carriers do not comply with the on time goals, which are consistently late, and which do not make appointments when they should.

Collect Shipping

WIth collect shipping, Walmart does all the work, right? Not necessarily. Suppliers must ensure that the orders are ready for pickup by Walmart’s truck by the appointment time and confirm the shipments by 4:00 PM CST the day after receiving the PO.

Collect shipping can get troublesome when suppliers don’t have someone to confirm the shipment by the deadline since Walmart doesn’t automatically grant “off days.” If a supplier receives an order on Friday, they must confirm it on Saturday.

The way to get around these issues is to let the replenishment team know the supplier will be unable to confirm shipments on weekends by filling in the “weekend bump logic” field on a lead time audit.

Likewise, if a Walmart carrier did not pick up an order on time, even though it was ready, suppliers can file a “Late Pickup Notification” in Walmart’s transportation portal. They must do so each day that the order sits on the dock.

Being In Full

Of course, a significant metric to OTIF is simply being in full. Suppliers must deliver the exact quantities of items listed on the purchase order. Otherwise, Walmart will induce fines.

There are a few ways to be in full. Suppliers who can demand plan accurately have a leg up. Having accurate forecasting models is at the heart of being able to plan inventory more accurately. Recent advancements in machine learning have made significant strides in improving the accuracy of these forecasts. However, predicting the future is easier said than done.

Suppliers must also clearly delineate their packaging from other suppliers by specially marking them or using colored boxes. Doing this will help decrease confusion at the distribution center. Suppliers must avoid mixing pallets as well.

Communication is critical. If a supplier cannot fill an order, they should tell Walmart immediately.

Walmart Accountability

Now, Walmart judges OTIF by two accountability buckets: Walmart’s and the supplier’s. When suppliers cancel purchase orders, it may be for a reason outside of their control. As we saw throughout 2020, from panic-buying to hurricanes to factory closures, there were plenty of times where suppliers simply could not fill an order.

With Walmart’s OTIF program, suppliers may cancel POs if they cannot fill the order. These reason codes can make or break a supplier’s compliance score.

When, for example, a supplier cancels a PO due to factory closures from a devastating hurricane (like Laura), Walmart will allow the supplier to choose the “Weather/Natural Disaster” reason code. This code moves the non-compliance accountability to Walmart’s bucket.

Fighting Fines

Walmart’s official stance is that OTIF fines are not disputable (unlike shortage deductions). That said, suppliers can fight them before they come in given the right data.

Armed with proof that the shipment was on time or in full, suppliers can ask their replenishment team or buyer to halt fines that are coming in. For prepaid issues, suppliers should provide signed proofs of delivery (PODs), while collect suppliers should have bills of lading (BOLs). Collect suppliers should screenshot their shipping confirmation as well.

Other documentation includes email threads, EDI 945s (Warehouse Shipping Advice) showing what the warehouse picked, and articles about weather disruptions.

Using Data to Predict and Prevent Fines

While Walmart offers its suppliers an OTIF scorecard in Retail Link, it only shows 13 weeks’ worth of data. Suppliers often have trouble tracking their non-compliant POs and do not have access to direct information regarding third parties.

Enter SupplyPike’s OTIF Radar. The SaaS platform allows suppliers full access to their data without any expiration dates. Suppliers can see their OTIF trends in attractive charts and graphs, including accountability buckets, past fines, and potential fines.

The app dives deep into third-party activity, such as carrier compliance, item performance, problematic distribution centers, and opportunities for improvement to product origins (e.g., factories). Suppliers can view how each party fared over time and download critical data to hold third parties accountable or even fight fines.

Suppliers can download complete purchase order information which includes ASN information and compliance issues. Suppliers can drill down into the data, viewing PO types and discrepancies.

OTIF Radar is a formidable tool for any Walmart supplier’s arsenal. Unleashing the power of actionable insights and easy-to-digest metrics allows suppliers to predict and prevent costly fines.

See your data in action by scheduling a demo today!