OTIF is the performance metric that holds the mirror to your business’s operational efficiency. It is not just a fanciful buzzword but a metric that’s rapidly establishing itself as a critical KPI in supply chain management.
Ignoring OTIF can lead to costly fines- maybe seven or even eight-figure, especially for product-focused companies operating within food, beverage, and consumer packaged goods verticals. Therefore, as an eCommerce business, you should understand the pivotal role of on-time, in-full KPI for overall success and a streamlined supply chain.
In this blog, we’ll discuss the meaning of OTIF and how to calculate it. Further down the line, you’ll also learn how it impacts your business performance and some tips for improving OTIF.
What is OTIF and What it Stands for in Supply Chain?
OTIF, known as ‘On-Time In-Full’, is a KPI that measures the performance of a supply chain model by tracking if an order is delivered in its entirety (In-Full) and within the scheduled delivery window (On-Time).
The crux of the matter is – did you deliver what was expected and when it was expected?
Every business would strive for a 100% OTIF score, meaning all deliveries are on time and complete. However, a score of 95% or above is generally considered an excellent benchmark. This figure signifies that 95 out of 100 orders were delivered as promised, on time, and in full.
Understanding OTIF in the context of the supply chain is similar to appreciating the seamlessness of logistics in supply chain management. Each note – or, in this case, each delivery – plays a vital role in creating performance. If a delivery is late or incomplete, it’s a missed note, disrupting the flow and resulting in customer dissatisfaction.
How to Calculate OTIF?
Calculating OTIF might seem like a complex mathematical undertaking, but in reality, it boils down to a simple formula.
The OTIF calculation involves dividing the number of orders delivered on time and in full by the total number of orders, then multiplying the result by 100 to get a percentage.
This could be visually represented as:
OTIF (%) = (Number of On-Time In-Full Orders / Total Number of Orders) x 100
Putting it into an example, let’s say you shipped 800 orders this month; out of those, 720 were delivered on time and in full. Your OTIF rate would then be:
OTIF (%) = (720 / 800) x 100 = 90%
This signifies that you delivered 90% of your orders without hitches, a strong OTIF score in many industries.
Perishable goods might require a higher OTIF score due to the time-sensitive nature of these products. Similarly, high-demand or high-value product lines may set a higher benchmark to ensure customer satisfaction and loyalty.
Armed with the knowledge of how to calculate your OTIF score, let’s see how eCommerce businesses utilize this KPI to measure performance.
How the OTIF KPI is used to measure performance in eCommerce
The Role of OTIF in eCommerce Businesses
With its dual emphasis on punctuality and completeness, OTIF provides a clear barometer of supply chain resilience. From sourcing in the supply chain to warehousing, and shipping to customer service, an impressive OTIF score suggests that all components of the eCommerce ecosystem are performing seamlessly.
Good OTIF Score Improves Customer Satisfaction
The impact of OTIF on customer satisfaction cannot be understated. Simply put, when customers receive their orders on time and just as they want, they are more likely to have a positive shopping experience.
Indeed, research has shown a strong correlation between on-time, complete deliveries and high customer reviews/ratings.
OTIF and its Influence on Shipping Experiences
OTIF’s reach also extends to shipping experiences. A consistently high OTIF score indicates an accurate, fast, and reliable shipping process – qualities that customers value highly in their online shopping experiences.
Role of OTIF in Warehousing and Storage
OTIF is an equally valuable tool in warehouse management. By delivering the correct orders at the right time, OTIF can drive warehouse operations toward maximum efficiency. It encourages practices such as accurate inventory tracking and proactive demand forecasting, helping to prevent stockouts and overstocks.
OTIF’s Impact on Procurement Processes
OTIF offers insights into supplier performance, contract compliance, and order lead times. A high OTIF score from a supplier is a reassuring sign of reliability and contractual adherence, while frequent OTIF failures may indicate the need for supplier evaluations or even changes.
Moreover, tracking OTIF can highlight issues with order lead times, enabling procurement teams to refine their schedules, negotiate better terms, or seek out more reliable suppliers as needed.
