One hundred percent OTIF. The perfect order, that’s the goal. Along with many other KPIs, a perfect fulfilment rate is ideal, but the reality is no system is completely and consistently free of issues. To hit better target numbers, what factors do we need to focus on to improve OTIF and get as close to the bullseye as possible?

What is a Good OTIF Metric?

As previously stated, an ideal OTIF report would be 100% successful compliance and performance across your customer base. In the real world of unpredictability and circumstance, 80% to 90% fulfilment rates constitute more realistic results.

OTIF KPI

In the simplest of terms, the key performance indicator (KPI) for an OTIF rating is expressed as a percentage measuring logistics or delivery performance within a supply chain. Specifically, it refers to the ratio of customer orders successfully shipped on or before the requested delivery date and at the correct quantities versus the total number of orders.

The Benefits of Improving OTIF

Beyond the obvious benefits to your customers, having a robust system to measure and track your OTIF results can cut down shipment returns, expedited deliveries, and order refusals.

Not only does this add to your bottom line and increase customer confidence, having access to more predictable stock levels helps avoid missed revenue opportunities due to lack of inventory on hand.

Ways to Improve OTIF

A good strategy towards improving OTIF results must focus on agility, resiliency and the ability to plan for contingency. One method of leveraging agility can be implemented through the use of systems that utilize machine learning technology and emerging artificial intelligence models.

While adopting new technologies may not happen overnight, the ability to diagnose issues early does allow you to react quickly and enact changes.

Along with implementing enhanced technologies, other ways of improving supply chain OTIF performance include:

1. Leverage Real-Time Data

Leveraging real–time data is essential for improving OTIF performance. Partnering with a logistics provider whose technology offers real–time updates on order tracking is a must. This allows you to know exactly what’s happening in-transit and proactively prevent late deliveries if any issues arise.

2. Utilize Logistics Data

Logistics data is a critical tool for understanding overall shipping performance. Segregating out key metrics such as pickup and drop-off accuracies can help you identify weak spots in your supply chain. if drop-off times are consistently late, you can drill down on the underlying cause of problem to help determine a solution.

3. Work with Logistics Experts

Work with a logistics partner who understands the intricacies of your market sector. Better 3PL companies will be up-to-date on the latest technologies and have reliable carrier networks. A logistics partner with a strong record of dependable performance and timely delivery goes a long way to improving your OTIF rate.

4. Know Your Customer Intimately

Knowing the specific requirements of your customer helps mitigate wasted time and effort. Every business has its own culture and way of operating – such as very specific requirements for delivery windows. Assuming every customer operates by the same standard is setting yourself up for failure.

5. Keep Production and Transportation Coordinated

Companies with misaligned production and transportation schedules will have a hard time coordinating with on-time deliveries. Systems must be put in place that keep production expectations in line with transportation deadlines.

6. Understand Must-Arrive-By-Date Scheduling

Buyers set due dates for product deliveries. Meeting the must-arrive-by-date (MABD) consistently is a critical component of delivery. Your buyer will determine a definitive due date for your product to arrive by at their distribution center.

It’s important to understand that while some receiving locations exercise open scheduling, others restrict appointment hours with little to no flexibility.

7. Communicate Clearly with Warehouses

Communicating clearly with your warehouse partners and production managers will help ensure product pick-and-pack is properly coordinated and ready to ship on time. One sure way to generate bad-will is to leave carriers waiting too long in customer pick up or needing to set new appointment times.

8. Optimize Network Configurations

Cutting down on transportation times means optimizing warehouse providers to work with key receiving locations. Organizing your network to better suit preferred customers can keep transportation between facilities more efficient.

9. Add Extra Lead Time

If at all possible, padding your shipping with an extra day or two for contingency can make the difference between a successful and late delivery – especially in seasonally affected areas.

10. Partner with Preferred Carriers

Partnering with preferred carriers with experience in your sector will give your organization the best chance of hitting a customer’s OTIF requirements. These carriers will be familiar more with the nuances of the type of shipping and have a better chance of meeting deadlines.

11. Consider Consolidation Opportunities

By using consolidation or pool distribution, you can improve on-time performance to specific receiving locations and cut costs. Opportunities that unify shipping functions create more a more nimble service and increase capabilities.

