**Updated to reflect changes to Walmart's OTIF requirements in March 2021
Walmart maintains one of the most complex supply chains. It is also one of the most efficient. To keep its shelves stocked and customers happy, the retailer relies on countless suppliers. Ensuring mutual success, the suppliers are required to follow On Time In Full (OTIF) guidelines.
OTIF guidelines are a set of shipping standards. This system allows the company to reduce the lead times on its flow of goods. It also helps Walmart reduce its warehousing costs.
By shrinking its supply chain between suppliers and stores, goods are less likely to go out of stock. This allows Walmart and the supplier to sell more products.
The retailer uses OTIF compliance ratings to gauge shipping performance. This measures the supplier’s ability to meet Walmart’s goals. The rating system measures delivery performance. It also notes if every part of the planned shipment arrives.
When did Walmart OTIF Compliance Begin?
Walmart suppliers have followed delivery compliance guidelines for many years. At first, the system used was called Must Arrive By Date. As online shopping grew, the company sought ways to improve lead times.
The result was the introduction of On Time In Full standards in 2017. OTIF guidelines emphasize narrow delivery windows and full orders.
What are the 2021 OTIF Compliance Changes?
In September 2020, the retailer announced changes to its supplier delivery targets. The updated delivery goals went into effect on September 15, 2020.
The biggest change to OTIF compliance is that, both, general merchandise, and food and consumables, have to meet their "must-arrive-by" dates and "in-full" orders 98% of the time. This target applies to both less-than-truckload and full load shipments.
Failure to meet the new standard can result in a 3% chargeback of the cost of the goods.
Previously, LTL and full load shipments had different targets for on-time delivery. Additionally, general merchandise had different OTIF targets than food and consumables.
The updated delivery terms reflect the retailer's desire to enforce a uniform approach to the way it enforces its delivery guidelines. At the same time, the changes come after months where many retailers have faced challenges with maintaining inventory on store shelves as a result of supply chain disruptions amid the COVID-19 pandemic.
On-Time Factors
To meet Walmart’s on-time requirement, shipments must arrive within a delivery window. The delivery window will vary from shipper to shipper. Generally, a delivery window will be one or two days. Early or late deliveries will result in penalties against the supplier’s scorecard.
In-Full Factors
Shipments to Walmart’s distribution centers should be 100% in-full. This means they will not be under- or overfilled. As with on-time factors, failure to make in-full delivery can have negative consequences.
What OTIF Targets will Shippers Need to Meet?
The changes in September increases the pressure for suppliers to deliver on time while also ensuring that orders are 100% correct. This change is meant to reduce the amount of surplus inventory Walmart keeps in back rooms and distribution centers, while also ensuring that shelves remain stocked.
2020 In-Full Target Goals
- Food Consumables: 98 percent
- General Merchandise: 98 percent
2020 On-Time Target Goals
- Prepaid Full Truckload: 98 percent on time arriving at distribution center on the "must arrive by date"
- Prepaid Less-Than-Truckload: 98 percent on time arriving at distribution center on the "must arrive by date"
- Collect Shipments: 98 percent on time tendering on ship ready date to a Walmart routed carrier
Failure to Meet OTIF Compliance Goals
To encourage suppliers to meet their shipping goals, Walmart can impose chargebacks. The chargebacks are 3 percent the value of the shipped goods.
If a delivery is early, the shipper can expect a 3 percent fee on the total value of goods. If it’s late, the shipper can expect a 3 percent fee. If the shipment is short, the shipper can expect a 3 percent charge. And so on.
Shipping and Delivery Tips
Lead times are key to improving and maintaining OTIF compliance. Walmart’s shipping policy may sound daunting. But there are benefits to meeting the goals.
Mastering lead times creates better efficiency for the supplier. It also allows the supplier to maximize the goods they sell.
It's important to manage LTL and truckload shipments according to their differences. For instance:
- Sync the MABD for LTL so that the MABD occurs Monday through Friday, because most LTL carriers do not operate on the weekends.
- Avoid holiday weeks whenever possible.
- Work with your NOVA system (Walmart's purchase order management system) and RM in sync with warehouse and production to ensure all portions of the process are achievable.
Work with the Right Carrier
Not all less-than-truckload and full load carriers are equal. This is especially true with OTIF shipments. Due to the time-sensitive nature of retail shipments, many carriers add surcharges. This should not be viewed as a standard practice.
Good planning on the carrier’s part will not require additional costs. Furthermore, some carriers will book retail shipments as expedited service. Don’t be fooled into thinking this is a common practice.
A great carrier will assist with load planning. They will also help the supplier optimize routes and modes of transportation. Additionally, they should offer a wide range of shipment planning technology and online tracking.
Stage Inventory For Quick OTIF Delivery
Transit times on deliveries can be challenging for retail shipments. This can be especially tricky for long-haul shipments. By positioning inventory closer to consignee locations, shippers can reduce the possibility of encountering delays that can lead to missed delivery windows.
Consider using warehousing services to position freight closer to Walmart distribution centers. Distribution and fulfillment solutions can help with building a great just-in-time delivery strategy!
Challenge Bad Chargebacks
Sometimes, the supplier isn’t responsible for a chargeback. Incorrect scanning or simple mistakes on the buyer’s part can flag potential OTIF failures. Carriers can help in fending off false flags.
By maintaining organized records, they can help prove a delivery arrived on-time and in-full. Records can include a signed BOL by the consignee and guard shack tickets.
Averitt has helped countless shippers achieve their OTIF goals. Our team offers delivery services tailored for retail compliant shipping. Click here to learn more about our On Time In Full service!
If you have any questions regarding Walmart OTIF shipping, please contact our team at retail@averittexpress.com.
