Supply Chain Performance Program - On Time, In Full Implementation
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Supply Chain Performance Program – On Time, In Full Implementation ©2017 CVS Health and/or one of its affiliates: Confidential & Proprietary
Announcement in January
• In January, we communicated some
modifications to our Vendor
Compliance Program.
• Replacing current Ship-to-Arrive
(STA) Compliance Program, with On
Time and In Full Program (OTIF).
• Expense offset structure changing
from a flat fee per P.O. structure to a
% of COGS structure.
• Incorporating P.O. Fill Rate
measurement
• Incentive Program built in
• Advanced Ship Notice (ASN)
required for all shipments
© 2017 CVS Health Confidential & Proprietary 1
Reaffirmation in June
• In June, we sent an additional
communication meant to reaffirm the
upcoming modifications.
• Performance will be measured
monthly.
• Expense offset structure will be
variable based on vendor
performance (Performance/Incentive
Based Compliance).
• Expense offset structure to be
applied to any portion of PO not
delivered On Time.
• Webinar training scheduled week of
June 18’th to provide guidance on
the administration of program rules.
© 2017 CVS Health Confidential & Proprietary 2
Agenda
• Supply Chain Performance Objectives
• Administration of Program
• Supply Chain Performance Portal
• Assessment of Purchase Orders (Timing)
• Application of Qualifying Receipts (On Time)
• In Full Assessment
• Performance Based Incentive Program
• Charge Calculation
• Vendor Visibility / Timing
• Disputes
• Portal Administration
• Logging in and setting up access
• Key Dates/Next Steps
© 2017 CVS Health Confidential & Proprietary 3
Note:
• The purpose of today’s webinar will be to discuss the administration
of the OTIF program in the vendor portal.
• We have included illustrative examples in this presentation however
views and reports generated in the CVS vendor portal will differ, not
in content but in format.
• There will be an additional vendor training scheduled in July to
demonstrate standard operating procedure for the vendor portal and
explanation of key reports.
© 2017 CVS Health Confidential & Proprietary 4
Goal of the Supply Chain Performance Program
is to Drive Sales and Margin and reduce Supply
Chain Costs Incremental
Incremental
Sales
Sales
KEY IMPERATIVE: Decrease Lead
Improved Time -
In-Stock DRIVE OPERATIONAL Improve F&R
EFFICIENCY AND Process
EXCELLENCE IN
EXECUTION
Inventory Superior SCP Performance Improved
Dock
Reduction Drives:
Efficiency
© 2017 CVS Health Confidential & Proprietary 5
OTIF Objectives and Parameters
Program Objective
To ensure purchase orders are delivered consistently with the Ship‐to‐Arrive date and in accordance with
original purchase order quantities.
On Time In Full
A compliant PO meets the following criteria: A compliant PO must be filled to 95% of the
original order quantity*.
PREPAID (Vendor Managed Freight):
PO arrives on or before the STA date CVS will measure the Fill Rate at the PO SKU
‐OR‐ level. Each SKU must be filled to 95% of the
A requested delivery date that falls within a 5 business day original order quantity.
compliance window (PO STA date or 4 business days prior).
METRIC:
COLLECT (CVS Managed Freight): Quantity of units received in first receipt on PO
Compliant POs meet the following criteria: at a CVS Distribution Center (DC) divided by
1) Shipping information is submitted to CVS at least 72 hours prior the original quantity on the PO, SKU or PO Line
to available pickup (include business calendar M‐F), and level.
2) Ample transit time is provided to CVS to meet the STA date upon
pickup (transit times defined in Routing Guide). *Overages of a single item on the PO do not
apply towards total units shipped/received on
BACKHAUL (CVS Managed Freight): a PO.