12. Renegotiate When it Makes Sense

There are many facets of a business relationship that can be renegotiated, especially when both parties benefit. Over time, it’s not uncommon for demand to ebb and flow, therefor it makes sense to maintain an open conversation based on mutual flexibility.

For example, a couple of key points that could help improve OTIF performance would be things such as requesting new due dates or adjusting order quantities to better suit overall operations. In all cases, it’s best to provide proof with data supported reasoning and clearly defined expectations.

What KPI Factors Affect OTIF?

Factors that affect OTIF can be as simple as weather and seasonality. Other factors include slow shipping speeds,  in-transit damage, outdated order tracking systems, manufacturing lead times, communication systems and of course human error itself.

Overall, there are a multitude of individual facets, factors and KPIs involved in the successful movement of products through the logistics industry:

Any of these factors can have an impact on OTIF scores and therefor, affect the overall shipping experience and by extension, the level of customer satisfaction.

OTIF vs OTD

While similar to OTIF, OTD (On-Time-Delivery) is less specific in that it does not take quantity into consideration. A successful OTD simply means a shipment was received on time whether in part or in whole. Additionally, OTDs typically allow more time for early delivery.

Can OTIF Be Standardized?

Considering the magnitude, scope and breadth of the supply chain industry, creating a catch-all standardized has practical limitations. Although, moving in a direction that increases successful OTIF outcomes is a step in the right direction.

If we use the CPG sector as an example, a McKinsey survey of twenty four major retailers and manufacturers reported, “92 percent agreed that an industry standard for OTIF would create value.”

Logistically speaking, the challenges facing any kind of standardized OTIF rely on a transportation industry that is constantly in a state of development. Therefor transportation analysis is more of a snapshot in time versus an absolute measurable metric.

Furthermore, organizations must define all the variables that go into shipping their products successfully through the supply chain from end-to-end. Meaning taking into consideration factors such as tariffs, regulatory adherences and political environments.

Considering the operational and logistical variables sector to sector and around the globe, standardized OTIF would also require a unification of fragmented systems. Though this may seem like an insurmountable task, there are solutions such as multi-party orchestration platforms that provide intelligence on variables in operations and logistics systems.

What Does OTIF Mean in Logistics?

In terms of logistics, on-time in-full (OTIF) is a supply chain metric used to measure performance. The goal is to consistently deliver “the perfect order” – meaning, the supplier delivers the product within expected delivery windows and in full quantities.

In short, OTIF metrics are not universal. In fact, the term OTIF itself refers to Walmart’s compliance program. Over time many other big-box stores have adopted or manifested similar programs.

As we’ve seen recently, post-COVID supply chain disruptions have been a major issue. Take for example the consumer goods sector, though we are seeing some stabilization, keeping store shelves full on a continuous basis is still a considerable challenge.

Want to better control warehouse, freight, and delivery costs? Having a robust supplier compliance process in place helps to eliminate contention, remove bias and maintain objectivity.

What is Supplier Compliance?

Supplier compliance is a program designed to ensure suppliers conform to a company’s set of standards, specific requirements and at the same time, adhere to local regulations.

Due to the growing number of suppliers and diversification modern businesses have access to, supplier compliance also allows you to level the playing field in terms of what you expect according to your own set of standards and expectations.

Compliance best practices can include anything from making sure your materials are legally and ethically sourced, to ensuring the associated workforce is treated well according to BSCI (Business Social Compliance Initiative) social compliance standards, and compensated properly for their efforts.

What’s the Difference Between Supplier and Vendor Compliance?

Suppliers are typically one of the first links in the supply chain, doing business primarily through B2B relationships. Because they are removed from the retail end of the supply chain, suppliers do business according to compliance regulations and requirements more related to manufacturing.

Vendor compliance on the other hand, is the set of rules that cover a retailer’s requirements when they purchase from a vendor. The retailer then sells to the general public as a function of B2C (Business to Consumer) commerce.

Why is Supplier Compliance Important?

Maintaining a predictable level of performance and deliverables from your suppliers by means of compliance is an asset in your own business’ ability to prosper.

