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DC Velocity
Forward Thinking

Walmart modifies OTIF requirements, tests plan to automate delivery appointments

Comment
Retailer changes "on-time, in-full" compliance dates, delivery thresholds.

Walmart Inc. has throttled back on its original deadlines and thresholds for meeting its controversial "on-time, in-full" delivery service, which require truckload and less-than-truckload (LTL) carriers to meet specific delivery requirements or face a 3-percent off-invoice penalty.

Meanwhile, Walmart is testing a program to automate the now-manual process of scheduling delivery appointments to its U.S. distribution centers. Under the initiative, Walmart will automatically pre-set delivery appointments for carriers, which will then be expected to hit the targets, according to a top carrier executive and a Walmart partner.

The ultimate goal of the automated appointment program is to precisely align Walmart's DC capacity with its delivery schedules so that its entire supply chain operates on a just-in-time basis with virtually no inventory, the executive said. Any excess stock will be returned to the supplier, the executive said. The program is being piloted at a DC in New Albany, Miss., and is expected to be rolled out across the company's regional DC network in the third quarter, according to Walmart documents obtained by Supply Chain Quarterly's sister publication, DC Velocity.

Both programs are working toward the same objectives of tightening delivery flow, cutting inventory-carrying costs, and ensuring available product at all times in a world where customer expectations have been elevated due to e-commerce and, notably, Seattle-based Amazon.com Inc. In commenting on the scheduling initiative, the LTL executive said in an e-mail that "what is coming is just-in-time inventory for retail on all levels. Walmart will always be in stock, and (will) carry very little excess. Carrying costs of inventory will drop dramatically, (and) what they don't sell will head right back to the vendor."

Under the new targets for the on-time, in-full program, which is better known by the acronym "OTIF," effective April 1 truckload carriers will be expected to make deliveries of food and other consumables within "must-arrive-by dates"—set at one day for food and other consumables, and two days for general merchandise—and to do so 85 percent of the time. LTL carriers, whose operations are less linear and more labor-intensive, will be required to hit those targets 50 percent of the time.

When Walmart announced the initiative last July, it set an Aug. 1, 2017, deadline to hit a 75-percent target for truckload deliveries, and a Feb. 1, 2018, date to meet a 95-percent threshold. LTL carriers were started at 33 percent, and were scheduled to be raised to 50 percent by Feb. 1.

Kory Lundberg, a Walmart spokesman, said there's no set timetable for attaining the 95-percent threshold, adding that the goal is for all of Walmart's suppliers to be at that level. "We want to ultimately get to 95 percent with all of our suppliers, and we want to get there in a thoughtful way," Lundberg said in an e-mail.

The OTIF program has raised concern among Walmart's vast supplier and motor carrier partner network, many of whom have operated for years under four-day delivery windows and without the added pressure of meeting the "in-full" objectives. Some motor carriers raised concerns about being penalized for delays on the supplier's end, and the hassles of passing on the off-invoice charge to its shipper.

Lundberg said he wasn't aware of any pushback from carriers to the OTIF mandate. "Our in-stock is the highest it has been since 2012. And we have experienced 13 quarters of positive comp sales while continuing to reduce excess inventory from our U.S. stores," he said. OTIF is a "key component" of those improvements, he said.

The new scheduling initiative is aimed at eliminating the manual process that Walmart said in its communiqué makes it "virtually impossible to prioritize purchase orders presenting the most value to our customers when our network is at capacity." Automating DC appointments "means less administration for our suppliers and carriers," the company said. In the future, Walmart purchase orders will contain such information as appointment date and time, destination, and appointment number, according to the document.

"After full implementation, there should be no more DC callbacks and no more phone calls to schedule delivery appointments," Walmart said.

Automating delivery appointments will require synchronizing customer demand, suppliers' logistical requirements, and Walmart's network capacity requirements, the company said. Suppliers and carriers will hear more in April about how to integrate their logistical parameters into the broader operation, Walmart said.

The changes to OTIF and the planned rollout of the scheduling platform were announced recently at a Walmart national supplier meeting in Bentonville, Ark.

Mark Solomon is executive editor—news at DC Velocity, a sister publication of CSCMP's Supply Chain Quarterly.

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