1) 4 days is provided to CVS to meet STA date upon pickup
(measured as days between Available for Pickup date and STA date)
‐ Any non‐compliant portion of a PO may be subject to performance penalties
‐ Performance is assessed monthly
‐ Penalty amount is variable based on vendor’s monthly OTIF Effectiveness Score
©2017 CVS Health and/or one of its affiliates: Confidential & Proprietary 6
Administration of the Program –
Supply Chain Performance Portal
COMPLIANCE Vendor
ACCOUNTS
CVS NETWORKS SUPPLIERS Performance
PAYABLE
(3RD PARTY) Team
Order and Delivery Weekly Charges Deductions Disputes Created Disputes
Data sent to CN Calculated Applied Resolved
OTIF Performance Reporting
• Suppliers
• Vendor Performance Team
• Vendor Collaboration Team
• Inventory Planning
• Category Management
Work together to Measure performance Improved customer
Review Data
improve performance improvement service
© 2017 CVS Health Confidential & Proprietary 7Administration of OTIF Program -
Assessment of Purchase Orders (Timing)
• Purchase orders are assessed for OTIF 10 calendar days after first
receipt
Sunday Monday Tuesday
July
Wednesday Thursday Friday Saturday
1 2 3 4 5 6 7
FR
8 9 10 11 12 13 14
OA
15 16 17 18 19 20 21
FR – First Receipt
OA – OTIF Assessment
© 2017 CVS Health Confidential & Proprietary 8Administration of OTIF Program -
Assessment of Purchase Orders (Timing)
• Any receipts occurring within 5 business days after the first receipt are
included in the OTIF assessment for the purchase order
Sunday Monday Tuesday
July
Wednesday Thursday Friday Saturday
1 2 3 4 5 6 7
AD* AD X AD AD X
8 9 10 11 12 13 14
X AD OA
15 16 17 18 19 20 21
*First Receipt – 7/2
OA – OTIF Assessment
AD – Assessment Day – Receipts recorded locally at the CVS distribution center included in
assessment
X – Non Business day (Holiday or Weekend)
© 2017 CVS Health Confidential & Proprietary 9Administration of OTIF Program -
Application of Qualifying Receipts (On Time)
• All receipts included in the OTIF assessment are then evaluated to
determine whether they meet the on time requirements
PREPAID COLLECT BACKHAUL
Vendor Managed Freight CVS Managed Freight CVS Managed Freight
PO arrives on or before the STA date, or Based on timing of freight information Based on timing of freight information
entered into transportation portal: entered into transportation portal:
A requested delivery date that falls within Shipping information is submitted to CVS 4 days is provided to CVS to meet STA
a 5 business day compliance window at least 72 hours prior to available pickup date upon pickup (measured as days
(PO STA date or 4 business days prior). (include business calendar M-F), and between Available for Pickup date and
STA date)
Ample transit time is provided to CVS to
meet the STA date upon pickup (transit
times defined in Routing Guide).
© 2017 CVS Health Confidential & Proprietary 10Administration of OTIF Program -
Application of Qualifying Receipts (On Time)
Example 1:
STA Date First Request First App Appnt Second Request Trailer Arrival Date Conclusion
7/2/2018 7/2/2018 7/2/2018 N/A 7/2/2018 Compliant
Example 2:
STA Date First Request First App Appnt Second Request Trailer Arrival Date Conclusion
7/2/2018 7/2/2018 7/2/2018 7/5/2018 7/5/2018 Non Compliant
Example 3:
STA Date First Request First App Appnt Second Request Trailer Arrival Date Conclusion
7/2/2018 7/2/2018 7/3/2018 7/5/2018 7/5/2018 Compliant
© 2017 CVS Health Confidential & Proprietary 11Administration of OTIF Program -
Application of Qualifying Receipts (On Time)
Collect On Time Requirements
1) Shipping information is submitted to CVS at least 72 hours prior to available pickup (include business calendar M-F), and
2) Ample transit time is provided to CVS to meet the STA date upon pickup (transit times below).
1) Assume Origin: CA, Destination: TX
2) Zone 5 to Zone 3 => Required Transit: 5 days
System Entry Date Days Available for Pickup Days STA Date Conclusion
6/18/2018 3 6/22/2018 5 7/2/2018 Compliant
© 2017 CVS Health Confidential & Proprietary 12Administration of OTIF Program -
Application of Qualifying Receipts (On Time)
Backhaul On Time Requirements
1) 4 days is provided to CVS to meet STA date upon pickup (measured as days between Available for Pickup date and
STA date)
Available for Pickup Days STA Date Conclusion
6/22/2018 5 7/2/2018 Compliant
© 2017 CVS Health Confidential & Proprietary 13Administration of OTIF Program -
In Full Assessment
• Receipts deemed to be On Time are included in In Full assessment below
• In Full is measured at the purchase order line (SKU) level
• OTIF Effectiveness is the % of original purchase order quantities that
were delivered on time.
