On-time-in-full (OTIF) is a supply chain metric that tracks the delivery of goods in a specific period. It indicates the supplier’s ability to enhance customer satisfaction. OTIF improves store operations by calculating the inventory that needs monitoring, storage, and shipping in real-time.
Let’s explore OTIF, including ways to measure it and its benefits in the supply chain industry.
What is On-Time-In-Full(OTIF)?
On-Time-In-Full (OTIF) is a group of performance metrics in supply chain management that evaluates the percentage of orders delivered to customers:
- On-time: The delivery arrives by the agreed-upon deadline.
- In full: The delivery contains the exact quantity and type of items ordered, with no discrepancies or substitutions.
For example, if a customer orders 100 units of a product to be delivered by November 25, an OTIF-compliant delivery would arrive on or before November 25 without any delay.
Why is OTIF Important?
- Improved Customer Satisfaction: Customers value timely and accurate deliveries. Consistently achieving a high OTIF score builds trust and enhances brand reputation.
- Cost Optimisation: Poor OTIF scores lead to penalties, expedited shipping costs, or lost sales. Maintaining OTIF reduces such costs.
- Operational Efficiency: OTIF highlights bottlenecks in supply chain processes, enabling organizations to address inefficiencies.
- Vendor Performance Management: Retailers often use OTIF to evaluate supplier reliability, encouraging consistent performance across the supply chain.
How to Measure Supply Chain Efficiency – On-Time-In-Full
The formula for calculating OTIF is:
OTIF (%)=(Number of OTIF Deliveries/Total Deliveries)×100
To calculate this, follow these steps:
- Identify On-Time Deliveries: Check how many deliveries arrived by the agreed-upon date.
- Count In-Full Deliveries: Determine how many deliveries meet the quantity and quality requirements.
- Combine Both Metrics: Only count deliveries that meet both the “on-time” and “in-full” criteria.
- Divide by Total Deliveries: Calculate the percentage by dividing the OTIF-compliant deliveries by the total number of deliveries.
For instance, if out of 200 deliveries, 160 were both on time and in full, your OTIF score would be:
On-Time-In-Full (%) = (160/200)×100 = 80%
Challenges in Achieving On-Time-In-Full
Managing a globalised supply chain network isn’t easy. It’s challenging due to a complex interplay of various factors across the supply chain. Here’s why it is tough:
1) Demand Fluctuations
Unpredictable customer demands can disrupt production schedules and delivery timelines.
2) Transportation Issues
Delays due to traffic, weather, or logistical inefficiencies impact on-time deliveries.
3) Inventory Shortages
Stockouts lead to partial deliveries, reducing the “in-full” component of OTIF.
4) Supplier Errors
Inaccurate supplier shipments can result in missing items or delayed production.
5) Complex Supply Chains
Globalised operations often involve multiple suppliers, increasing the risk of delays or errors.
How to Improve On-Time-In-Full in Your Supply Chain
Here are the 6 ways to improve the on-time-in-full supply chain score:
- Enhance Forecast Accuracy: Use advanced analytics and demand forecasting tools to predict customer needs and adjust inventory levels accordingly.
- Strengthen Supplier Relationships: Collaborate with suppliers to ensure they understand your OTIF expectations and align their processes accordingly.
- Implement Robust Inventory Management: Utilise inventory management systems to monitor stock levels and avoid shortages.
- Optimise Transportation: Invest in efficient logistics solutions and monitor delivery performance to minimise delays.
- Leverage Technology: Use supply chain management software to track shipments in real time and address issues proactively.
- Employee Training: Train your workforce on OTIF goals and processes to ensure consistent compliance.
Benefits of Maintaining a High OTIF Score
Having a high OTIF score sets you up for long-term success. Here are the potential benefits of the On-Time-In-Full inventory metric.
1) Increased Customer Loyalty
When businesses consistently meet customer expectations for on-time and in-full deliveries, they build trust and reliability, key factors in fostering customer loyalty. Customers are more likely to return to businesses that have proven they can deliver on their promises. This reliability enhances the overall customer experience, making them feel valued and more inclined to engage in repeat business.
