Walmart’s new “on time, in full” (OTIF) program, announced in July, aims to ensure that all or nearly all shipments to its stores show up on time, improving product availability and increasing revenue. It calls for fines for late deliveries, early deliveries and even for items that are incorrectly packaged.
While OTIF is mainly about store inventories for retail, it also affects Walmart’s burgeoning ecommerce business as the company has a widespread ship-from-store program to meet consumer demand. Target made a similar move in 2016, and other major retailers are sure to follow.
The new OTIF rules began in August, with Walmart requiring full truckload suppliers of fast-turning CPG items to deliver 100% of what was ordered by the delivery date 75% of the time. Late or early shipments or missing items during a one-month period trigger a fine equal to 3% of their value.
By February, Wal-Mart wants these deliveries to be OTIF compliant 95% percent of the time. Its previous target was 90%, with a more lenient four-day window.
This is causing the thousands of vendors supplying Walmart to scramble and tighten up their supply chain and delivery processes. Fines for violations will start to be enforced in February.
Eagle Foods, which supplies milk and snack foods to Walmart, found itself in a pinch when looking at OTIF compliance. The company had been relying on less-than-truckload (LTL) carriers to deliver its products to Walmart. Under the retailer’s previous compliance program (Supply Chain Reliability), this system worked fine as deliveries could arrive a day early or a day late and not face any penalties.
But with OTIF coming into force, Eagle Foods found the service-level performance of LTL carriers was not good enough to meet the much stricter requirements, said Tony Snyder, the company’s director of logistics. Eagle Foods delivers its milk products to 42 Walmart DCs in the U.S., while its snack products go to 11 Walmart facilities.
“For LTL it’s all about their efficiency vs. hitting the actual date,” Snyder said. “To them early is good, but now it really isn’t in eyes of Walmart, and that’s part of the challenge. Some LTL carriers have better relationships with them but most don’t. If you don’t have standing days (regular weekly delivery days), it’s hard to get (delivery) appointments. We definitely saw that LTL service was no longer good enough.”
That’s when Eagle Foods turned to GEODIS, its third-party logistics (3PL) provider, and GEODIS’s freight consolidation program. By combining Eagle’s orders with those of other Walmart vendors, and allowing Eagle to send them to a single centralized GEODIS facility, the 3PL is able to build full truckload shipments and help Eagle and others meet Walmart’s OTIF requirements.
“We started working with GEODIS in July, and now we can deliver to all 42 Walmart DCs (for milk products) from their DC in Plainfield, IN,” Snyder said. “Now we’re only taking loads to one site vs. four, with full trucks in, allowing us to reduce safety stock levels by consolidating volume. We now have regular order drop dates on Tuesdays for delivery on Thursday or Friday, depending on which Walmart DC, instead of sporadic delivery via LTL.”
Snyder said since joining the program, Eagle Foods has been able to streamlines its overall shipping process, and has seen improvement in the weekly OTIF scorecard Walmart sends out to all of its vendors.
Jeff McDermott, Senior Vice President of Transportation Management for GEODIS, said the freight consolidation program started in 2015 to address tighter service level requirements from major retailers like Walmart, Target and Kroger, among others.
“Once we have all the (supply chain) information from all our customers, we were able to look across all of them and say, which ones are all shipping to the same retailer on the same day, and what DC are they shipping to? We worked with them to figure out how to consolidate processes and deliver on the same truck. They pick orders on the same schedule, and schedule shipments on the same truck so the deliveries are on time. It gives them reliability they’re not able to create on their own.”
GEODIS has 45 million square feet of warehouse space in the U.S., and relationships with hundreds of freight carriers, to help retail and ecommerce clients move their goods around the country and hit their SLAs.