Example PO # 1 Purchase Order Details On Time Receipts
Item Units Ordered Unit Cost PO Cost Qualifying Receipt Quantity OTIF Effectiveness Rate
SKU A 100 $ 1 $ 100 50 50%
SKU B 100 $ 1 $ 100 100 100%
SKU C 100 $ 1 $ 100 95 95%
SKU D 100 $ 1 $ 100 90 90%
Total 400 $ 400 335 84%
© 2017 CVS Health Confidential & Proprietary 14Administration of OTIF Program -
Performance Based Incentive Program
Assess Monthly Drive vendor performance in critical business metrics (On Time and In Full) and reward vendors providing best in class
Performance service with reductions or exemptions in COGs offsets.
Performance
Measurement Vendor Performance is assessed according to OTIF Effectiveness.
Invoice cost associated with product received On Time
OTIF Effectiveness
Total invoice cost
Vendor performance is assessed monthly at the PO vendor level.
Assign OTIF Effectiveness Penalty Offset
Performance
Tier At or Above 95% Exempt
Below 95% and at or above 85% 1.5%
Below 85% 3.0%
Calculate
Apply penalty offset above to portion of any PO deemed non compliant.
Penalty OffsetsAdministration of OTIF Program -
Monthly Summary Charge Calculation
Example PO # 1
Item Units Ordered Unit Cost Invoice Cost OTIF Compliant OTIF Non Compliant OTIF Compliant ($) OTIF Non Compliant ($) Chargeable Non Comp
SKU A 100 $ 1 $ 100 50 50 $ 50 $ 50 $ 50
SKU B 100 $ 1 $ 100 100 0 $ 100 $ ‐ $ ‐
SKU C 100 $ 1 $ 100 95 5 $ 95 $ 5 $ ‐
SKU D 100 $ 1 $ 100 90 10 $ 90 $ 10 $ 10
Total 400 $ 400 335 65 $ 335 $ 65 $ 60
Example PO # 2
Item Units Ordered Unit Cost Invoice Cost OTIF Compliant OTIF Non Compliant OTIF Compliant ($) OTIF Non Compliant ($) Chargeable Non Comp
SKU A 100 $ 1 $ 100 0 100 $ ‐ $ 100 $ 100
SKU B 100 $ 1 $ 100 0 100 $ ‐ $ 100 $ 100
SKU C 100 $ 1 $ 100 0 100 $ ‐ $ 100 $ 100
SKU D 100 $ 1 $ 100 0 100 $ ‐ $ 100 $ 100
Total 400 $ 400 0 400 $ ‐ $ 400 $ 400
Example PO # 3
Item Units Ordered Unit Cost Invoice Cost OTIF Compliant OTIF Non Compliant OTIF Compliant ($) OTIF Non Compliant ($) Chargeable Non Comp
SKU A 100 $ 1 $ 100 95 5 $ 95 $ 5 $ ‐
SKU B 100 $ 1 $ 100 100 0 $ 100 $ ‐ $ ‐
SKU C 100 $ 1 $ 100 100 0 $ 100 $ ‐ $ ‐
SKU D 100 $ 1 $ 100 95 5 $ 95 $ 5 $ ‐
Total 400 $ 400 390 10 $ 390 $ 10 $ ‐
OTIF Effectiveness Calculation Performance Tier Penalty
Total Invoice Cost $ 1,200 95% 0.0%
OTIF Compliant Cost $ 725 85% 1.5%
OTIF Effectiveness 60.42% < 85% 3.0%
Monthly Penalty Calculation
Total Chargeable Non Comp $ 460
Penalty Tier 3.0%
Monthly Penalty $ 13.80
Includes only lines with OTIF less than 95%
of original order quantity
© 2017 CVS Health Confidential & Proprietary 16Vendor Visibility
• Beginning 7/13, Vendor Portal is updated every Friday with OTIF performance data.
Includes all OTIF Assessments for prior week
• Beginning 7/14, Vendor Portal will push out reporting every Saturday for the previous
week’s assessment to the vendor community. Distributed Via E-mail, by pay vendor number.
July
Sunday Monday Tuesday Wednesday Thursday Friday Saturday
1 2 3 4 5 6 7
8 9 10 11 12 13 14
OA1 UP1 WR1
8 9 10 11 12 13 14
OA2
15 16 17 18 19 20 21
OA2 OA2 OA2 OA2 UP2 WR2
OA – OTIF Assessment UP – Portal Update Date WR – Weekly Report distributed
© 2017 CVS Health Confidential & Proprietary
17Vendor Visibility
• Monthly OTIF Assessments include all purchase orders with receipts for the month.
