A large shipping firm has grabbed a problem by the throat.
Wal-Mart has raised its on-time in-full (OTIF) shipment requirements for all suppliers to 98%. It’s in response to a significant drop-off of on-time deliveries and short shipments, possibly due to COVID-19, but also connected with general carrier and business distress. By punishing suppliers, Wal-Mart sets a standard that others will want to match.
Failure of on-time and in-full deliveries poses a severe problem for managing inventory and matching supply to demand. Carriers won’t be able to get away with it now, and suppliers won’t do as much short-shipping. The standard will ripple over first to other consumer-oriented firms, then to all sorts of firms.
Standards for delivery are a good thing if they become industry-wide. They change the stakes, and give the consumer a clear idea of what to expect for a shipment. They set a basis for deciding what a reasonable charge is. If you can cheat on the delivery date or amount and get away with it, you are likely to when you think it’s to your advantage. And that violates customer trust.
A good example is Amazon’s pioneering of two-day shipping via Amazon Prime. It created a standard for the e-Commerce practice that firms in that market have to be clear about when they set the price for their full offer (including shipment terms)– are they following it or not?
Improving customer trust is a good thing, and sets up sound guidelines for customers to evaluate the value of an offering.
Mark Solomon Friday, September 11, 2020