On-time In-full: An Essential Supply Chain Metric

Close monitoring of carriers, warehouses, distribution centres, and all other moving parts in the supply chain can help to identify patterns that are currently affecting, or may affect, the OTIF ratings in the future.

On-time In-full (OTIF) is the system which measures a supplier’s ability to deliver shipments according to quantity and schedule expectations. It is a key performance indicator (KPI) in trade and is applicable to all industries, especially in manufacturing.

The concept of OTIF was adopted at scale by Walmart. As the concept improved operational and financial efficiency at Walmart, other companies, and logistics industry adopted it in one way or the other. Walmart started penalising suppliers for both late and early delivery.

Origins of OTIF

The term OTIF has been around for the past 20 years. In 2017, Walmart introduced the concept of OTIF as a KPI for its suppliers, vendors, and logistics service providers. It was done to improve customer satisfaction, track supplier performance, and drive store improvements.

Enterprises that are enforcing the OTIF parameters have good reason to do so; they are under pressure to cut prices and raise wages from consumers and employees, respectively.

How is OTIF Calculated?

Calculation of OTIF is straightforward. It has two components which are On-time and In-full.

On-time In-full = Total deliveries made on time and in full / Total deliveries made X 100

So, let’s say out of 500 orders, 472 were delivered on time and complete. That means your OTIF rate = 472/500 X 100 = 94.40%

Importance of OTIF

A few delayed consignments can send ripple effects through the supply chain. If the disruptions happen often, the result can be destructive for all the stakeholders. Retail stores cannot afford empty shelves and e-commerce companies cannot afford delays or cancelation of orders.

If you are supplier who takes little-to-no action to improve OTIF, it may adversely affect your competitiveness in the market and relationship with customers.

What is a Good OTIF Benchmark?

Ideally companies should strive for 100% OTIF across their operations but in the real world, however, a decent OTF benchmark to aim for is high 80% or even 90% range.

In an ideal world, companies would strive for 100% compliance with on-time in-full across their customer base. Since this is the real world, however, a solid OTIF benchmark to shoot for is the high 80% or even 90% range.

Ways to Improve OTIF Rating

A higher OTIF rating can help suppliers expand the scale and scope of their operations. ways to improve the OTIF ratings are given below:

1. Single point of information: By establishing one point of communication suppliers can notify buyers about any possible or actual delay in shipments.

2. Understand appointment scheduling

3. Increasing familiarity with vendor requirements

4. Aligning production and transport schedules

5. Requesting due dates that are suited to your production schedules

6. Getting access to real-time tracking of shipments

Conclusion: OTIF Improves Collaboration

Strong OTIF strategies lay the foundation for better cooperation among all the supply chain participants. If everyone is on the same page with the rules and regulations for delivery of shipments, they can work together in an efficient system avoid late penalty disputes.

Customers are likely to support enterprises that offer clear data about what to expect and apply methods to prevent delays in consignments. Carriers gain access to regular stream of revenue if they earn the trust of their customers.