Like any major brick-and-mortar retailer, Target has stringent supply chain compliance policies, including its On Time Fill Rate (OTFR) metrics, its Vendor Compliance Policy, and the new “Perfect Order Program” launching on May 4, 2025. 

These key performance indicators (KPIs) help reduce out-of-stocks, mishaps at its distribution centers, and electronic data interchange (EDI) errors, all of which impact retail suppliers’ revenue. For most of these KPIs, Target charges either a percentage of the cost of goods sold (COGS) on the order or an amount per carton.

Let’s go over Target’s supplier requirements and KPIs.

On Time Fill Rate (OTFR)

Like other retailers’ On Time In Full (OTIF) compliance metrics, Target’s OTFR program ensures that its suppliers fulfill their orders according to the purchase order (PO or EDI 850) in the requested amount of time. These KPIs reduce confusion along the supply chain and properly document and plan shipments.

The KPI is divided into different metrics:

• On Time Release (Collect or We Pay): Release 100% of your POs in ShipIQ (SIQ) within the release window of time, or receive a 1.5% COGS fine on all non-compliant items. You can find this information in SIQ.
• Supplier Performance Adherence (Collect or We Pay): Ship 100% of your shipments on the assigned date and time according to SIQ, or incur a 1.5% COGS fine on all non-compliant items.
• On Time (Collect or We Pay): Ensure that 100% of your shipments are ready for pickup within the assigned timeframe, as indicated by Vendor Ready to Ship (VRS), or pay a 3% COGS fine on all non-compliant items.
• On Time (Prepaid or They Pay): Ensure that the Target DC receives 100% of your shipments within the in-yard delivery window, or suffer a 3% COGS fine for all non-compliant items.
• Fill Rate Original: Ensure you have shipped at least 95% of the items requested on the original EDI 850 (PO). Target measures this metric at the item level, not at the carton or case pack. Target will charge a 3% COGS fine for all non-compliant items.

Summary of OTFR

Target revised the OTFR vendor compliance policy on August 4, 2024. You may see levied fines at a rate of 5% of COGS before then. These fines are inactive, and you won’t see that rate on new orders.

Target’s Perfect Order Program

In February 2025, Target announced a new Vendor Compliance Policy to its suppliers: the “Perfect Order Program.” This program is very similar to an initiative that Walmart launched in 2021, called the Supplier Quality Excellence Program (SQEP). It even refers to issues with ASNs and barcodes as “defects” while striving for “operational excellence.” The Perfect Order Program will go into effect on May 4, 2025, for domestic Target suppliers.

There are three aspects of this program: ASN Availability, ASN accuracy, and physical barcodes. Let’s go over these.

ASN Availability

There is an existing KPI for EDI 856 Advance Ship Notice (ASN) Availability and fines associated with non-compliance. To avoid penalties, ensure you have sent an ASN for 100% of your purchase orders and that they are completely error-free. You must also send these ASNs before the in-yard date and time for the shipment. Otherwise, Target will charge a 3% COGS fine for all items without an EDI 856 or with one with errors. Prior to the first week of May 2025, the fine minimum is $150.

On May 4, 2025 (May wk 1 2025), Target will still require ASNs for 100% of your purchase orders on time, so the goal has not changed. However, the fine has. To keep in line with other retailers and industry standards, Target will begin charging $0.75 per carton instead of 3% COGS. The minimum fine for EDI 856 availability is $100, unless the Target rejects or can’t acknowledge the 856 (i.e., “Not in ‘A’ status”), in which case there is no minimum.

The metric for “Not in ‘A’ Status” states that your ASNs must be error-free and acknowledged by Target by the EDI deadlines. You can find this information in your EDI documentation provided by Target.

Again, there is no minimum chargeback amount for non-acknowledged ASNs, and 100% of your EDI 850s must have an accompanying EDI 856. The metric for ASN Availability ensures that Target receives ASNs for each PO before the in-yard date and time for the delivery. This KPI is part of its OTFR requirements.

To review your metrics, visit the EDI 856 Advance Ship Notice (ASN) Availability Performance Chart in Partners Online (POL). This chart displays the availability percentage visually for ease of use. To align your supply chain compliance, check this dashboard daily.

The chart displays your “defect” reasons as codes. Let’s break these down.

• ASN Missing: Target did not receive any error-free EDI 856 documents for the shipment appointment.

• ASN Late: Target received the EDI 856 after the in-yard date and time for the scheduled truck. Note that there is a one-hour grace period.

• ASN Not in “A” Status: Target was unable to send an acknowledgement for the EDI 856 by the in-yard date and time. Ensure you are properly testing your ASN flows and that you are receiving EDI 997s (Acknowledgement).

