supply chain performance otif implementation webinar
TRANSCRIPT
©2017 CVS Health and/or one of its affiliates: Confidential & Proprietary
Supply Chain Performance Program – On Time, In Full Implementation
Announcement in January
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• 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
Reaffirmation in June
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• 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.
Agenda
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• 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
Note:
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• 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.
Goal of the Supply Chain Performance Program is to Drive Sales and Margin and reduce Supply Chain Costs
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ImprovedIn-Stock
Inventory Reduction
Decrease Lead Time -
Improve F&R Process
Improved Dock
Efficiency
KEY IMPERATIVE:DRIVE OPERATIONAL
EFFICIENCY AND EXCELLENCE IN
EXECUTION
Superior SCP Performance Drives:
Incremental SalesIncremental Sales
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OTIF Objectives and Parameters
On TimeA compliant PO meets the following criteria:
PREPAID (Vendor Managed Freight):PO arrives on or before the STA date
‐OR‐A requested delivery date that falls within a 5 business day compliance window (PO STA date or 4 business days prior).
COLLECT (CVS Managed Freight):Compliant POs meet the following criteria:1) Shipping information is submitted to CVS at least 72 hours prior to available pickup (include business calendar M‐F), and2) Ample transit time is provided to CVS to meet the STA date upon pickup (transit times defined in Routing Guide).
BACKHAUL (CVS Managed Freight): 1) 4 days is provided to CVS to meet STA date upon pickup (measured as days between Available for Pickup date and STA date)
In FullA compliant PO must be filled to 95% of the original order quantity*.
CVS will measure the Fill Rate at the PO SKU level. Each SKU must be filled to 95% of the original order quantity.
METRIC:Quantity of units received in first receipt on PO at a CVS Distribution Center (DC) divided by the original quantity on the PO, SKU or PO Line level.
*Overages of a single item on the PO do not apply towards total units shipped/received on a PO.
‐ 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
Program ObjectiveTo ensure purchase orders are delivered consistently with the Ship‐to‐Arrive date and in accordance with original purchase order quantities.
Administration of the Program –Supply Chain Performance Portal
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CVSCOMPLIANCE NETWORKS (3RD PARTY)
ACCOUNTS PAYABLE SUPPLIERS
Order and Delivery Data sent to CN
Weekly Charges Calculated
Deductions Applied
Disputes Created DisputesResolved
Vendor Performance
Team
• Suppliers• Vendor Performance Team• Vendor Collaboration Team• Inventory Planning• Category Management
OTIF Performance Reporting
Review Data Work together to improve performance
Measure performance improvement
Improved customer service
Administration of OTIF Program -Assessment of Purchase Orders (Timing)
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Sunday Monday Tuesday Wednesday Thursday Friday Saturday1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
July
• Purchase orders are assessed for OTIF 10 calendar days after first receipt
FR
FR – First ReceiptOA – OTIF Assessment
OA
Administration of OTIF Program -Assessment of Purchase Orders (Timing)
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Sunday Monday Tuesday Wednesday Thursday Friday Saturday1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
July• Any receipts occurring within 5 business days after the first receipt are
included in the OTIF assessment for the purchase order
AD*
*First Receipt – 7/2OA – OTIF AssessmentAD – Assessment Day – Receipts recorded locally at the CVS distribution center included in assessmentX – Non Business day (Holiday or Weekend)
OA
AD AD AD
AD
X X
X
Administration of OTIF Program -Application of Qualifying Receipts (On Time)
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• All receipts included in the OTIF assessment are then evaluated to determine whether they meet the on time requirements
PREPAID Vendor Managed Freight
COLLECT CVS Managed Freight
BACKHAUL CVS Managed Freight
PO arrives on or before the STA date, or Based on timing of freight information entered into transportation portal:
Based on timing of freight information entered into transportation portal:
A requested delivery date that falls within a 5 business day compliance window (PO STA date or 4 business days prior).
Shipping information is submitted to CVS at least 72 hours prior to available pickup (include business calendar M-F), and
4 days is provided to CVS to meet STA date upon pickup (measured as days 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).
Administration of OTIF Program -Application of Qualifying Receipts (On Time)
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Example 1: STA Date First Request First App Appnt Second Request Trailer Arrival Date Conclusion7/2/2018 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 Conclusion7/2/2018 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 Conclusion7/2/2018 7/2/2018 7/3/2018 7/5/2018 7/5/2018 Compliant
Administration of OTIF Program -Application of Qualifying Receipts (On Time)
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System Entry Date Days Available for Pickup Days STA Date Conclusion6/18/2018 3 6/22/2018 5 7/2/2018 Compliant
Collect On Time Requirements 1) Shipping information is submitted to CVS at least 72 hours prior to available pickup (include business calendar M-F), and2) Ample transit time is provided to CVS to meet the STA date upon pickup (transit times below).