Tips for Improving OTIF Performance
Improvement Strategies and Tools
Understanding and implementing the right strategies and tools can boost OTIF scores dramatically.
- A robust warehouse management system (WMS), for instance, can streamline your delivery processes. You can optimize order picking, packing, and shipping by leveraging WMS’s capabilities.
- In our fast-paced business environment, having access to and making decisions based on real-time data can make all the difference. This approach enables swift resolution of issues, thus enhancing OTIF performance.
- Distributing inventory across multiple warehouse locations allows for faster and more efficient delivery. It brings products closer to customers, significantly reducing delivery times and improving OTIF scores.
Leveraging Automation for OTIF Improvement
Automation has been a game-changer in enhancing OTIF performance. By automating repetitive tasks and processes, businesses can minimise human error and increase efficiency. For example, automated sorting systems have helped Amazon achieve impressive OTIF scores, setting new standards in the eCommerce industry.
Implementing Order Tracking Software
Order tracking software significantly improves the visibility and accuracy of the delivery process. It allows businesses and customers to track shipments in real-time, ensuring transparency. By identifying potential delays early, businesses can take proactive measures to mitigate issues, thereby maintaining high OTIF scores.
Optimising Order Fulfillment Processes
Continuous optimization of order fulfilment processes is key to maintaining and improving OTIF performance. This might involve refining picking and packing strategies, improving warehouse layouts, or enhancing carrier relationships. It’s vital to review these processes regularly, make data-driven decisions, and implement changes to improve OTIF scores consistently.
Role of Third-Party Logistics Aggregators
Third-party logistics aggregators, like NimbusPost, can bring their expertise to the table, thereby enhancing OTIF scores. Logistics aggregators specialise in managing various aspects of logistics, from warehousing to transportation, which allows businesses to focus on their core competencies.
By outsourcing logistics to experienced providers, companies can benefit from their operational efficiencies and expertise.
Conclusion
OTIF is not just about getting the right product at the right time. It is also about building strong relationships with trading partners.
While now you know nearly everything, it’s important to note that OTIF is not a set-it-and-forget-it KPI. Rather, it requires continuous monitoring and tackling challenges head-on, whether it’s supply chain complexity, collaboration issues, or ERP limitations.
Indeed, maintaining high OTIF performance can feel like balancing on a tightrope. But, as we’ve seen, the benefits – cost savings, customer loyalty, and enhanced market positioning – are truly rewarding.
FAQs
What does OTIF mean in procurement?
When a procurement department aims to achieve a high OTIF rate, it means they strive to ensure that the goods or materials are delivered to the recipient within the specified timeframe and in the exact quantity requested, without any shortages or discrepancies.
What is a good OTIF rate?
A good OTIF (On Time In Full) rate is typically around 95% or higher.
What is the difference between OTD and OTIF?
OTIF (On-Time In-Full) is a comprehensive metric considering the timeliness and completeness of order. It measures whether a delivery was made on the scheduled time and if the order was delivered in its entirety.
On the other hand, OTD (On-Time Delivery) focuses solely on the timeliness aspect, assessing if the delivery was made within the agreed time frame.
What are the benefits of OTIF?
- OTIF ensures that customers receive their orders on time and in the right quantity, boosting satisfaction and loyalty.
- Tracking OTIF encourages supply chain optimization, leading to more efficient operations and reduced waste.
- Accurate and on-time deliveries enable better inventory control, preventing stockouts or overstocking.
- Consistent OTIF performance can build trust between suppliers and businesses, leading to stronger partnerships.
- Regularly meeting OTIF standards helps predict demand and supply more accurately, aiding in efficient planning.
What is the difference between OTIF and DIFOT?
OTIF (On-Time In-Full) focuses on the sender’s perspective, measuring how often orders are shipped out completely and on time from the supplier or manufacturer’s side.
On the other hand, DIFOT (Delivered In-Full, On-Time) takes on the customer’s perspective, quantifying how frequently they receive what they want and when they want it.
