The Shipper's Guide to Smarter Freight Cost Management
With the holidays approaching, there’s one thing at the top of every shipper’s wish list: a perfectly executed, 100% on-time in-full (OTIF) delivery rate. Maximizing sales during the upcoming peak season means having products at the warehouse, in the stockroom, or on the retail shelf at the exact moment they’re needed. No exceptions.
On-time, in-full delivery isn’t just a strategic goal or KPI. It’s a huge cost center, and it’s only growing as supply chains are increasingly disrupted. A new report calculates the cost of late or short deliveries at $100 billion annually — and that’s only considering the food and beverage industry. Imagine if the research also considered the losses associated with holiday apparel, seasonal décor, and popular gifts that arrive too late in peak season?
Retailers are driving up penalties to improve shipper compliance, adding to the immediate financial cost. For example, Walmart requires manufacturers to deliver OTIF on 98% of orders, and the retail giant imposes a hefty 3% fine when that target is missed. For other big retailers like Kroger, Target, Costco, and Publix, OTIF thresholds are often above 95%.
But the costs of missed deliveries go well beyond retailer chargebacks, dispute resolution, and freight expediting. In fact, those costs are only about 10% of the $100 billion total. The larger costs — 90% of the total — arise from missed sales revenues, excess inventory, waste, and damage to both retailer and consumer relationships.
Missed deliveries to retailers can mean less favorable shelf placement, promotions, and allocation plans for the foreseeable future. And, when consumers are forced to find a replacement product, they may stick with that choice, abandoning a preferred brand. It’s easy to see why missed deliveries drive billion-dollar losses.
How Can You Improve OTIF? Knowledge Is Power
Industry benchmarks indicate that many manufacturers are achieving 85% to 91% OTIF delivery rates, which is below retailer thresholds. Every day, these manufacturers are losing out by not performing at their highest potential.
How can manufacturers move the OTIF needle? Perhaps the greatest single contributor is visibility. The first step to maximizing delivery success is understanding the root causes behind delivery failures. Are your late deliveries related to a specific carrier? Do you need to get orders out of the warehouse faster? Are your loading practices optimized for speed and accuracy?
Most manufacturers lack the time and internal resources to focus on these bigger-picture questions, especially if they’re already pressed to achieve on-time delivery. That’s why it helps to have a partner like Redwood on board.
The Redwood Advisory team adds incredible value by taking an objective, third-party look at your OTIF rates — and uncovering the hidden factors that are costing your business millions in retailer penalties, missed sales, and long-term relationship damage. By applying analytics and intelligence to your existing data, Redwood can see exactly where your supply chain is underperforming, from slow fulfillment processes to delays at the loading dock and traffic on the highway.
Based on this knowledge, Redwood experts create a road map for addressing the root causes of delivery failure. Covering people, processes, and technology, this plan builds a quantifiable business case and projects how your OTIF rates will improve — so you can move forward with confidence.
Optimizing Execution: Where the Rubber Meets the Road
But Redwood’s value doesn’t end with assessment and strategic planning. As a modern 4PL, Redwood has the comprehensive solutions and services you need to turn your OTIF improvement plan into reality.
If your delivery challenges are rooted in poor carrier performance, Redwood can apply its digital freight brokerage and managed transportation services to address that issue immediately, linking you with more reliable options. Over time, Redwood can help redefine and optimize your carrier mix, using scorecards and metrics to see exactly when and where carrier performance is slipping. And, by installing and integrating advanced TMS technology, Redwood can give you real-time, 24-7 visibility into customer deliveries — so you can manage delivery problems in the moment, not in the rear-view mirror.
If OTIF failures are driven by warehouse inefficiencies, Redwood can help make your distribution center operations faster, more accurate, and more efficient. Did you know Redwood offers a managed warehousing capability? Whether or not you choose to rely on Redwood’s strategically located facilities, you can rest assured that we understand distribution operations at a deep level. Redwood can optimize your own operations by installing and integrating advanced WMS technology, as well as applying best practices in facility design, order management, picking, packing, loading, and other key competencies that drive OTIF.
If your supply chain includes cross-border movements, there’s a good chance that changing regulations, tightened capacity, and customs delays may be slowing your deliveries. Redwood Mexico can address all these challenges. With over 150 bilingual experts, six managed facilities, over 300 carrier partners in Mexico, and end-to-end freight management capabilities, Redwood Mexico keeps customer shipments moving — driving high OTIF rates, no matter how many miles are crossed.
Get on the Road to Better OTIF Performance
It’s easy to think of OTIF as just another supply chain metric. But, in fact, a high OTIF delivery rate is a direct indicator that you’ve built strong, reliable, resilient operations. An OTIF of 95% or higher doesn’t just mean retailer compliance. It translates into a marketplace advantage and a cost control lever that could save your organization millions of dollars.
It’s well worth your time to reach out to Redwood and explore the possibilities of transforming your OTIF results. Imagine turning your OTIF performance from a liability to a significant competitive edge — and from a cost center to a revenue driver. Redwood is the trusted partner that can get you there.
