Want to Improve Your OTIF Performance? This is How You Do It
On-Time, In-Full (OTIF) sounds like it should be a simple, straightforward KPI to explain, right? (It honestly is.)
But we are willing to bet that if you ask a few different supply chain industry professionals to define OTIF, you’ll more than likely get a lot of nuanced answers. This isn’t because explaining it is difficult, see:
On-Time, In-Full is a Key Performance Indicator (KPI) that essentially measures the accuracy, speed, and ability for a company to fulfill orders in quantities large or small that are requested by the customer.
Obviously, there is a lot to be measured in order for this type of KPI to give a truly accurate view of how well a company is doing in these areas. And this is one thing that all of those supply chain industry professionals you asked for a definition can and likely will agree on: OTIF encompasses a lot of different things and it looks different for every company.
Another thing that they will agree on is that there does indeed exist a few core items that every company’s OTIF rates can benefit from in some way. These are simple concepts but they are concepts that are equally crucial to the success of any company trying to improve upon its ability to consistently deliver the goods its customers want on time, every time, and at a reasonable speed.
In this article, we’ll take a look at some ways to tackle the issue of low OTIF rates so that businesses can adapt and thrive moving forward.
Because of the varied OTIF definitions employed in the supply chain, confusion, frustration, and anger are the norm when your OTIF rate falls because you are left to scramble to pick up the pieces of a rather large and multi-faceted process. Again, no matter how this process looks for a company, the thing to remember is that it generally encompasses quite a few various processes along the way and they all play into this data set in one way or another.
So, your order was correctly filled, it was on time, and you successfully played your part in the steps of the order fulfillment process. So why is your rate still low and your business suffering?
It’s likely because another part of the supply chain with which you are partnering has a slightly different OTIF definition that you are unaware of. If you communicate with the said company in a respectful manner and fully explain how you feel your order fulfillment process should be considered OTIF by your definition, one of two things will happen:
- They’ll agree with you, and change their OTIF rate definition.
- They’ll disagree with you and explain that they are sticking with their own OTIF rate definition.
Either way, you each now know where the other stands and that is fine. Not all areas in the supply chain can even be measured the same way, so this is where transparency and communication across the entire supply chain, from pulling and packing right down to the last mile, come into play. Each department can measure and record their data as they need to, but if it is useful further down the line, then there should be a clear line of communication to give the next department a heads up to potential disruption, delay or any other issue so they can more properly prepare.
Consider Companies’ Inventory Management Strategies
It should be obvious that orders arriving late would not be considered “on-time” by anyone’s standard. However, in some instances, shipments that arrive early could also be penalized by companies that are trying to minimize their stored inventory.
If you are shipping to a company that uses JIT rather than JIC for its inventory management strategy, you could run into problems of fines and lower OTIF rates. For example, companies that are trying to minimize their inventory with a JIT strategy will not be happy if your shipment arrives earlier than agreed upon and they have to figure out what to do with the extra items that they don’t have space for.
For a real-life example of a JIT inventory management strategy, you need to look no further than the largest retailer in the world, Walmart. Walmart demands an OTIF rating of 98% or higher from all suppliers. Delivery timeframes are assigned to Walmart’s suppliers and if deliveries come early, late, or are not in full, these suppliers can face backlash in terms of monetary penalties and a lower OTIF. This, in turn, can lead to suppliers’ products being removed from the shelves, leaving these companies in a tight spot.
In some rare situations, such as a global pandemic, Walmart and other retailers will be understanding and will temporarily relax their OTIF guidelines. However, these companies have schedules to keep and shelves to stock, so their leniency will only go so far.
The bottom line: understand your retailers’ inventory management strategies and plan your deliveries accordingly.
Streamline your Operations
If you are finding yourself with a consistently low OTIF rating, it’s important to take a step back and look at how you are running your business. Consider the following options for improving your business operations and, in turn, your OTIF rate:
Implement the Newest Technology
One of the best ways to stay on top of any issues that develop in a company is effectively automating processes where you are able. Using the best and latest technology will help to improve your OTIF score as well as ensuring that you sustain your supply chain advantage.
Work with Excellent Logistics Providers
Good logistics professionals are invaluable in helping you solve the issues related to a low OTIF rating. If you’re finding that your 3PL provider seems to be the weak link in your operations, it may be time to look elsewhere.
Compare Your “On-Time” Score with Your “In-Full” Score
At the beginning of this article, we discussed the confusion surrounding OTIF due to varied definitions of the term throughout businesses. But regardless of how it is specifically defined by a company, it is made up of two components: “on-time” and “in-full”. You may find that your deliveries have been consistently on time, but you may have struggled to deliver orders in full. Therefore, it may be a wise decision to sacrifice your high “on-time” score by waiting a few extra days in order to ensure that the delivery is “in full”. This decision will have to be decided on a case-by-case basis as every company and every situation is different.