Recently, Walmart upped its requirement for the on-time, in-full (OTIF) delivery of full truckloads within a two-day window from 85 to 87 percent. While the 2 percent increase doesn’t seem like much, mid-sized or smaller manufacturers may have a tough time stepping up to the higher standard. And for many of these businesses, the price of failure will be substantial with millions of dollars in potential fines on the line, not to mention millions in lost sales and brand loyalty.
Increased Supply Chain Complexities Make OTIF Difficult
Additional supply chain pressures are raising the risks for OTIF. For one thing, suppliers are dealing with more and more SKUs as they enter new markets and respond to consumer demand for customized products. Pricing and promotions are adding to the volatility, while consumer expectations for speed and immediate product availability are soaring.
Globalization is also complicating OTIF because many manufacturers operate their sourcing, production and distribution systems around the world – making it more difficult for them to accurately predict their service levels. As a result, demand forecasting miscalculations, raw materials and finished goods inventory shortages, manufacturing interruptions and transportation delays can wreak havoc on their ability to meet OTIF standards.
The Ongoing Technology Battle to Improve OTIF
Companies have invested millions in technology in attempts to optimize the supply chain forces that drive OTIF. A manufacturer typically runs several applications that support supply chain functions –from ERP, APS and CRM to systems for warehouse management, demand forecasting, MRP and manufacturing execution. However, because these systems often are disconnected silos, they don’t provide a holistic view of the supply chain.
Supply chain practitioners can spend as much as 80 percent of their time collecting and crunching numbers from disparate global systems in efforts to make decisions related to OTIF goals and to pinpoint the root cause of supply chain weakness that’s causing downstream disruption. It can take weeks before a decision is made and root cause is identified, if it ever is. By then, the damage is more than likely done.
Even more surprisingly, only a small percentage of companies actually look into the ‘why’ of their OTIF-related non-compliance incidents. Why aren’t they investing in root cause analysis? Because it requires pulling data from several sources to try to determine why a delivery missed its window. What can make this particularly challenging, too, is that so much transactional data often sits in different databases, making it both difficult and time-consuming to unite disparate data sources in order to answer those questions that beg to be answered.
Using Operational Analytics and a Modern Data Hub to Drive The Supply Chain
Operational analytics can help by offering to Walmart suppliers (and virtually any other consumer goods manufacturer, for that matter) the ability to easily view all information relating to production, distribution and inventory across multiple systems and data sources.
The first step is to establish a modern data hub (or repository) to cleanse, normalize and standardize large volumes of data from multiple sources in a central location. And from this data platform, stakeholders like account teams, corporate demand planners and others to view the data in the context they require using operational analytics. This hub should also allow the information to be consumed for demand planning, demand sensing and inventory management. Bringing additional data streams into the hub like Walmart’s forecast of end-consumer demand can also help suppliers improve forecast accuracy and lead to leaner and more efficient inventory replenishment.
The use of operational analytics to gain greater visibility of suppliers on the inbound side is also critical for those businesses that serve Walmart since disruptions on their side can impact a supplier’s ability to deliver on-time and in-full. Understanding OTIF rates, lead times, fulfillment costs and inventory capacities per partner and supplier and being able to take action on this data to rationalize one’s trading partners is invaluable.
Operational analytics also offer the ability to “manage by exception,” providing automated insights into each supply chain stage and alerting key shareholders when anomalies exist. With immediate action by supply chain planning teams on these exceptions, suppliers can further ensure they meet their OTIF obligations.
All of this together with real-time freight visibility can help suppliers rise to the occasion in meeting Walmart’s newest OTIF delivery requirement. Plus, the end-to-end visibility that’s made possible by an integrated data hub and operational analytics solution will help pave the way for them to swiftly handle tougher retail delivery standards in the years ahead.
Categorised in: Intelligent Analytics
This post was written by Pat Hennel