Supply Chain Performance OTIF Implementation Webinar

©2017 CVS Health and/or one of its affiliates: Confidential & Proprietary

Supply Chain Performance Program – On Time, In Full Implementation

Announcement in January

© 2017 CVS Health Confidential & Proprietary 1

• 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


• 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


• 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:


• 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


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

©2017 CVS Health and/or one of its affiliates: Confidential & Proprietary 6

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


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)


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)



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)


• 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).



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



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



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


• 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


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$


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$


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



8 9 10 11 12 13 14


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

© 2017 CVS Health Confidential & Proprietary18

• 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


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


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


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


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


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)



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.



• 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.

Key Dates/Next Steps


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


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


Thank you for attending today’s session

Any questions can be addressed to:

[email protected]

Supply Chain Performance OTIF Implementation Webinar

Documents

Transcript of Supply Chain Performance OTIF Implementation Webinar