Making Sense of Walmart’s New OTIF Requirements
According to a recent article in The Wall Street Journal, Walmart recently announced that it is tightening its On-Time/In-Full (OTIF) requirements for its suppliers. Whereas large suppliers were previously required to deliver orders within a two-day window 85% of the time, Walmart will now increase the target to 87%. Smaller suppliers will see their on-time requirement jump from 50% to 70%.
Additionally, the “In Full” portion of the compliance requirement dictates that suppliers must deliver complete orders to Walmart, or face penalties. Suppliers that fail to meet these criteria face fines of 3% of the value of the shipment. Walmart also announced that it will begin measuring “On-Time” and “In-Full” separately, to make it easier for suppliers to evaluate their performance to the OTIF metrics.
For many suppliers, Walmart is their largest customer, so getting OTIF right is critical. And meanwhile, other major retailers, including Amazon, Target, and Costco, to name a few, have introduced retail compliance programs of their own. This is the wave of the future- and suppliers should expect that these requirements will only tighten over time.
What steps can suppliers take to mitigate the risk and improve their on-time, in-full delivery?
- Understand the difference between On-Time and In-Full: From Walmart’s point of view, a shipment is either on time or it is late- period. On the other hand, the “In-Full” requirement is a measure of the completeness of an order and is expressed as a percentage. The binary nature of the on-time metric means it is the more important of the two. In other words, it is better to be on time with an 80% fill rate for a given shipment, than to be full but late.
- Plan capacity needs on a daily and weekly basis: While challenging, working with your 3PL or carriers to anticipate future capacity needs and to develop contingency plans for volume surges can help you stay one step ahead of the game.
- Increase communication with your 3PL and/or carriers: The forward planning mentioned above is only possible when there is a free flow of communication between suppliers and their 3PL and/or carriers. Suppliers should be proactive and transparent in communicating their priorities and challenges so their providers can be better positioned to help.
- Seek out expert help: At the risk of stating the obvious, one of the best approaches for suppliers that are being challenged by OTIF requirements is to work with a 3PL that has intimate knowledge of the OTIF policies, relationships with experienced and vetted carriers, and access to the major retailers’ scheduling tools. In addition, 3PLs can provide access to technology that delivers critical business insights.
- Keep your eye on the clock: Ensure that drivers have adequate HOS in the event that they arrive early for a delivery and must wait until the appointed delivery window to open.
- Recalibrate the trade-off between cost and service: As OTIF compliance becomes more stringent, and the risk of fines increases, it doesn’t make sense to seek out rock-bottom truckload rates from subpar providers only to cough up the savings (and potentially much more) in the form of chargebacks. Instead, work with your 3PL to increase your on-time/in-full delivery, avoid the fines, and in the process, improve your relationship with Walmart and other major retailers.
Learn how the right combination of people, processes and technology can help you mitigate OTIF challenges. Call 866-275-1407 or Contact Us