Retailers always want to have the right product at the right place, at the right time, and at the right cost. Target is no exception to this. Their goal is always to have the items their shoppers want when they want them.
When purchase orders from Target to vendors aren't shipped as planned, whether related to timing or fill-rate, sales are missed, guest frustration increases, and rework might need to happen at Target, the vendor, and the carrier. All of this leads to increased costs and complexity in the supply chain. Those are the two things that you want to keep as low as possible within a supply chain so that products are as cheap as possible for you and me to buy at a store.
To try and incentivize vendors to be on time and in full, retailers like Target often implement a punitive fine program, Target's Compliance program in their language (sometimes referred to as OTFR for On Time Fill Rate, or OTIF at other retailers). They state their goal isn't to create more fines but to recognize zero charges and 100% compliance on the timing and fill rate of orders.
Updates as of August 4, 2024
On Time and Fill Rate fines lowered from 5% to 3%
Fill Rate will be assessed at the Item level, no longer at the PO level
Fill Rate fines assessed on Fill Rate Original, not Fill Rate Revised
Prepaid suppliers window for arrival, currently can be up to 2 days early, moving to a 1 day early or 1 day late window
Collect suppliers are getting two new fines
On Time Release (OTR) for ‘releasing’ orders in the Target collect pickup scheduling app, ShipIQ, 1.5% fine on cost of goods
Supplier Pickup Adherence (SPA), measuring shipments able to be picked up when they were planned to be picked up or not, 1.5% fine on cost of goods
Target's Current Compliance Goals
Target's goals suppliers are responsible for are assessed on each purchase order and are as follows:
Fill Rate Revised (PO Level) (Pre-August 4, 2024):
95% of all revised order units are delivered
Fill Rate Original (Item Level) (Post-August 4, 2024):
95% of original PO item quantities are delivered
On Time Release:
For Collect (We Pay) on ShipIQ (SIQ): 100% of POs are released in SIQ within the given timeframe in SIQ
Supplier Performance Adherence:
For Collect (We Pay) on ShipIQ (SIQ): 100% of shipments are shipped on the Target assigned pickup date in SIQ
On Time:
Collect (We Pay) on Vendor Ready to Ship (VRS): 100% of goods for PO are picked up within the pickup date window
Prepaid (They Pay): 100% of goods for PO are received in the in-yard delivery window
EDI 856 Advanced Ship Notice (ASN) Availability:
100% of purchase orders with delivery appointments have an available, error-free ASN before the In-Yard date/time for the associated delivering trailer
Compliance Fines Summary
Compliance Type | Goal | Fine |
Fill Rate Revised - PO Level | 95% | 5% COGs of goods not received |
Fill Rate Original - Item Level | 95% | 3% GOGs of all items not received in full |
On Time | 100% | Pre-Aug 4, 2024: 5% COGs of all goods received outside the window
Post-Aug 4, 2024: 3% COGs of all good received outside the window |
EDI 856 (ASN) Availability | 100% | 3% COGs of all goods received without an ASN |
On Time Release | 100% | 1.5% COGs not released within the ship window |
Supplier Pickup Adherence | 100% | 1.5% COGs not picked up within the assigned window |
Measured Without Fines
Target does keep track of a few other areas for compliance; however, they do not yet assess fines for these areas:
ASN Accuracy for items and quantities listed on the ASN vs the purchase order
While no fines are currently assessed, they may be in the future per Target. It's a good idea to keep up with these metrics because they can help you improve your supply chain performance and be a better partner to retailers like Target as well as to your end consumers.