On Time In Full (OTIF) is a metric used in the supply chain to measure the effectiveness of deliveries. It is a critical element of efficient inventory management and ensures that customers get the products they need when they need them. As a result, OTIF is an important factor in the success of any business, particularly those in the retail sector. Achieving an OTIF of 100% is the ideal goal, however, due to the many complexities of the supply chain, this is not always achievable. In this blog post, we will explore what OTIF is, why it is important, and how it can be improved. By understanding these concepts, businesses can stay ahead of the game and ensure their delivery systems are running as efficiently and cost-effectively as possible.
What are the expectations of OTIF?
The expectations of OTIF are simple but strict. Here are the two primary components of OTIF, with explanations:
On time
According to OTIF, shipments must arrive on the requested delivery date or at the specified time in order to be considered on time. The definition of “on time” varies from company to company, so suppliers work with the retailers they supply to establish the specifics. This metric’s on-time component gauges how closely a delivery adheres to its scheduled time. Being on time is crucial for many reasons, including that customers can purchase the goods.
Along with being on time, it’s important to avoid arriving too early, as this can have an impact on operations and distribution systems and use up industry capacity. A retailer must find a way to store the extra inventory if a shipment arrives early, which can be expensive. Due to the significance of OTIF for inventory management and order fulfillment, many retailers penalize suppliers who fail to deliver goods both on time and in full. This demonstrates how important OTIF is to a supplier’s ability to keep customers and a revenue stream.
In full
When a delivery is complete, the customer receives the full quantity of the product they ordered. While some retailers don’t mind getting more than they asked for, this could limit their ability to store inventory. Given that they are providing additional products for free, the supplier may also suffer a revenue loss as a result. These factors make choosing the proper batch size crucial for all supply chain participants. By completing the delivery, retailers and customers are guaranteed to receive their order when necessary.
What is OTIF?
The ability of a supplier to deliver shipments on time and in accordance with quantity expectations is known as OTIF. In order to ensure the right amount of products arrive exactly when customers expect them, carriers who adhere to the OTIF standards frequently use real-time insights from software. This exact key performance indicator (KPI), also known as perfect order proficiency, assesses the effectiveness and precision of a company’s supply chain and logistical systems. Its applicable in all industries, but especially in manufacturing. OTIF is essential for suppliers to maintain customer satisfaction and generate income.
The ability of a carrier to deliver OTIF is a critical factor in partnership evaluation by retailers and consumer packaged goods (CPG) businesses. To maintain customer access to products on the shelf and maintain control over their inventory levels, which both have an impact on profitability, retail stores need shipments to arrive on time and in full. Retail customers also expect a broad range of products and an abundance of promotional offers. Together, manufacturers, retailers, and carriers must develop reliable, flexible supply chains to meet the growing demand for precise delivery.
Here are the formulas for the OTIF elements:
Importance of establishing OTIF expectations
Real-time visibility software is frequently used by suppliers to closely monitor OTIF data. By monitoring locations and times, identifying and resolving bottlenecks and other problems, they can gradually raise their score. Establishing OTIF expectations and success at your business is crucial for a number of reasons, including:
Supporting customer satisfaction
A company can demonstrate its ability to keep its promises by having a high OTIF score. Customers anticipate that if it specifies a specific delivery time and quantity, it will be met. Suppliers can increase customer satisfaction and trust by precisely meeting those expectations. Customers are more likely to support companies that provide clear information about what to anticipate and put measures in place to prevent shipment delays. They’re also more likely to do business with a company again and stick with it over time, which can give a carrier a consistent stream of income.
Saving time and money
Setting OTIF expectations is a crucial step in streamlining your entire logistics process, which can help you save time and money. A strong, effective supply chain ensures that no labor or resources are wasted. Additionally, suppliers can avoid late or early financial penalties by delivering on time and in full.
Fostering collaboration
Participants in the supply chain may find it simpler to cooperate with one another if OTIF expectations are clear and OTIF strategies are effective. Trading partners can cooperate effectively in an effective system and prevent disputes over late penalty assessments if everyone is aware of the rules and guidelines for delivery shipments. Retailers, suppliers, carriers, and other companies involved in logistics planning benefit from collaborative relationships.
Solving issues
A supplier would be wise to establish OTIF expectations as this will allow them to recognize and address any issues with their logistics procedures. They can track information on a minute by minute basis if they use a real-time visibility platform, such as the location of a truck or the precise time it arrived at a store. Operators can identify the underlying causes of any issues that cause delays. For instance, they might concern the product itself, warehousing, scheduling appointments, transit times, or drivers.
What You Need to Know About Walmart’s OTIF Initiative
FAQ
What is the meaning of OTIF?
A supply chain metric called on time in full (OTIF) is determined by multiplying fill rate by on time. This perfect OTIF satisfies the perfect order definition when the perfect fill rate and perfect on time are used at the order level.
How is OTIF calculated?
The supply chain industry has not agreed upon a precise formula for the OTIF, but generally speaking, the formula is as follows: The number of deliveries made on time and complete / the total number of deliveries.
Why do we measure OTIF?
The percentage of orders you fill that include everything the customer ordered and arrive at the designated location on time is known as on-time, in-full (OTIF). This metric demonstrates your company’s capacity to keep its commitments and win customers over.
