Solving the OTIF Penalty Problem

Shipping execs, particularly for enterprise companies, are continuing to focus on addressing the OTIF penalty problem in an effort to help their bottom line and avoid penalties. OTIF, meaning On Time Delivery In Full, is a key performance indicator in the logistics industry that assesses a supplier’s ability to deliver orders on time and completely. Originating with Walmart in 2017 to meet evolving consumer demands, OTIF has become widely adopted for supply chain assessment, inventory planning, and order fulfillment. It encourages accurate and timely deliveries, benefiting retailers by preventing revenue loss due to stockouts or unsellable items.

For many large CPG customers, Walmart could make up 30-50% of their total sales volume, and from a transportation perspective, Walmart often represents the highest volume customer freight lanes in their network. Understanding the OTIF fine exposure that comes with this is essential to successfully manage this business. For example, with $50,000 in total cargo/case value riding on a BOL, fine exposure of 3% (or $1,500 for that BOL) can often outweigh the cost of transportation for that shipment, or at least serve as a significant factor to consider when making routine guide decisions.

Jenkins Mock, sales manager for Fetch Freight, speaks of how Fetch specifically experiences this with their customers: “We know our customers have felt the frustration in the past when other carriers have run into issues that then reflect on the shippers with hefty penalties, experiencing significant fees…we know how important it is to address them immediately, which is why we are on call 24/7, finding innovative solutions for whatever comes up.”

From a carrier management perspective, it is critical for these shippers to understand PO level cost-to-serve and consistently tie those fines back to the actual transportation transactions to truly optimize the economics when selecting Walmart transportation partners.

Strategies that have proved successful for Fetch typically revolve around first understanding fine exposure due to carrier failure, making sure that these factors are incorporated both in the intermediate carrier performance management process, and certainly during RFP awards to ensure that those routing guides will enable success for their organizations. Even for those who do not believe that achieving fully compliant OTIF scores and fine waivers are realistic near-term goals, marginal improvement in fine exposure could still be worth millions of dollars annually in the bottom line, as well as improving the relationship with the shipper’s most sensitive customer. It’s important for Walmart suppliers to make sure that their carriers understand the full impact of their performance and to partner with carriers who understand these implications, having consistently demonstrated the ability to be successful with Walmart.

“Fetch Freight really comprehends the weight of these penalties and ongoingly helps us in addressing them, which is what you need in a logistics partner, feeling the impact of the risk of the hefty fines we’re on the line for,” says one Fortune 500 shipping partner.

While managing and analyzing carrier data poses as significant challenge for logistics providers, Fetch uses custom technology platforms in conjunction with its all-hands-on-deck approach to personalized customer service, looking at each delivery individually to optimize efficiency and agility in its solutions.

To learn more about how Fetch can help your company to address OTIF penalties, click here.