From MABD to OTIF: Wal-Mart’s Latest Supply Chain Imperative

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From must arrive by date (MABD) to on time in full (OTIF), Wal-Mart’s latest delivery standard is not just another supplier scoring metric. It’s actually a dynamic reporting mechanism that could become one of the best tools for measuring inventory flow ever conceived — at least, that’s what logistics experts and various consultancies with a compliance training interest are saying.

There’s no rocket science here. Calculating OTIF is as simple as taking the number of cases received within a specified delivery window and dividing that figure by the number of cases actually ordered. Apparently, Wal-Mart was tired of fudging the number. Can you blame it?

Here are the latest OTIF guidelines for full truckload (FTL):

  • Starting August 2017, FTL suppliers must deliver orders 100% in full, on the must arrive by date, at least 75% of the time.
  • By February 2018, FTL suppliers must deliver orders 100% in full, on the must arrive by date, 95% of the time.
  • Non-compliance will result in a fine of 3% of the “missing case” value; early deliveries will also be penalized, to eliminate overstock situations. (Penalties will be invoiced monthly.)

For less-than-full truckload (LTL):

  • Starting August 2017, LTL suppliers must deliver orders 100% in full, on the must arrive by date 33% of the time.
  • By February 2018, LTL suppliers must deliver orders 100% in full, on the must arrive by date, at least 36% of the time.
  • If OTIF was 36% or better in August 2017, then the supplier must demonstrate a 20% improvement.
  • Non-compliance penalties (3% of non-compliance COGS) will be invoiced monthly.

Wal-Mart has been threatening its suppliers with something resembling the OTIF standard for quite some time, as on-time and in-full delivery scoring among its top 100 suppliers was less than stellar (only 10% were hitting the metrics Wal-Mart has now combined into the OTIF standard). And if that kind of abysmal performance has been the case for Wal-Mart, then understanding why “track and trace” and other supply chain visibility standards are gaining popularity becomes far easier.

Times are changing, and Wal-Mart will continue to take a lot of heat. But imposing a standard designed to drive on-time deliveries and eliminate missing items? The world’s largest retailer gets a “pass” on this one, as its OTIF initiative will result in a higher bar, creating value across industry.

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