Becoming a Walmart or Sam’s Club supplier is a cause for celebration. You’ve just gotten your products into the world’s largest retail environment. One that reaches billions of consumers around the world every day.
The size of this opportunity, however, also creates new challenges. Because Walmart and Sam’s Club deliver so many products to such a huge market, they’ve created a series of complex systems to ensure that merchandise is on the shelves when and where consumers want to buy it.
These systems are invisible to shoppers. They just know that the shelves are well-stocked with their favorite products. For vendors, however, these systems are an ever-present part of daily operations. Their requirements guide how products are packaged and shipped, how billing is handled, and how much of a supplier’s invoice gets paid.
A key element of this process is Walmart’s On Time In Full (OTIF) requirement. The OTIF initiative, which Walmart launched in 2017, is intended to achieve the following goals:
- Drive sales through better shelf availability
- Improve the flow of merchandise from truck to shelf
- Increase transportation efficiency
- Allow store associates to spend more time with customers rather than managing inventory
What is On Time?
A shipment is considered “on time” when it arrives at the Walmart store or distribution center within the specified delivery window established by the purchase order. This delivery window ends with the must arrive by date (MABD), which is determined using a variety of factors that we will cover in a future post.
It is important to note that shipments will be considered not “on time” if they arrive outside of the delivery window on either side. That means shipments that arrive too early are penalized in the same way as those that arrive late.
What is In Full?
To be considered “in full,” orders must include the exact quantity ordered, arriving within the specified delivery window. Any part of an order arriving outside of the delivery window will not be considered “in full.”
What Are Walmart’s OTIF Expectations?
Walmart would ideally like to see suppliers reach 100% On Time In Full performance. The officially stated goal is currently is 98%.
Members of the Walmart team do have the ability to relax OTIF guidelines to account for unavoidable supply-chain disruptions such as weather or material shortages, but these are generally expected to be a short-term situation for most categories and suppliers.
What are the Consequences of Poor OTIF Performance?
The immediate consequences of poor OTIF performance are financial. Walmart has a formula for calculating monetary penalties based on the percentage of an order that arrived outside the delivery window.
In the longer term, consistently poor OTIF performance could jeopardize your status as a Walmart or Sam’s Club supplier. Walmart doesn’t asses OTIF penalties as a way to make more money. The penalties are there to encourage suppliers to improve their OTIF performance and maintain an outstanding shopping experience for customers. This means that consistently bad OTIF performance could eventually get your products removed from store shelves.
How Can You Improve Your OTIF Scores?
There are several ways to improve your OTIF performance, but the first step is to understand why you are scoring poorly. This requires a close review of your OTIF Scorecard in Walmart’s Retail Link® software. Studying the scorecard will offer a clearer picture of where, when, and why you’re being penalized for poor OTIF performance.
From there, you can work to address issues as needed in the areas of purchase-order management, demand planning, and addressing logistics and shipping issues. Over time, your should be able to make OTIF compliance a cornerstone of your daily operations. The benefit will be fewer financial penalties, as well as an improved relationship with your Walmart or Sam’s Club merchant team.
Brangea Can Help
Contact us today to discuss how we can help you put systems in place to monitor your OTIF score and improve your performance. We can begin by working with you to extract and decipher the wealth of valuable information in Retail Link. Then we can use that insight to help you establish new approaches and partnerships for managing the planning, manufacturing, and delivery of your products.