If you work in logistics, then making sure your supply chain deliveries are on-time, in full will be key to your success, writes Paul Fordon, MD of TEPS.
It’s a key metric that should be placed near the top of the list in terms of importance. Yet despite having such an influential role in the long-term success (or failure) of a business, many companies within the supply chain fail to give this metric the full attention that it deserves.
But, how can you drive efficiency, and accuracy whilst saving time in your supply chain with on-time in full strategies? How can you ensure that you’re succeeding in this area? It all comes down to your on-time in full strategies. On this page, we’ll take a close look at OTIF, its benefits, and how you can improve yours.
What is OTIF?
OTIF stands for on time in full, a key metric used to measure efficiency in supply chain companies. An on-time in full delivery is essentially a successful delivery that arrived “on time” and “in full” (i.e., everything that was supposed to arrive did so). Your OTIF rate is the percentage of your total orders that meet this benchmark. Suppliers, logistics companies, and manufacturers can all use OTIF to measure their performance.
It can be difficult to achieve OTIF, especially for companies who have stock brought into ports or store their goods in warehouses, but there are things you can do to improve your OTIF rate.
Benefits of OTIF Strategies
Most companies within the supply chain will benefit from adopting strategies that improve their OTIF percentage. Why? Because there are so many benefits to doing so. The advantages include the following:
• Reducing Costs – A problem with OTIF is usually a result of a shipping problem. By identifying what those problems are, businesses can make changes that help to optimise their shipping process and reduce the need for expensive, expedited shipping services.
• Happier Customers – Customers rightly grow frustrated when they experience problems with their orders. By improving your OTIF percentage, you’ll give your customer satisfaction rates a nudge in the right direction.
• Improve the Company’s, Bottom Line – Late and missed deliveries can be hugely problematic and expensive for companies. At best, the company will need to pay for expedited shipping to fulfil an order. At worst, they may receive a hefty fine or lose a customer altogether. Investing in your OTIF will reduce unnecessary expenses and help to solidify long-term success.
How to calculate OTIF
Understanding your OTIF rate is key to measuring your company’s performance. There’s a simple formula you can use to calculate your rate. First, figure out the total number of deliveries that were made on time and in full. That means the orders that arrived when they were supposed to and contained everything that was supposed to be in the order (i.e., there was nothing missing, and the customer got everything they asked for).
Next, divide that number by the total number of deliveries you made. For example, let’s say you made 820 deliveries on time and in full. Your total deliveries were 950. The formula would be: 820/950 x 100 = 86%. You’ll never get a 100% OTIF rate, but you should aim to be as close to 100% as possible. A score of 85 – 90% is classed as very good.
How to improve OTIF
Even if you have a high OTIF rate, you may want to look at improving the score. There’s no downside to making as many on-time and in-full deliveries as possible. Some handy methods for improving OTIF include:
• Use Smart Warehouse Management Systems – You’ll have problems fulfilling an order if you don’t have items in stock. A smart warehouse management system will allow you to understand what inventory you have in your warehouse at any one time.
• Utilise Real-Time Visibility – Real-time visibility allows companies to keep up to date with the status of an order. By keeping tabs on the location of your shipment in real-time, you’ll be able to identify potential problems that could result in delays. You can also keep your customer up to date.
• Work with Experienced Companies – You’ll depend on other companies to deliver your goods on time and in full. Working with an experienced haulage, storage, and distribution provider will help to reduce the likelihood of issues that could cause a delay or other problems with your shipment.
Ultimately, it’s worth investing in your OTIF rate because of its importance to your business.