Those of us familiar with Walmart’s existing OTIF (on-time, in-full) requirements know that the company’s standards for suppliers are brutal. Starting tomorrow the requirements will become even more stringent.
As announced on September 1, Walmart now requires carriers and suppliers to deliver 98% of loads by their “must-arrive-by” or be charged a 3% fine on the cost of goods. The announcement comes with only a two week adjustment period before the new policy takes effect.
This is the first time Walmart’s OTIF standards for general merchandise and food and consumables have been in alignment since Walmart began its OTIF program in 2017. Prior to the new program, general merchandise required a 95% exact fulfillment rate and food and consumables required 97.5%. According to Talk Business & Politics, the first publication to break the story, food and consumables have been consistently behind in meeting Walmart’s requirements.
Less than truckload and Truckload requirements for time-in-transit will also be made equivalent under the new program. Walmart’s current on-time delivery metric for prepaid Truckloads, in which the supplier pays all related freight billing and sets the delivery time, is 87%. Any Truckload shipment going collect, in which the freight cost is paid by the consignee and the shipper is free from any carrier issues that impact delivery date, require a metric of 95% on-time delivery. Prior to the new program, OTIF requirements for LTL carriers was 70%, making this new requirement a pretty steep adjustment.
Walmart’s already stringent requirements were created to keep merchandise on the shelves in the wake of lagging supplier fulfillment, which cost the company millions in sales. The current requirements come along after Walmart raised OTIF requirements for general merchandise and food and consumables last year. Still, Walmart executives note that improving product availability is a must amidst rising consumer expectations. In order to meet the goal of order fulfillment, both in store and online, orders need to be on-time and in-full.
Like much news about shipping and logistics, Walmart’s decision is motivated by the never before seen peak in ecommerce amidst the COVID-19 pandemic. The retail giant is bracing for a peak in shipping as the holiday season converges with the demand in ecommerce from the pandemic. Frequent and severe inventory shortages have become part and parcel of the retail landscape. Walmart granted an OTIF exemption at the pandemic’s peak, but the exemption expired in mid-August.
Some have suggested that the policy change is due to Walmart’s introduction of it’s Walmart+ program, offering same-day delivery on many items including grocery and general merchandise, for an annual subscription fee of $98 or a monthly subscription fee of $12.95. The cost of the new program is nothing compared to the cost of Walmart defending its online grocery market share from the likes of Amazon and Target. However, Walmart’s grocery OTIF numbers need a serious boost if this program is to compete with Amazon and Target who have similar OTIF standards.