Walmart Reduces Carrier Requirements for On-Time and In-Full Shipments

Walmart is loosening its restrictions for suppliers, with a recent announcement that the retailer has revised its On-Time In-Full (OTIF) requirements. As of Feb. 1, Walmart has reduced supplier requirements from the 98% on-time and in-full bar established in 2020 to 90% for on-time and 95% in-full.

While the retailer didn’t give a reason for the change, Andrew Lynch, president of Zipline Logistics, said he suspects it has something to do with carriers not being able to keep up.

“Our speculation is that Walmart’s late delivery fees were becoming too big of a revenue stream for them as carriers struggled to meet the strict guidelines,” said Lynch. “Walmart doesn’t want to be making its money from fines. What Walmart really wants is for its suppliers to have well-functioning supply chains where they save money on transportation and fines, so that their products are competitively priced for Walmart and on time to store shelves.”

A win-win for suppliers

This is good news for brands who have struggled to meet Walmart’s high bar. The change is not huge, but it provides more room for error in the case of unexpected supply chain disruptions.

It’s even better news for those suppliers who were already meeting the original standards.

“Although the change is relatively minor, it will send ripples through each link of the supply chain as suppliers adjust strategies according to the new standards.”

“The real cost of late deliveries to brands isn’t the fines, it is the out-of-stocks that occur when Walmart doesn’t have product in time to stock its shelves,” said Lynch. “Brands who do meet Walmart’s strict requirements can look at the 8% decrease in standards as 8% more opportunity to win shelf space from underperforming competitors.”

Meet expectations with the right transportation partner

Reducing supplier requirements won’t help all suppliers, though. Many shippers and carriers will still struggle to meet Walmart’s standards even after the change. Lynch attributed this to poor foresight when it comes to choosing the right transportation provider.

“Many brands do not consider the full implications of their choice of transportation providers and make the mistake of chasing a bottom-dollar rate for a truck, only to find that the service provided by these carriers is lacking,” he said. “The initial cost is lower, but the lack of service leads to a loss in gross profits due to out-of-stock products and fines from Walmart for missed appointments or shortage shipments.”

He added that suppliers who want to not only meet but exceed retailer shipping requirements should choose a transportation provider who is retail-specialized, familiar with compliance issues, and capable of tailoring strategies to reduce overall transportation costs.

Working with logistics experts who are also retail experts, Lynch added, can help suppliers overcome inefficiencies, create flexibility, and monitor performance to make better business decisions.

“Although the change is relatively minor, it will send ripples through each link of the supply chain as suppliers adjust strategies according to the new standards,” said Lynch, noting that this might mean it’s time to consider switching transportation providers, adjusting data collection and analysis, or even changing the cadence of production.

“This is where the importance of a transportation provider with retail expertise comes into play,” he added. “As a supplier makes these changes, a specialized partner can assist in creating a smooth transition, adjusting strategies, and communicating new processes to all touchpoints of the supply chain.”