Asking suppliers to be “On-Time and In-Full” is a cost saving method that Wal-Mart will begin implementing in August, as reported by Matthew Boyle of Bloomberg News.
The program, known as OTIF, aims to add $1 billion in revenue while solving a problem the company has faced with overcrowded back rooms. The company has been reducing inventory as its 4,700 U.S. stories.
Beginning August, items that are fast-turning must be delivered 100% full on the correct date, 75% of the time. If items are late or missing during a month period the supplier will be fined 3% of the value. Early shipments are fined as well or will incur a fine of 3% of the values.
But 75% of the time isn’t the final goal, by February that number jumps to 95%.
In a presentation to vendors, earlier this year, as reported by Bloomberg, Kendall Trainor, a Wal-Mart senior director of operations support and supplier collaboration explained that variability from its tops vendors is putting a huge stress on supply chain efficiency.
He cited OTIF scores for Wal-Mart’s top 75 suppliers -- including P&G and Unilever – had been as low as 10% and not one reached the 95 percent long-term target.
Suppliers will have to adapt to a new schedule. explained Colby Beland, vice president of Sales and Marketing for CaseStac, a logistics provider that bundles supplier shipments for delivery to retailers’ warehouses. “One of the biggest adjustments suppliers need to prepare for is scheduling. Under OTIF, Walmart tracks deliveries in a smaller time period than done previously. OTIF is measured on a monthly basis, whereas Supply Chain Reliability was measured on a quarterly or 13-week period. The Walmart 13-week schedule is gone, and it’s now measured on a monthly basis. So if you have one bad week over a four-week period, it’s very difficult to recover.
“With Supply Chain Reliability, it was spread out over 13 weeks. You could have one or two bad weeks and still recover to not be penalized. With OTIF, over a four-week period, if you have one bad week, at 95% versus 90%, there’s really no way to recover, and you’re more than likely going to receive a penalty.”