Walmart’s new On Time In Full (OTIF) guidelines have sparked many conversations in the supplier community. New information brings new questions, and suppliers are looking for ways to improve processes before the approaching deadline.
Colby Beland, VP of Sales and Marketing for CaseStack, was a recent guest on Focus on Suppliers. He took a deep dive into what we can expect over the next few months and why suppliers need to be creating OTIF solutions sooner than later.
What Is the Purpose of OTIF?
Many talk about Walmart’s expectation on OTIF, but Beland takes time to explain the “why” behind the initiative: “What suppliers need to understand is OTIF is a flow initiative from Walmart. It is getting the goods through Walmart’s supply chain in the most efficient way. If the product arrives early, it backs up the stores; if the product comes late, it’s not on the shelf to make sales.”
He goes on to show how the new process is an improvement over the previous one: “Walmart is targeting to have a single-day arrival so the product flows efficiently to the distribution centers. Supply Chain Reliability is gone, and OTIF is the new measurement. It is basically a metric that requires a less-than-truckload supplier or a full-truckload supplier to deliver within a parameter that Walmart has set.”
All Eyes on August
Suppliers focused on the OTIF initiative understand this August is a critical deadline. Beland gives us a closer look at this time frame and illustrates why procrastination is not an option. “The baseline for suppliers was set in January 2017, and Walmart wants to see a 10% improvement over that baseline between now and August 2017,” he explains. “In August, Walmart will start fining suppliers who are not able to meet the improvement that Walmart is looking for.
“If suppliers aren’t working on making improvements today and they’re just waiting on August to see what happens, they’ll start out of the gate with penalties. It’s just going to be much more difficult to get the processes streamlined to meet the measurements that Walmart is looking for. For any supplier who isn’t working on this, well, they need to be working on this right now! August will be here before you know it.”
New Scheduling Brings Smaller Windows
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. Beland explains how suppliers can easily fall behind if they fail to plan now.
“OTIF is measured on a monthly basis, whereas Supply Chain Reliability was measured on a quarterly or 13-week period,” he details, “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.”
Planning to Prevent Penalty
There is still time to improve processes and prevent the costly penalties. While the percentage is the same as before, a smaller window is a huge factor. “Just like Supply Chain Reliability, it’s 3% of the value of the product,” Beland explains. “The higher value of the product, the more expensive it can be for the supplier. And the penalties are going to start rolling in on a four-week period instead of a 13-week period.”
Beland concludes with advice on how to succeed with OTIF. “Begin working your process now. If your internal team cannot get the 10% improvement, you need to find outside sources of help. Whether a consultant, a third-party, a consolidator like CaseStack, you have to start working on it now.”