Supermarket Perimeter - April 2019 - 19

t was only a couple of years ago when Bentonville, Arkansasbased Walmart Stores announced a new accountability program
for its suppliers: On Time In Full (OTIF). This original OTIF
initiative was driven to improve in-stock at the store level. Suppliers
were measured on delivering shipments at their appointed times
and delivering the complete load ordered. Failure in either metric
resulted in a fine.
At the recent Walmart Supplier Forum, enhancements to OTIF were
announced, which put a renewed accountability on Walmart suppliers.
The new measurements continue Walmart's commitment to in-stock
as well as committing to helping suppliers meet the expectations.
Making improvements in OTIF performance not only improves instock, but also suppliers' profitability. When suppliers are profitable,
Walmart benefits.

From OTIF to OT&IF
Terry Clear, Director of Client Services for 8th & Walton, was a recent
guest on the Conference Call podcast. He and his team have been
working with suppliers since the announcement.
In the interview, Terry explained the nature of
the change to the initiative, what suppliers can
expect, and how Walmart is helping them meet
the new goals.
We began by asking Terry what all suppliers
were anxious to learn at the Supplier Forum:
What was the big surprise about OTIF?
"The big surprise was that On Time and In
Full will now be two separate metrics," Terry
explained. "So the On Time portion will measure
your performance related to delivery into the distribution center and the In Full performance will
be related to how many cases were received on
the purchase orders. They will be two separate
th
metrics going forward."
With the first question on suppliers' minds
answered, the next step was learning how they can track their own
accountability to make improvements. Walmart is rolling out changes to
keep suppliers in the know in the new split metrics.
"There will be changes to the OTIF Scorecard suppliers see in Retail
Link," Terry continued. "The On Time portion will have new goals, and
it's really about if the supplier is pre-paid or collect, LTL or full truckload.
It shows how products arrive at the distribution center relative to the
Must Arrive By Date (MABD) compliance window."

now faced with the new OT&IF and new decisions to make.
"One thing suppliers should do is understand what their new metrics
will be and then evaluate their previous performance," he says. "They
need to think, 'If we execute to these new metrics, then what are our
potential penalties?' That way a supplier can identify where they need
to make changes in the process."

Changes come with changing shopper expectations
At the end of day, Walmart updates its expectations based on shopper
demand. Today's shoppers want their items on the shelf, at the curb of
the store, or delivered to their home. "Walmart is on a mission to get
an outstanding supply chain," he said. "They started off in the first year
with a low OTIF score around 75% then moved it up to 85%. Now they're
going to an 87% for pre-paid full truckload suppliers. They're going to
95% fill rate for general merchandise and health and wellness suppliers.
Food and consumables are at 97.5% fill rate and those metrics will be
measured separately."

The big
surprise was that
On Time and
In Full will now
be two separate
metrics."

Walmart is helping with new
fill rate expectations

Walmart wants suppliers to win, because better
supplier performance means better sales for
Walmart. In rolling out the new OT&IF expectations, the company also launched a new tool to
help suppliers meet the new goals. Not only has
Terry studied the tool and how to use it, but he
also developed a two-hour class suppliers can
take in Bentonville or via webinar.
"The Order Forecast (previously known as
the Supply Plan) is a forecast of future purchase
orders," Terry explains. "That's one reason I
believe Walmart has elevated the goal for fill rate.
Walmart is now giving suppliers visibility up to 10
weeks in the future of what their purchase orders
will look like. With this new visibility, there should
be no reason why you can't fill these purchase orders."
Terry concludes with advice he gives suppliers when they first
sit down for a consultation. Using the new tools to aid in meeting
Walmart's expectations is key to getting ahead of supply chain opportunities, surprises down the road, and stiffer penalties." Understand that
you need to have some level of order safety stock available. You can no
longer just be surprised that a purchase order was 20% or 40% larger
than what you expected. Monitor your order forecast. Also understand
that there can be last-minute changes that make that purchase order
somewhat different from what the order forecast was predicting."
Since its inception, OT&IF has been a positive for Walmart and
suppliers wanting to improve their supply chain. Driving the customer
experience by keeping a focus on in-stock is setting a higher standard
in the industry, which will undoubtably be adopted by other retailers in
the future.

Terry Clear, 8 & Walton

Learning from past mistakes

8TH AND WALTON

When the original OTIF initiative was announced a few years ago, some
suppliers dismissed it for two reasons:
* They felt Walmart would never go through with it
* They elected to simply pay the monthly fines feeling it would be
cheaper than changing their supply chain process.
Terry and his team consult with suppliers each week who wish they
could turn back the clock and not make one of those decisions! After
hundreds of thousands of dollars in fines (not to mention lost shelf and
feature placement in the store), Terry offers sound advice to suppliers

8 th and Walton is a consultancy based in Bentonville, Arkansas,
dedicated to helping suppliers become better partners with Walmart.
The firm provides classes and customized advisory services. Jeff
Clapper is president and CEO, Jarrod Davis director of marketing.

www.supermarketperimeter.com

APRIL 2019 - 19

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Supermarket Perimeter - April 2019

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