2) Stronger Retailer Relationships
Retailers rely on their suppliers to maintain efficient and reliable supply chains. Suppliers with high OTIF scores are often rewarded with preferred partnerships, increased orders, and better shelf placement. A reputation for being a dependable vendor helps build long-term, mutually beneficial relationships with retailers, leading to better business terms and even priority treatment during stock shortages or high-demand periods.
3) Reduced Costs
When businesses meet their OTIF targets, they reduce the risk of incurring penalties, chargebacks, or the need for expedited shipping to meet deadlines. These penalties can significantly affect the bottom line, so ensuring on-time and complete deliveries can save money and avoid unnecessary costs. By optimising logistics and production processes to meet OTIF standards, companies can also lower operational inefficiencies and streamline their supply chains, further reducing costs.
4) Improved Operational Efficiency
Achieving high OTIF scores forces businesses to refine their internal processes, from inventory management to production schedules and logistics planning. This results in a more efficient and streamlined operation. By constantly improving processes to meet OTIF requirements, companies can reduce waste, optimise resource utilisation, and improve workforce productivity, leading to better overall performance.
OTIF and Industry Trends
Here are the latest supply chain efficiency measures to improve your business operations.
- Automation: Technologies like robotics and IoT help improve inventory accuracy and streamline deliveries, boosting on-time-in-full.
- Data-Driven Decisions: Predictive analytics tools provide insights into potential delays, allowing companies to take preventive measures.
- Sustainability: Efficient OTIF processes reduce waste and emissions, aligning with environmental goals.
- Real-Time Tracking: GPS and blockchain technologies ensure transparency and enable proactive issue resolution.
Common Misconceptions About OTIF
- It’s Only About Speed: OTIF measures accuracy as well as speed. A delivery isn’t OTIF-compliant if it’s on time but incomplete.
- It Only Benefits Customers: While OTIF prioritises customer satisfaction, it also benefits suppliers and retailers by reducing costs and improving efficiency.
FAQs – On-Time-In-Full (OTIF)
What is the difference between OTIF and DIFOT?
OTIF (On Time In Full) focuses on timely and complete deliveries, while DIFOT (Delivery In Full, On Time) is similar but emphasises the retailer’s perspective on order fulfilment.
How often should OTIF be measured?
OTIF should be measured consistently, ideally daily or weekly, depending on the volume and complexity of your supply chain.
What industries use OTIF?
OTIF is widely used across industries like retail, manufacturing, logistics, and e-commerce to evaluate supply chain performance.
Can a supply chain be both efficient and responsive?
It is possible to make your supply chain network agile, responsive, and efficient through technology and modern optimisation techniques.
Can technology improve OTIF?
Yes, technologies like warehouse management systems (WMS), transportation management systems (TMS), and predictive analytics significantly improve OTIF performance by reducing errors and delays.
How does OTIF impact supplier performance evaluations?
Retailers and manufacturers often use OTIF as a critical performance metric for suppliers. Consistently high OTIF scores indicate reliability and efficiency, while poor scores may lead to penalties, reduced orders, or contract termination.
What are the common reasons for low OTIF scores?
Inventory shortages, inaccurate forecasting, transportation delays, production issues, or miscommunication between supply chain stakeholders cause low OTIF scores.
Can OTIF be used for internal operations, or is it only customer-facing?
While OTIF is primarily customer-focused, it is also valuable for evaluating internal operations. It helps identify inefficiencies in procurement, manufacturing, or distribution processes, ensuring smoother internal workflows.
Conclusion
Having the right stock at the right time matters the most for global businesses. On-time-in-full is a healthy metric to check stock availability throughout the year. Once you optimize your supply chain and leverage technology to improve delivery routes, managing customer orders becomes easy. Need further assistance in inventory management? Reach out to Qodenext for tailored, hassle-free guidance.
