Walmart tightens on-time, in-full rate for suppliers to 87%
Walmart tightened its on-time, in-full (OTIF) policy to require suppliers to deliver full truckloads within a two-day window 87% of the time. This is up from a previous requirement of 85%.
Suppliers will be fined 3% of the cost of goods sold if they fail to meet the requirements, Walmart spokesperson Michelle Malashock told sister publication Supply Chain Dive in an email. This change was first reported by The Wall Street Journal.
The retailer has been measuring OTIF as a single metric but plans to split this into two different measurements going forward. "The separate metrics will help suppliers increase their focus on delivering in-full, which we see as a key to continued improvement with in-stocks," Malashock said.
"For the last few years we have been very focused with On-Time and In-Full (OTIF) from our suppliers," Malashock said. "We know that when we receive all the product we've order and it's delivered at the right time — we and our suppliers see better sales."
Walmart first implemented OTIF for suppliers in 2017, upping the requirements for the first time in 2018. This requirement by Walmart has led to more shipments showing up on time and in full, which in turn has helped increase in-stock levels with less inventory.
"On-time and in-full deliveries help us keep the right amount of inventory at the store at the right time," Malashock said. "Before we instituted this program, merchandise shipped outside of the window caused us to keep a surplus inventory in our back rooms."
When Walmart announced the 85% OTIF requirement last year, Tony Uphoff, Thomas president and CEO, told Supply Chain Dive the policy can place a strain on suppliers and that "it will be a very difficult transition for some suppliers, especially those that haven't invested enough in the enabling technologies that will allow them to better manage their supply chains."
Many of Walmart's suppliers do work hard to meet the retailer's OTIF requirements, according to Michael Zimmerman, a partner at A.T. Kearney.
"They track the statistics very closely," Zimmerman told Supply Chain Dive. "They have arrangements with their carriers to improve their operational capabilities and in the cases of failures they have processes in place to both attribute responsibility and bear cost, and also do root-cause analysis to address those causes and reduce failures."