OTIF Best Practices
- The primary goals of Walmart’s On-Time In-Full (OTIF) program
- Some best practices to improve your OTIF score
- How to implement these practices
On September 1, 2020, Walmart announced new changes to its On-Time In-Full goals. The changes enacted mean that all orders, regardless of shipment type or merchandising alignment, must be filled and on time for 98% of all cases ordered.
Seem pretty steep? Here are some best practices suppliers can enact in their supply chain to ensure they are compliant with the new goals.
How to be On-Time (Prepaid)
For 98% of all ordered cases to be “On-Time,” they must arrive within the delivery window for their particular situation. There are different delivery windows based on destination distribution centers and merchandising alignment, so suppliers should know with which delivery window they need to comply.
Supplier shipping on their own means having to communicate the OTIF requirements. Suppliers will need to stress the importance of being on time to carriers, third-party logistics companies (3PL), or consolidators. A best practice would be to establish a game plan:
- What is the supplier going to do if the carrier starts running late or early consistently?
- What happens if the carrier can’t keep appointments?
- Will the carrier/consolidator/3PL pay for fines?
- Can the supplier negotiate cheaper rates based on poor performance?
If suppliers ship LTL, they need to speak with their buyer or replenishment manager to see if that method is best for their business or ship full truckload for bigger orders. It may be beneficial to look at consolidation as well, which is the process of combining LTL orders from other suppliers into a full container shipment with multiple stops.
Suppliers who are scheduling their carriers on their own without using a 3PL or a consolidator will need to vet carriers and track them very closely. It may seem more cost-effective to go with a cheaper carrier, but if they are consistently late (or early), then the OTIF fines can harm that return on investment. Suppliers should find a carrier with a good track record and even ask for the carrier’s OTIF scores. Suppliers must compare pricing with performance and keep in mind that 3% of their COGS is on the line.
Suppliers should also ensure that third parties are correctly scheduling delivery appointments. Third parties need to make and hold the promise that they can get the order into the DC during the delivery window (which can be very time-sensitive and strict depending on merchandising alignment).
Sometimes, the DC will make the carrier wait at the dock past the appointment time, causing the carrier to be late. Suppliers should track their DCs’ performance as well, as there may be issues with them. If the supplier finds a particular DC consistently making carriers wait, it should contact its buyer and replenishment manager and let them know that there is an issue.
How to be On-Time (Collect)
For Walmart to consider a supplier’s cases “On-Time (Collect Ready),” for 98% of all ordered cases, two things must happen:
- The supplier routes and confirms all Walmart POs by the time specified on the order.
- The supplier fulfills the order according to the PO in the exact quantities and has the order ready for pick up at the appointment time specified on the PO.
To be compliant, suppliers must check their PO routings and respond within one day. Confirming the shipment on time lets Walmart know that the supplier will have the order ready for Walmart’s carrier. Generally speaking, suppliers must confirm Walmart POs by 4 PM Central Standard Time the day after Walmart sends the PO. However, other scenarios have different compliance requirements:
- For Department 94 (Produce) system and manual POs, the supplier must confirm the shipment at least two days before the ship-on day. If the supplier receives the PO fewer than two days before the ship-on day, the supplier must confirm the shipment the day the supplier received the PO.
- Suppliers must confirm manual POs 30 days before the MABD listed on the PO. However, if the supplier received the PO fewer than 30 days before the MABD, the supplier must confirm the shipment by 4 PM CST the day after receiving the order.
Suppliers (or their third-party warehouses) also need to have the whole order picked, packaged, and on the dock by the appointment time on the pickup date. Walmart expects suppliers to make sure their orders are ready for the retailer’s carriers to come and get them.
How to be In-Full
Suppliers need to fill 98% of all cases ordered to be compliant with Walmart. To be “In-Full” means to ship all of the quantities in the PO exactly as Walmart has ordered them.
To this end, suppliers must forecast their sales to Walmart. Walmart’s Retail Link already provides a GRS forecasting tool, showing a rough estimate of how many cases Walmart expects to order from the supplier. However, suppliers should create their own demand plans and supply plans in conjunction with this forecast. These plans will ensure the supplier always has enough products on hand.
Again, communication is critical. When suppliers have issues with their supply, they should immediately communicate that to their buyers and replenishment managers. Buyers and replenishment managers can work together with suppliers to update sales forecasts, supply plans, and other expectations.
Suppliers should clearly mark their packaging so that the DCs will know to whom the order belongs. Different stickers or color boxes may help with identification. It is also important to avoid mixing pallets if possible to ensure that the DC staff can’t mix up items and orders.
PO cancelation and submitting tickets
If need be, suppliers can cancel POs, and the accountability may fall into Walmart’s bucket depending on the given reason code. Walmart accountability lies with these cancelation codes:
- End of Life Items/Deletes: Walmart has ordered an item that should no longer be in stores. Typically, the supplier has selected not to sell these items, or Walmart has deleted the item from its catalog.
- Gross Forecast Error: Walmart has created a GRS forecast that is simply unobtainable for the supplier. An example of this would be a spike in last year’s sales led to an unrealistic expectation for this year.
- Gross Modular Error: Walmart’s marketing department or store has not set up the modular correctly, causing inventory errors. An example of this would be a store creating an end-cap for a holiday item and not forecasting the amount required to stock that section.
- Incorrect Item Setup: There was an error with Item 360 when the supplier attempted to create or modify an item in the catalog.
- PO Re-Write (Features): There were strategy changes causing the creation of a replacement PO.
- PO Written Incorrectly Walmart: Walmart or the supplier created a PO with quantities based on inaccurate information from Walmart. An example of this would be Walmart creating a PO based on data stating there is no stock for an item in a particular DC when the DC actually has multiple cases of that item.
- Weather/Natural Disaster: There was an incident out of the supplier’s control that caused issues with the PO’s supply chain. These incidents include catastrophic weather, such as hurricanes or tornadoes, natural disasters, such as earthquakes, or a “State of Emergency” declaration, such as massive bombings. For a while, Walmart included cancelations due to COVID-19 impacts as “Natural Disaster,” but the retailer has since excluded the pandemic as a valid cancelation reason.
If suppliers know they must fulfill an order, cannot cancel the PO for one of the above reasons, and cannot fill the order as requested, they should immediately reach out to their replenishment manager.
If suppliers are having trouble with DCs receiving their shipments on time because of an issue on Walmart’s side, then they should immediately create a ticket in Walmart’s Transportation Portal on Retail Link.
Tracking your data
Communication is key to a smooth and successful supply chain. The best way to communicate effectively is to track your data closely and accurately. SupplyPike’s OTIF Radar does just that.
With OTIF Radar, you can export data relating to each aspect of your supply chain, from origin to destination, from item to carrier.
OTIF Radar Scorecard – Carrier Detail
OTIF Radar – Carrier Analysis – List of POs
Getting started with OTIF Radar has never been easier! Schedule your tour today!
Written by The SupplyPike Team
About The SupplyPike Team
SupplyPike builds software to help retail suppliers fight deductions, meet compliance standards, and dig down to root cause issues in their supply chain.Read More