1) Assume Origin: CA, Destination: TX2) Zone 5 to Zone 3 => Required Transit: 5 days
Administration of OTIF Program -Application of Qualifying Receipts (On Time)
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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 Conclusion6/22/2018 5 7/2/2018 Compliant
Administration of OTIF Program -In Full Assessment
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• 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 On Time ReceiptsItem 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%
Purchase Order Details
Administration of OTIF Program -Performance Based Incentive Program
PerformanceMeasurement
Assess Monthly Performance
Drive vendor performance in critical business metrics (On Time and In Full) and reward vendors providing best in class service with reductions or exemptions in COGs offsets.
Vendor Performance is assessed according to OTIF Effectiveness.
OTIF Effectiveness
Total invoice cost
Invoice cost associated with product received On Time
Assign Performance Tier
OTIF Effectiveness Penalty Offset
At or Above 95% Exempt
Below 95% and at or above 85% 1.5%
Below 85% 3.0%
Calculate Penalty Offsets
Vendor performance is assessed monthly at the PO vendor level.
Apply penalty offset above to portion of any PO deemed non compliant.
Administration of OTIF Program -Monthly Summary Charge Calculation
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Example PO # 1Item 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 # 2Item 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 # 3Item 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$ ‐$
Performance Tier PenaltyTotal Invoice Cost 1,200$ 95% 0.0%OTIF Compliant Cost 725$ 85% 1.5%OTIF Effectiveness 60.42% < 85% 3.0%
Monthly Penalty CalculationTotal Chargeable Non Comp 460$ Penalty Tier 3.0%Monthly Penalty 13.80$
OTIF Effectiveness Calculation
Includes only lines with OTIF less than 95% of original order quantity
Vendor Visibility
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Sunday Monday Tuesday Wednesday Thursday Friday Saturday1 2 3 4 5 6 7
8 9 10 11 12 13 14
Sunday Monday Tuesday Wednesday Thursday Friday Saturday1 2 3 4 5 6 7
8 9 10 11 12 13 14
• 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.
OA – OTIF Assessment UP – Portal Update Date WR – Weekly Report distributed
OA1 UP1
8 9 10 11 12 13 14
15 16 17 18 19 20 21
8 9 10 11 12 13 14
15 16 17 18 19 20 21
OA2
OA2OA2OA2OA2 UP2
JulyJuly
WR1
WR2
Vendor Visibility
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• 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.
LR – Last Receipt of Month EP – OTIF Evaluation Period FA – Final OTIF Assessment JulyUP – Portal Updated MR – Monthly Vendor Report July
Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sunday Monday Tuesday Wednesday Thursday Friday Saturday1 2 3 4 5 6 7 1 2 3 4
8 9 10 11 12 13 14 5 6 7 8 9 10 11
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
29 30 31 26 27 28 29 30 31
July August
LR EP
FA UP MR
Administration of ProgramDeductions Disputes
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Vendor Portal
Vendors
Supply Chain
Performance Team
• Vendor disputes will be managed in the new vendor portal
• Dispute period is 90 days from monthly dispute communication
• Reversals (if applicable) are processed every Friday for any dispute approved
• Further instruction on disputes will be published in the SCP Guide later this month
Logging in and Setting up Access
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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
Logging in and Setting up Access –Training Videos/Documents
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Several training resources are available for users and are accessible through the “Self Help” toolbar located at the top of the screen
Logging in and Setting up Access –Training Videos/Documents
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Recommended Training Videos: Request account, log in,
navigate Research chargebacks Create and research disputes Leverage data in grids
Logging in and Setting up Access –Setting up Access
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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)
Logging in and Setting up Access –Setting up Access
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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.
Logging in and Setting up Access –Setting up Access
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• 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.
Logging in and Setting up Access –Setting up Access
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Key Dates/Next Steps
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Step Details Timing
Training • Webinars to discuss facilitation of SCP Program
06/19 & 06/20
Webinar slides published • Made available to CVS Vendor Community via www.cvssuppliers.com
6/25
Supply Chain Performance User Guide
• Made available to CVS Vendor Community via www.cvssuppliers.com
06/29
Program Go-Live • PO’s with 7/1 STA reviewed under OTIF Program
7/01
First Assessment • OTIF violation summary available for supplier viewing and reporting
7/13
Additional VendorDemonstration
• Demonstration of key reports and screens from vendor portal
7/18
Key Dates/Next StepsVendor Readiness Checklist
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Step Timing
Log into Vendor Portal once Credentials have been provided
06/25
Ensure all personnel within your organization have appropriate access
06/25 – 07/01
Attend Webinar Demonstration 07/18
THANK YOU
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Thank you for attending today’s session
Any questions can be addressed to: