Logistics professionals use many key performance indicators (KPI) to meet compliance standards, but few are as impactful as on-time in-full (OTIF) delivery. First Call Logistics is proud to use this KPI for our carriers delivering to Walmart. We’re currently sitting at 99% OTIF!
So what is on-time in-full (OTIF) and why does it matter for shippers and carriers?
On-Time In-Full (OTIF) and Its Challenges
On-time in-full (OTIF) is a leading KPI in the logistics industry. As the phrase suggests, it measures a supplier’s ability to deliver a shipment on time at the full amount ordered.
As consumers expect a broader range of products available at any given time, the supply chain becomes more complex. Using on-time in-full as a KPI is a relatively new concept that originated with Walmart in 2017 in response to changing consumer demands.
OTIF quickly was adopted widely to assess the supply chain for purposes of inventory planning and optimization and order fulfillment. Because it incentivizes accurate and timely delivery, OTIF helps retailers avoid losing out on money due to lack of stock or items being otherwise unsellable.
Although it was originally intended to make supply chain management easier for retailers, monitoring OTIF also has the potential to help shippers and carriers improve their processes to their own benefit. Proactive management of the supply chain pays off for everyone in the long run.
On-time in-full presents some challenges to logistics providers. The biggest challenge comes in the form of managing and analyzing data from their carrier base. The data must be consolidated then validated for quality and consistency in order to calculate a score accurately. Adopting technology platforms is crucial to meeting this challenge.
Another challenge is that retailers and manufacturers use different methods to calculate OTIF. Because they are using different metrics, they have different views of the same performance. Recently, more analysts have pushed for a common definition of OTIF across the supply chain to avoid issues proactively.
How to Calculate On-Time In-Full (OTIF)
On-time in-full is calculated in two parts. First, the on-time score is the percentage of time the delivery occurred in the assigned delivery window
On time = (Delivery time) – (Confirmed delivery time)
The in-full score is the percentage of accurate amount of freight delivered.
In full = (Delivered amount) – (Confirmed amount)
The target for both the on-time and in-full scores is zero.
OTIF is calculated by dividing the cases matching the criteria by the total number of cases. The target goal is 100%. Companies may charge OTIF fines for incomplete or off-time deliveries, as explained below. The fines typically are calculated as a percent of the value of each shipment that doesn’t meet OTIF standards. Walmart, for example, fines 3% for shipments that do not meet OTIF guidelines. This may seem small, but it can add up quickly over multiple shipments.
Why OTIF Matters and How to Improve It
On-time in-full delivery matters for everyone in the supply chain, including shippers, carriers, and receivers. Because carriers are penalized for incomplete and off-time delivery, there is more urgency around precise supply chain operations. Executing each stage of the supply chain with such precision necessitated unprecedented accurate insights into every stage of the supply chain.
On-time in-full has become a KPI that retailers use when evaluating partnerships with suppliers. If a supplier is falling behind in OTIF, the retailer may choose to partner with a different supplier.
Logistics teams need to stay on target to retain customers. This means they’ll scrutinize their carriers to ensure they’re meeting delivery times.
The OTIF KPI incentivizes companies to be consistent in their performance. Real-time visibility platforms have become invaluable tools in ensuring that consistency. These platforms keep the process transparent from the beginning to the end of the supply chain. They also help logistics teams identify where delays cause OTIF issues.
While visibility platforms help identify supply chain issues, they also help resolve OTIF fine disputes. These disputes are settled faster when all parties have access to the relevant data.
Some retailers provide routing guides. These continuously updated documents provide information for maintaining shipping standards. Typically, routing guides can be found in a retailer’s supplier network portal. Shippers and carriers should be familiar with retailers’ guides to avoid large OTIF penalties.
One way to improve OTIF is to come up with internal standards, since there is no industry standard. With a combination of real-time visibility, accountability, and collaboration with the supply chain, Tom Kieley argues, companies can improve their bottom line.
OTIF is often viewed as a last mile issue. In other words, poor OTIF is typically pinned on transportation; however, revisiting lead times can significantly improve OTIF. By only focusing on transportation as an OTIF issue, suppliers might miss issues in other stages of the supply chain.
Logistics professionals widely agree that collaboration is key to improving OTIF. Understanding the underlying causes of poor OTIF can help avoid overbuying or paying late-delivery penalties. It also helps receivers avoid overpaying invoices that don’t match final purchase orders.
Third-party logistics (3PL) companies can help shippers improve their OTIF as well. A 3PL will know the ins and outs of big retailers’ routing guides, and it will have the capability to help companies identify issues in their supply chain. At the end of the day, this means shippers, carriers, and retailers are happy—and avoid OTIF fines
Improve Your OTIF Delivery Percentage with First Call Logistics
Need help improving your OTIF percentage? Consider working with First Call Logistics. Well-versed in the challenges of retail delivery, our team will work to create a strategy that ensures your products are delivered on time every time. To learn how you can improve your on-time delivery percentages and strengthen customer relationships, contact our team today!