Target Compliance Policy Update

Learn About: 

• Target Compliance Policy Standard Updates

• Fill Rate Changes 

• On-Time Ship, On-Time Arrival, On-Time Release, and Supplier Adherence Changes

• EDI Compliance Standards

Target is making some big changes to how they work with their suppliers, focusing more on being precise and on time. The retail giant has recently announced that there will be an update to their Compliance Policy Standard, effective August 4, 2024. Some key updates to the compliance policy include:

• Compliance will revert to pre-pandemic standards of the original fill rate, and all suppliers will be subjected to fill rate compliance charges at the item level.

• Target will reintroduce a standard fill rate of 95% with a 5% cost of goods sold (COGS) penalty on unfilled items.

• Shipments to non-perishable regional distribution centers (RDCs) need to arrive no more than one day before the start of the ship window and no later than one day beyond its end.

• Compliance charges will continue to be assessed at 5% COGS on units delivered early or late relative to the shipping window.

Fill Rate Changes

Target's move from the "Fill Rate Revised" policy back to the "Fill Rate Original" policy represents a notable shift in how the company evaluates and manages vendor compliance.

Fill Rate Revised (Old Policy)

Previously, the "Fill Rate Revised" policy zeroed in on how effectively vendors fulfilled adjusted order amounts at the purchase order location. This approach allowed for adjustments to order quantities after placing the initial order. For example, if Supplier ABC received an order from Target for 100 items, but was only able to fulfill 90 units that week.  In the Fill Rate Revised world Supplier ABC would edit the PO with an EDI 860 down to 90 units and ship 90 units. This would result in a 100% fill rate revised and 90% fill rate original.

Vendors were evaluated on their success in meeting these updated targets, aiming for at least a 95% fulfillment rate. Those who didn't hit this mark were subject to a chargeback penalty of 5% on the cost of goods for items not received within the agreed timeframe, as outlined by EDI 860/EDI 870 documents.

For more information on EDI documents, download our 'EDI for Retail Supply Chains Cheat Sheet'.

Fill Rate Original (New Policy)

The new policy, "Fill Rate Original," takes a different approach by measuring the difference between the units received at the PO-Location-Item level and the original units ordered. This change emphasizes the importance of adhering to the initial agreement and penalizes deviations from the original order quantities, regardless of whether they are shortages or overages. The performance goal remains at 95%, but the focus is now on the original order quantities rather than any revised figures. Compliance under this policy is determined by EDI 850, with a similar chargeback of 5% of the cost of goods on items short or over the original ordered quantity.

On-Time Ship, On-Time Arrival, On-Time Release, and Supplier Adherence Policy Updates

On-Time Ship (Collect/We Pay)

When it comes to On-Time Ship, where Target is responsible for picking up the goods from the supplier, there's been a slight adjustment. Previously, the concern was only for goods needing to be ready to pick up within the designated timeframe. Now, the policy applies penalties to goods not ready for pickup, either too early or too late. Target's goal is to have goods ready 100% of the time. Failure to meet this standard results in a minimum chargeback of $150.

On-Time Arrival (Prepaid/They Pay)

On-Time Arrival shifts the responsibility onto suppliers to ensure the goods reach Target. It is important to note that whether the goods arrive earlier than expected or later, the Target compliance policy imposes penalties to uphold the 100% on-time delivery goal. This standard highlights the importance of timing in Target's supply chain, maintaining a minimum penalty of $150 for any discrepancies.

On-Time Release (Collect/We Pay)

The On-Time Release policy, which involves Target organizing the shipment of goods from their location, has seen a notable compliance update. After being temporarily suspended, the policy now enforces a 2.5% penalty on the cost of goods not shipped within the agreed-upon window, including both early and late shipments.

Supplier Adherence (Collect/We Pay)

Lastly, Supplier Adherence has been updated during this policy change. Similar to On-Time Release, Supplier Adherence focuses on Target's shipping management and has  its own compliance penalties. Although compliance fines were  temporarily on hold, Target has now implemented a 2.5% fine for suppliers that do not adhere to the shipping schedule. This update aligns with Target's overarching goal of maintaining 100% performance.

EDI Compliance Standards

EDI 856 Not Validated - Domestic Only

While there were no significant updates for the EDI 856 transaction, it is still important to be aware of Target's current compliance standards. Target has implemented a charge of $0.75 per carton received after the compliance date for suppliers that do not meet the accuracy requirements of EDI 856. This measure i encourages suppliers to improve their data accuracy, emphasizing the importance of providing complete and correct shipping information in a timely manner. The goal is to minimize discrepancies and delays impacting inventory management and customer satisfaction.

EDI 856 (ASN) Availability - Domestic Only

Additionally, Target has a compliance assessment for situations where units are received without an available ASN. In such cases, a charge of 3% of the cost of goods will be applied. This policy highlights how important the Advance Shipping Notice (ASN) is for Target's supply chain operations. The ASN offers a detailed look into what a shipment contains, helping Target plan and manage its receiving processes more effectively at its distribution centers.

Related reading: What is an EDI 856? 

With all these updates, Target is telling its suppliers loud and clear: being accurate and on time is important. But there's no need for suppliers to feel overwhelmed by these new demands. Our article, "A Supplier's Guide to Target's Compliance Standards," will navigate you through these changes. 

How SupplyPike Can Help

Interested in improving compliance at Target? SupplyPike offers solutions to gather data and verify chargebacks, automatically disputing invalid ones and swiftly reclaiming lost funds. 

SupplyPike's flat-rate solution is designed to encourage supplier improvement, preventing chargebacks and compliance fines while actively winning back lost revenue. Schedule a meeting with a team member to see if SupplyPike is a good fit for your Target business!

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