Walmart comes down hard on trading partners for early, late and incomplete deliveries.
Brace yourselves, Walmart suppliers – the leash is about to get much shorter.
Scrapping its previous Supply Chain Reliability Program, the retail giant is increasing pressure on trading partners. Walmart’s new “On Time In Full” (OTIF) program, which goes into effect in August, will automatically fine trading partners that fall outside an even tighter threshold for early, late or incomplete deliveries – no excuses.
Under Walmart’s previous rules, suppliers were expected to achieve a 90-percent fill rate and were held to delivery windows of four days for general items and one day for perishables and other fast-turning items. Furthermore, chargeback disputes often resulted in a waived fine.
With the new OTIF requirements, suppliers of fast-turning items will be expected to deliver “on time” and “in full” 95-percent of the time by February 2018 and the acceptable delivery window for general items has been compressed to two days. OTIF scores will be calculated monthly and early so that late or missing items will incur automatic chargebacks for three percent of their value. According to the company, “disputes will not be tolerated”. With Walmart accounting for such a large percentage of many of its suppliers’ sales, these fees could quickly add up to tens of thousands of dollars or more in lost revenue.
Walmart cited improved in-store product availability as the primary driver behind the new program. It’s an understandable goal when faced with the reality of an unwavering competitor in Amazon who is capable of delivering most goods to a customer’s doorstep within two days. As Walmart looks to make efficiency improvements in response to the economic challenges it’s facing, the company has taken the path of least resistance – its suppliers’ wallets.
For many businesses, Walmart’s stricter vendor compliance terms are hardly a new development. Suppliers have for years looked at chargebacks as just another cost of doing business, but a continuation of that mindset is proving to be a challenge as delivery terms become tighter and chargeback costs rise.
On-time and in-full delivery is a complex problem in today’s supply chain. It is an issue that has grown more challenging with the prevalence and inherent delays of overseas manufacturing. Meeting vendor compliance requirements can be a major struggle for larger companies with enough capital to invest in state-of-the-art inventory management technology, while smaller businesses are even more exposed. However, one of the greatest roadblocks to meeting vendor compliance requirements also is one of the easiest to resolve – inefficiencies in the exchange of B2B documents through EDI.
For many vendors with legacy EDI systems, documents have been integrated poorly into their ERP systems and a single misstep in automation can result in inaccuracies across the board. It is imperative that businesses review how these documents are integrated, monitor changes to vendor compliance requirements, and employ EDI solutions that are up to the task of communicating with their trading partners effectively. An effective EDI solution should be capable of full system integration and provide additional value in the form of proactive alerting, reporting capabilities, and visibility into data.
Under OTIF, chargebacks are tied to the date that Walmart pays the invoice. A typical supplier might not even discover an issue for 90-120 days, depending on payment terms, causing fines to skyrocket as delivery problems repeat themselves in the interim. Luckily, suppliers can take advantage of modern visibility tools that are designed to prevent such issues from occurring by alerting users to problems with transactions as they happen. This affords vendors an opportunity to correct data errors before they result in costly chargebacks.
1 EDI Source offers IntelligentXchange™ (IX), a bolt-on, cloud-based EDI visibility platform designed to help suppliers reduce chargebacks by continuously auditing their inbound and outbound EDI data. Fortunately for those already using this powerful new tool, we have integrated changes in IX designed to make it easier for suppliers who work with Walmart. For our clients who are Walmart suppliers, please feel free to contact your 1 EDI Source representative to discuss your Walmart integration.