First implemented in 2017, Walmart’s “on-time, in-full” (OTIF) policy has kept carriers hopping, and a recent memo from the Arkansas-based company just upped the ante for those who wish to supply the shelves of the retail giant.
Effective Sept. 15, carriers must deliver orders “in full” and “on-time” 98% of the time or be fined 3% of the cost of the goods. Released on Sept. 1, the memo only gave suppliers two weeks to prepare.
Walmart began its OTIF policy at 85% and has slowly raised that number over the last three years. At the time, Walmart spokesperson Michelle Malashock said, “On-time and in-full deliveries help us keep the right amount of inventory at the store at the right time. Before we instituted this program, merchandise shipped outside of the window caused us to keep a surplus inventory in our back rooms.”
The OTIF policy requires all general merchandise orders to be filled exactly as Walmart prescribes. Prior to this announcement, OTIF compliance on food and consumables has lagged below Walmart’s requirements.
The new standard will also apply to the time-in-transit. Right now, Walmart sets an 87% on-time threshold for prepaid business if the supplier sets the delivery terms and pays freight charges.
In 2017, when they implemented the program, Walmart claimed it was losing money in sales because the restocking of shelves was not occurring fast enough. In a recent internal memo, Walmart said, “We must improve product availability to help ensure that our customers can purchase the products they want when they want, in-store or online. To deliver on this goal, orders need to be fulfilled accurately, on-time, and in-full.”
Walmart anticipates that as the current health crisis lingers and shoppers are unable to go to brick and mortar stores, the 2020 holiday season will be unlike any other for e-commerce sales so that stocked warehouse shelves will be an important component of the retailer’s success.
While the new policy is quite ambitious, Walmart sees it as essential to remain competitive with Amazon, which has been aggressively marketing its online grocery store in recent months.