One of my clients forwarded this Business Insider article about Walmart’s supply chain metrics. Walmart is not only requiring an increase in OTIF (on-time-in-full) delivery performance but it also will charge penalties for suppliers that don’t live up to the metric! Creating an efficient supply chain is critical for Walmart, so they are taking this proactive stance. This is prevalent throughout our manufacturing and distribution clients – regardless of industry.
For example, in aerospace, there are very similar supply chain metrics and penalties. If we want to grow our businesses, we must develop excellence throughout our supply chain. Just think, there is no way to deliver on-time if our carriers aren’t on-time. There is no way for our carriers and shipping departments to meet their goals if manufacturing isn’t on time. And, there is no way for manufacturing to produce on-time if our suppliers aren’t on-time…and so on.
What Should We Consider and/or What Impacts Could Arise?
First, if this type of supply chain metric isn’t on your customers’ scorecards, you can expect it will be there in the future. Don’t wait until it is a request – be proactive. And, if you already receive these types of scorecards from your customers whether or not they are passing on penalties, pay attention. Whether you become a value-added partner and grow the business together will depend on how well you perform. OTIF is becoming “the metric” for measuring on-time delivery performance.
With that said, I’ve found that being proactive with your customers on the details of this metric can be beneficial as well. For example, if you shipped product on-time but there was a delay in your customer’s receiving department, most customers will adjust the score. With dollars and partnership status at stake, this can be crucial.
Of course, find out how well you are performing. Dig into the metric calculation and, most importantly, the root causes for your successes and failures. I bet you’ll find a wealth of information in what is most important for you to raise the bar with your supply chain performance overall. Make it visible so that your team knows how well they are performing in your customers’ eyes. Encourage ideas and suggestions for improvement and watch those OTIF scores rise!