• Final OTIF Assessment to occur 10 calendar days after month end
• Portal is updated at the end of the following week and reports distributed to vendors
• Note: Webinar to be scheduled for mid July to review the 2 main summary reports.
Sunday Monday Tuesday
July Wednesday Thursday Friday Saturday Sunday Monday
August
Tuesday Wednesday Thursday Friday Saturday
1 2 3 4 5 6 7 1 2 3 4
8 9 10 11 12 13 14 5 6 7 8 9 10 11
FA UP MR
15 16 17 18 19 20 21 12 13 14 15 16 17 18
22 23 24 25 26 27 28 19 20 21 22 23 24 25
LR EP
29 30 31 26 27 28 29 30 31
LR – Last Receipt of Month EP – OTIF Evaluation Period FA – Final OTIF Assessment July
UP – Portal Updated MR – Monthly Vendor Report July
18
© 2017 CVS Health Confidential & ProprietaryAdministration of Program
Deductions Disputes
• Vendor disputes will be
Vendors
managed in the new vendor
portal
• Dispute period is 90 days from
monthly dispute communication
Vendor
• Reversals (if applicable) are
processed every Friday for any
Portal
dispute approved
• Further instruction on disputes Supply
Chain
will be published in the SCP Performance
Team
Guide later this month
© 2017 CVS Health Confidential & Proprietary 19Logging in and Setting up Access
Supply Chain Performance Portal available to suppliers 6/26
Hosted by third party company, ComplianceNetworks
Login Page: https://cvs.compliancenetworks.com
Vendors will receive login credentials via e-mail
Suppliers should consider doing the following from 6/26 to 7/1:
Test access utilizing login credentials
Navigate the system
Review training video and documents
Set up access for new users
One administrator has been assigned for each supplier
© 2017 CVS Health Confidential & Proprietary 20Logging in and Setting up Access – Training Videos/Documents Several training resources are available for users and are accessible through the “Self Help” toolbar located at the top of the screen © 2017 CVS Health Confidential & Proprietary 21
Logging in and Setting up Access –
Training Videos/Documents
Recommended Training Videos:
Request account, log in,
navigate
Research chargebacks
Create and research disputes
Leverage data in grids
© 2017 CVS Health Confidential & Proprietary 22Logging in and Setting up Access –
Setting up Access
The "Manage Users" page enables admin users
to:
• Add users and their associated vendors,
• Enable a user to receive vendor compliance
emails,
• Enable and disable user access to the web
portal, and
• Edit existing users’ contact information.
To access the “Manage Users” page select
"Manage Users" from the "Admin" menu (located
on the left hand toolbar)
© 2017 CVS Health Confidential & Proprietary 23Logging in and Setting up Access – Setting up Access Upon clicking, “Manage Users” in the “Admin” menu, the portal will display the “Manage Users” page with the “Search” area open. • To create a new portal user click the “Add User” button. • The portal will display the “Manage User Detail” screen. © 2017 CVS Health Confidential & Proprietary 24
Logging in and Setting up Access –
Setting up Access
• Enter the user’s details in the “Contact Info” area. The contact name in the “Contact” field and the
user’s email address in the “Email” field are required.
• To associate a vendor to the user click the “Add Vendor” button.
© 2017 CVS Health Confidential & Proprietary 25Logging in and Setting up Access – Setting up Access © 2017 CVS Health Confidential & Proprietary 26
Key Dates/Next Steps
Step Details Timing
Training • Webinars to discuss facilitation of 06/19 & 06/20
SCP Program
Webinar slides published • Made available to CVS Vendor 6/25
Community via
www.cvssuppliers.com
Supply Chain Performance • Made available to CVS Vendor 06/29
User Guide Community via
www.cvssuppliers.com
Program Go-Live • PO’s with 7/1 STA reviewed under 7/01
OTIF Program
First Assessment • OTIF violation summary available 7/13
for supplier viewing and reporting
Additional Vendor • Demonstration of key reports and 7/18
Demonstration screens from vendor portal
© 2017 CVS Health Confidential & Proprietary 27Key Dates/Next Steps Vendor Readiness Checklist Step Timing Log into Vendor Portal once Credentials 06/25 have been provided Ensure all personnel within your organization 06/25 – 07/01 have appropriate access Attend Webinar Demonstration 07/18 © 2017 CVS Health Confidential & Proprietary 28
THANK YOU
Thank you for attending today’s session
Any questions can be addressed to:
SupplyChainPerformance@CVSHealth.com
© 2017 CVS Health Confidential & Proprietary 29You can also read
