Sam’s Club has become an increasingly popular choice for shoppers in the COVID-19 era. Year-over-year growth for the retailer hit nearly 10% after the breakout of the pandemic.
And as sales have increased, so too have expectations for supplier partners of the big-box store. Companies working with Sam’s Club must meet strict retail compliance standards similar to those in place at the retailer’s parent company, Walmart.
Last year the retail giant instituted a 98% OTIF threshold for suppliers. Those organizations that cannot hit on-time standards, face a fine of 3% of the cost of goods sold for the non-compliant count in the order. The increase in expectations has upped the stakes for brands working with Walmart.
While not quite to the level of stringency at Walmart, Sam’s Club has its own version of OTIF. Sam’s Club launched its OTIF program in the spring of 2018, following the logistics compliance precedent set by Walmart. The store has gradually increased standards each year since its unveiling two years ago.
It now expects shippers to meet an on-time threshold of 90% while requiring 100% of orders to be in full. Those working with the retailer must have a handle on their supply chain function to meet the company’s standards. Without effective transportation processes in place, suppliers have a steep hill to climb to adhere to the big box’s retail compliance standards.
We will look at what a retail-optimized transportation function looks like and how it can help CPGs meet the challenges of the industry.
Sam’s Club OTIF Background
Part of Sam’s compliance program includes an extensive scorecarding component. These are report cards that grade suppliers on quality and performance, looking at common metrics like on-time delivery, inventory management, missed shipments, lead time, costs, etc.
When a vendor is unable to deliver on time or in full, the retailer incurs a loss because there is no product available to sell. Retailers then issue a chargeback to offset the incurred cost and discourage future failures.
OTIF Logistics Scorecard Guidelines for Sam’s Club
OTIF scorecard guidelines for Sam’s Club differ slightly from those set by Walmart. The biggest difference is that there is a four-day delivery window for dry product or product that is delivered directly to club locations. Similar to Walmart’s OTIF guidelines, orders going into Sam’s Club grocery or perishable distribution centers (DCs) have a one-day window and are required to deliver on the Must Arrive by Date (MABD).
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- Grocery or perishable DCs are expected to receive the ordered units on the MABD (one day window)
- The OTIF score expectation for grocery and perishable DCs is 90% on-time and 100% in full
- Dry DCs deliveries and Direct Club Deliveries (DCD) have an expectation to deliver on the MABD or any of the prior three days before MABD (four-day window)
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Working with Sam’s Club as a Supplier
Like many prominent retailers in the space, Sam’s Club can be a challenge to work with for CPG brands that do not have an optimized logistics function.
Costly chargeback penalties can undercut profitability for shippers working with the big-box store, which are a direct result of poor supply chain strategies. Shippers must also correctly set and adhere to appointment times, which are a prerequisite to delivery to the retailer.
Additionally, a significant component of Sam’s Club delivery is successfully meeting the retailer’s order cadence policies.
Distribution center employees place recurring orders on specific days of the week, which can be challenging for some brands to manage inventory and keep up with expectations.
To meet standards and hit goals, vendors should audit their shipping schedules to align their production and logistics operations. Doing so will allow your organization to hit OTIF standards and ensure that orders sent to Sam’s are profitable.
You can complete this process by analyzing past logistics data and performance. Transportation data analysis and effective planning is one of many areas that a logistics solutions provider can assist your organization.
How a Retail Specialized Logistics Provider Can Help Your Organization with Sam’s Club
If you are struggling with Sam’s Club delivery, there are a few things that you can do to improve performance and decrease transportation costs. A retail specialized logistics partner can fill in any gaps in your operational purview or strategy. With the right logistics partnership, you can expect:
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- Help with appointment scheduling. A proactive partner should assist your organization in setting appointment times that work with your production function.
- Organizational and transportation provider alignment on OTIF processes. A good 3PL will work with retail-specialized carriers and warehouses as well as ensure all internal parties are working cohesively to meet OTIF.
- Preferred carrier arrangement. Retailers’ distribution centers only work with certain carriers. A good logistics partner should understand these set-ups and book transportation exclusively with these providers.
- Ensure rescheduled appointments do not fall outside your MABD. Distribution centers can approve non-compliant appointments, but a good transportation partner should understand these dates and set all reschedules within the parameters of MABD.
- Help create set ship dates and less variance in transportation.
- Identify consolidation opportunities. You can create efficiency through an effective consolidation program by cutting transit time. Shorter hauls can lead to better OTIF performance.
- Evaluate current consolidation efforts. Inversely, ineffective consolidation programs can create issues. You may need to shuffle consolidation programs to separate your Sam’s Club orders from other freight.
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Zipline Logistics Works with Brands to Create a Supply Chain Differentiation Strategy
If you have just started working with Sam’s Club or have recently begun expanding your sales with the company, it may be beneficial for you to work with a retail specialized logistics partner.
Successfully, consistently delivering to Sam’s Club takes a thorough understanding of the retailer’s logistics requirements.
Simply scheduling transport into one of their distribution centers is not an effective long-term strategy for working with the grocery.
You must create an effective plan to ensure that orders are not subject to fines and are aligned with the remainder of your organization. Production functions that are out of sync are not only inefficient. They can also be a source of money left on the table.
Since over 97 percent of our orders end up on a retail shelf, we understand what it takes to ensure your product arrives at its destination as intended and on time.
We work with customers to manage their retail orders to create cost-reduction and performance-enhancing supply chain strategies.