On-Time Delivery — Avoid the Fines

REPOST: Sarah Nassauer & Jennifer Smith

Vendors and suppliers are struggling to meet Walmart’s new on-time delivery standards, “on-time, in full” (OTIF), which require all shipments to arrive at distribution centers in full and exactly two days from the Ship/Delivery date requested, but no earlier. In an attempt to improve service and product availability, all while avoiding overstocked warehouses and backrooms, Walmart has begun applying a 3% fine to orders that are delivered early, late, or only partially filled. The second largest U.S. grocer (based on sales volume), Kroger, will issue a flat $500 fine for these late deliveries.  Even Mother Nature is not an excuse, and suppliers must plan ahead by monitoring weather forecasts and other shipping issues to avoid the fines, which will be applied to the supplier or the carrier, if fault can be determined.

The savings from this expected reduction in inventory carrying costs will go to cover increases in wages as well as expanding e-commerce operations.

How will this affect the supply chain? Following this variation on the “Just in Time” inventory strategy, Target is already tightening up their on-time delivery standards, albeit without the fines for early shipments. Amazon is expected to follow suit, which will eventually trickle down to second and third tier retailers. These new policies change everything for suppliers, solidifying the need for streamlined systems in areas such as inventory management, picking, and shipping. The WSJ reported back in November that Walmart’s largest supplier, Proctor and Gamble, has spent billions of dollars overhauling its supply chain over the past couple years – in part to meet these more precise delivery windows. When time is of the essence, implementing or upgrading voice technology delivers for real-time, hands-free order fulfillment.

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On-Time Delivery — Avoid the Fines