The other code you will see on this dashboard is ASN On Time. This code means that Target has received, acknowledged, and accepted your EDI 856 by the in-yard time. That means no fines or chargebacks!

ASN Accuracy

The new program on May 4 adds a need for ASN accuracy. Target splits this metric into item-level and shipment-level. Item-level requirements include accurate vendor case pack information (VCP), while shipment-level requirements involve store ship information (SSP). Target calculates the metric for both by the number of received cartons and charges a flat fee of $0.75 per non-compliant carton with a minimum fine of $100.

The performance goal for ASN Accuracy is 100% of your purchase orders for all shipments. The EDI 856 must also adhere to the ASN Availability requirements, including on-time acknowledgement. 

To review your metrics, visit the ASN Accuracy Performance Dashboard Overview in POL. There are three reports on this dashboard:

• ASN Accuracy – Performance% – 8 Week Trend: This report displays a performance chart over the past eight weeks as a percentage of compliant ASNs. You can click the calendar icon to view older trends, but Target suggests keeping the timeframe to weeks.

• EDI 856 (ASN) Accuracy Reason Code Summary: This report provides an overview of your ASN performance as both a percentage and number of EDI transactions. You can click the calendar icon to view previous weeks.

• EDI 856 (ASN) Accuracy Item and VCP/SSP Defect Report: This report details ASN defects and lets you drill down to the item level. Click the calendar icon to view previous weeks.

The reason code summary and defect report both show ASN Accuracy Error Codes. These codes are:

• No Case Pack: The EDI 856 does not have any case pack information in the LIN segment for the affected items.
• VCP Mismatch: The total vendor case pack number on the EDI 856 does not match the total VCP number on the EDI 850 (PO).
• No SSP: The store ship value in the REF segment on the EDI 856 was null or empty. Typically, this is the bill of lading (BOL) number, manifest number, or invoice number. If there is a value in the REF01, there must be a corresponding value in the REF02.
• SSP Mismatch: The store ship pack information on the EDI 856 does not match the information on the EDI 850. The information on the purchase order must match the ASN.
• Full Case Issue: The number of case packs on the EDI 856 is greater than the total quantity shipped. The ASN shows more items than the BOL or invoice.
• Quantity Issue: There is only one Serial Shipping Container Code (SSCC) carton label, but the item quantity indicates that there should be more SSCC labels.
• Item not Found: The item on the EDI 856 was not on the EDI 850. Target’s system checks the Department Class Item (DPCI) and the barcode for this information.
• UPC or Item Mismatch: The DPCI and the barcode do not match according to Target’s item management system.
• UPC Invalid: The GTIN-14 barcode on the EDI 856 is not valid (e.g., it contains too many or too few numbers, special characters, etc.), or no item in Target’s system has that UPC.

You will also see the reason code Valid, which means that it has no defects and will not incur fines. Good news!

Struggling with the acronyms? Read our Digesting the Supply Chain Alphabet Soup blog post.

Physical Barcodes

Unlike the ASN aspect of the Perfect Order Program, physical barcodes must be accurate for both domestic and import suppliers. The program ensures that all goods received by Target in its DCs are scannable and can quickly and efficiently pass through the Automated Receiving Technology (ART) by the receipt date.

Target, like most retailers, uses RFID technology to scan barcodes and relay UPC information from the DC to its various supply chain systems. Accurate physical barcodes ensure the requested items from the PO are in the boxes Target receives from the supplier.

Target charges a fine of $0.75 for each non-compliant carton with a minimum threshold of $100. If the chargeback is less than $100, then Target will not issue a fine to you. The goal is to have legible, scannable, corresponding barcodes on 100% of all shipped cartons. 

There are two types of barcode defects:

• No Barcode Error: There was no barcode on the carton or label, so Target’s ART could not scan it.

• No Data Error: The scanned barcode does not match the UPC or DPCI listed in Target’s system. 

Domestic Target suppliers will receive fines for both error types. Import Target suppliers will only receive fines for No Barcode Errors. The metric calculation is:

Physical Barcode Accuracy % =
1 – [(No Barcode cartons + No Data cartons) / ART-eligible cartons]

So, if you shipped 1,000 cartons and 200 have no barcodes, and 100 have no data, then your order accuracy is 70%. 

70% = 1 – [(200 + 100) / 1000]

In this scenario, a domestic supplier would pay $225 (300 x $0.75), while an import supplier would pay only $150 (200 x $0.75). Both suppliers are 70% accurate for their barcodes.

Are OTFR Chargebacks Disputable?

OTFR and Vendor Compliance Policy chargebacks are disputable through the Synergy portal. Ensure you have all of your documentation in order so that you can make your case. Of course, you can also hire a service provider to help you with disputes. Contact us for a free opportunity report to see how much revenue you can recover from deductions and chargebacks. We only get paid when you get paid.