Managing a supply chain can be a complex undertaking, involving a variety of interdependent processes and stakeholders. Supply chains in the retail industry tend to be more complex due to short timelines, low margins, fragmented channels, limited space, huge product variations, and shifting consumer demand, among several other reasons.
Today, many top retail companies like Amazon, Walmart, and Target have adopted powerful mechanisms to control incoming goods and inventory. They have simplified and streamlined logistics processes and enabled greater supply chain visibility. One of the most popular mechanisms of streamlining logistics processes is by introducing a concept called Must Arrive By Date.
Must Arrive By Date (MABD) refers to a window of days that goods are due to a distribution center or warehouse. In other words, it’s a strict delivery window (typically given as a date including three previous days) and is designed to enable a more streamlined distribution process.
Suppliers that don’t supply goods within the MABD window are typically charged 3% of the cost of goods. Therefore, it’s an incredibly effective strategy for enabling a well-balanced supply chain for all stakeholders.
In essence, it enables retailers to receive items when they’re excepted, reducing inventory holding costs. Similarly, it prompts suppliers to manage their distribution processes better.
In this article, we’ll dive deeper into MABD logistics, explaining how it works, the benefits of MABD compliance, and the drawbacks of non-compliance. We’ll also provide a simple guide for retailers looking to achieve Must Arrive By Date compliance.
The Logistics of MABD
Over the last few decades, the retail industry has undergone a remarkable transformation in terms of process efficiency, channel management, logistics technologies, and distribution speed.
Shifting from receiving goods as soon as suppliers had them ready to a stricter delivery window allowed retailers to manage their warehousing and distribution processes more efficiently.
Since adopting the Must Arrive By Date concept, larger retailers imposed compliance mechanisms with their suppliers to optimize scheduling, reduce inventory management costs, and streamline the overall supply chain processes.
Before MABD became the industry standard for retailers, suppliers delivered cargo according to their shipping schedules. As a result, retailers had to procure sufficient space and ground personnel to store and manage goods.
The Industry Standard MABD Window
As mentioned earlier, the MABD Window is a strict delivery timeframe for when a minimum of 90% of a shipment must arrive at a retailer’s warehouse or distribution facility.
Key Takeaway: The Must Arrive By Date indicates the day of the arrival plus three previous days. For example, if the Must Arrive By Date is indicated as February 19, at least 90% of the cargo must arrive at the warehouse on February 16, 17, 18, o 19 (there is no grace period for late deliveries).
Moreover, all of the goods that arrive must be secured and undamaged. Most retailers don’t offer any flexibility regarding delivery deadlines to maximize availability and minimize delivery disruptions. A failure to comply with the Must Arrive By Date required vendors to pay a 3% fee (based on the costs of the goods).
What Type of Companies Impose MABD Compliance?
MABD compliance is typically imposed by big-box retailers with a national or global presence, including Walmart, Amazon, Target, Costco, Walgreens, and similar companies.
These companies have huge overhead costs that include warehousing, marketing, security, distribution, insurance, payroll, and more.
Benefits of MABD Compliance for Retailers
Maintaining MABD compliance is crucial for most big-box retailers like Walmart, Target, Costco, and Amazon, as it enables them to streamline their inventory management and reduce their goods holding and carrying costs.
Here’s a detailed guide on the benefits that retailers enjoy, when their suppliers adhere to their MABD requirements:
- Improved Inbound Scheduling – A fixed delivery window enables retailers to project space and labor requirements to facilitate inbound scheduling. In other words, they are able to predict more accurately when the goods are going to arrive at their facilities and also know how much shipment will arrive (>90%).
- Reduced Inventory Holding Cost – Since suppliers are required to deliver goods within the MABD window to prevent late fees, retailers can cycle through their inventory more effectively and reduce their warehouse space requirements since they hold fewer inventories at any given time and also have a more accurate delivery schedule.
- Increased Vendor Compliance – With MABD compliance, retailers can establish greater control and drive standardization in their logistics ecosystem since all vendors are required to adhere to the same policies.
- Reduced Inventory & Space Requirements – With a rapid inventory cycle, retailers can benefit from the cost saved in procuring large warehouse spaces and use the capital to invest in other aspects of their business, including marketing, security, and more.
Drawbacks of Supplier Non-Compliance
Suppliers and vendors who service big-box retailers are required to comply strictly. Failing to ensure compliance can result in various implications, including the following:
- Negative Standing – Due to the immense competition in the retail industry, the last thing any supplier wants is to be blacklisted and lose any current or future business. In other words, suppliers and vendors have to operate at a greater risk of reputational and financial damage if they build any negative standing with retailers.
- Financial Penalties – As mentioned earlier, failure to adhere to MABD compliance policies can result in a fee that is typically equivalent to about 3% of the cargo value. Recurring delays can result in contract termination and more legal repercussions.
- Downgraded Priority – If a supplier becomes non-compliant, retailers may opt for their competitors and which couple be harmful to the supplier’s reputation. A downgrade in priority typically means less business for them and reduced revenue.
How Suppliers Can Achieve MABD Compliance
MABD fees can be avoided by implementing actionable strategies for maintaining compliance. Below, we’ve elaborated on some key areas to focus on.
Do Due Diligence
One of the best ways suppliers can maintain MABD compliance is by doing their due diligence proactively to learn about the scope of their agreement before signing a contract with a big-box retailer. As a supplier, you must understand the following:
- Requirements for MABD (terms and conditions, window, penalties, etc.)
- Order Requirements
- Stock movement and sales volume
- Store locations
- And other miscellaneous details, such as payment terms, etc.
Furthermore, you should always cross-check your capabilities and be 100% sure you can fulfill the delivery requirements.
Careful Vendor Selection
Suppliers need to select trucking companies that can comply with their customer’s Must Arrive By Date requirements. Proper carrier selection is one of the most important prerequisites of streamlined logistics operations.
Remember, a supplier’s failure to adhere to delivery requirements will affect your service and the retailer’s operations. Therefore, as a supplier, you need to check and validate carriers based on their:
- Fleet size & type
- Number of trailers
- Number of drivers
- Experience in servicing similar retailers
Suppliers who have their own fleet of trucks have more control over their deliveries because they are not dependent on third-party carriers for transportation. This allows them to set their own schedules, choose the most efficient routes, and ensure that their products are delivered within the MABD window.
Conduct Regular Operational Planning
Suppliers must have sufficient on-ground coordinators to work closely with trucking dispatchers to ensure timely deliveries. Moreover, they need to adopt modern logistics solutions, such as ERP systems to keep track the orders from their retailers, Transport Management Systems (TMSs) for live tracking, deliveries, and other relevant details.
Suppliers need to have contingencies in place to address unexpected issues. Retailers understand that delays and disruptions are an unfortunate reality of the trade.
However, retailers who improse MABD compliance expect suppliers to have proper backup solutions and effective communication strategies to resolve issues and minimize disruptions.
Finally, suppliers need to open an active communication channel to keep retailers informed at all times and share details related to their shipments. Effective communication also involves proactively informing retailers about possible delays to prevent MABD non-compliance penalties.
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Co-Founder & Writer
About the Author
Andrew is a multi-business owner with over 12 years of experience in the fields of logistics, trucking, manufacturing, operations, training, and education.
Being the co-founder of freightcourse has given him the ability to pursue his desire to educate others on manufacturing and supply chain topics.