With the world shrinking, or as some would say becoming more flat, suppliers are increasingly becoming more scattered around the world. While suppliers and vendors enjoy enhanced levels of accessibility, communication and collaboration, the situation also carries inherited risks.

A Lack of Compliance Equals More Risk

Due to the increase in exposure to potential problems, the need for supplier compliance and conformance to your company’s needs becomes that much more important.

For instance, materials that show up on your dock with missing data or unfulfilled prerequisite actions can have a serious effect on operations resulting in major problems downstream. Or inconsistent materials can lead to quality control problems and even regulatory issues.

Furthermore, the type of business may have more stringent adherence policies due to the nature of the products being produced. For example, in the pharmaceuticals industry, proper compliance may need to include GMP (Good Manufacturing Practice) certification which: “describes the minimum standard that a medicines manufacturer must meet in their production processes”. Source.

Supplier Compliance and Relationships

Traditionally, supplier relationships have been in the form of intimate alliances and partnerships that can, under certain circumstances, undermine a compliance policy.

Having a robust compliance process in place helps to eliminate contention, remove bias and maintain objectivity. This improves supplier performance and can be qualified through analysis of key metrics and data points.

A well-planned supplier compliance program will lay out consistent goals and parameters. With the help of monitoring KPIs, this helps you standardize internal procedures and improve the cost effectiveness of operations. Perhaps more importantly, it gives you an edge over your competition and increases profits.

What to Include in a Supplier Compliance Policy

The purpose of a supplier compliance policy is to essentially standardize incoming production form outsourced businesses while at the same time minimize risk and liability.

To help control supply chain blind spots, compliance management must develop policies that keep up with supply chain evolution. The ability to retrieve information for audit evidence must be integrated into the company management systems in order to generate timely reports.

Therefor, categorizing supplier information, operations and procedures into discrete elements allows a company to stay on top of supplier performance.

A robust management process involves monitoring and updating supplier metrics set out in a typical policy. For example:

1. Capability Assessment
   • The gathering of information that is specific to the supplier.
   • Verification of supplier information. This data should be instantly retrievable and kept current at all times.
   • Authorized supplier usage. Without sticking to a list of authorized suppliers, companies expose themselves to additional risks. Non-approved suppliers may offer more attractive buy-in price points, but may also not conform to quality control standards required for your business.
2. Supply Contract Management
   • Make sure clear policies and rules are in place so suppliers are fully informed as to what is expected.
   • Formalize your requirements through contracts and agreements. Leave nothing to chance.
   • Include controls and restraints. Make sure suppliers understand your company’s boundaries and processes that need to be followed.
3. Performance Monitoring
   • Accountability. Just because you continually monitor for effectiveness does not remove a supplier from their responsibilities of compliance and performance. Suppliers must not be lulled into complacency.
   • Auditing. While traditional physical audits serve their own purpose, technology can also be used to maximize efficiency and minimize down-time.
   • Measure KPIs. Key performance indicators allow you to measure the pulse of performance. Gather and analyze statistics that show whether desired targets are being achieved or not. These could be percentages that quantify successful delivery times, material quality and consistency or return rates.

Compliance and Automation

As companies evolve, corporate systems become more complex to the point where the cost associated with managing an effective compliance program can become less attractive.

No company likes the idea of manually reading every certificate of analysis (COA) and comparing it to the required specification. It can an impossible task often coming in different formats and sometimes arrive even after the shipment’s been received.

If a company is lagging in development, problem detection and early warning just don’t happen. In worst cases some item problems are detected only after the container has been opened on the plant floor

The solution is to implement software that monitors a supplier compliance according to corporate standards, regulatory and legal responsibilities.

Effective Strategy Through Policy

Of all of the strategies used by companies, supplier compliance is often a critical program used to control costs. A formal, well-defined compliance policy used with every supplier can provide accountability and lower warehouse, freight, and delivery costs. With additional benefits such as increased speed and accuracy, vendors receive better service and higher customer satisfaction.

In general, a good supplier compliance policy will allow vendors to implement advanced supply chain systems. In linear markets, this could be just-in-time inventory, source ticketing and tracking, and advanced shipping notices (ASNs), all of which provide greater efficiency.