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.

Capacity crunch and driver shortage has caused serious issues in many businesses’ supply chains and has increased the demand for drop trailer / drop and hook shipping programs.

What is a drop trailer program?

A drop trailer program is when a carrier brings a tractor to the loading dock and picks up a trailer loaded previously. Drop-and-hook takes the process of trailer shipping one step further. A carrier will arrive with an empty trailer to drop, pick up a loaded trailer, and continue on.

In the US, many shippers are now considering such programs mainly because of the new hours of service rules issued by the Federal Motor Carrier Safety Administration (FMCSA) which are more strictly monitored by the ELD mandate.

Drop trailer services can also have a significant impact on the efficiency of your supply chain. Drop trailer programs help shippers and carriers plan more effectively for deliveries and outbound shipments as it’s important for them to align their schedules.

Without drop trailers, a carrier must arrive within a narrow time window to load or unload the trailer. Depending on how the appointment coordinates with their on-duty schedule, and considering other conditions such as traffic, weather, breakdowns or unexpected events, the driver may be forced to wait for hours, thus missing the appointment altogether.

In these situations, detention fees, late delivery fees, and a negative vendor scorecard are unpleasant results.

Drop Trailer Benefits for Carriers:

• Better trailer planning. You decide when you pick up and drop off.
• No more waiting to pick up a load or be live-loaded.
• Great for time-consuming loads, like floor-loaded freight.
• Higher delivery percentages that are on time.

Drop Trailer Benefits for Shippers:

• A smoother supply chain operation. You can load or unload a trailer at your convenience or when staffing levels are adequate; no more paying overtime to load or unload when a truck is early or late.
• Superior for time-consuming loads.
• Avoid extra driver or truck detention charges.
• Higher on-time delivery percentages.
• Decrease fines from strict retail Must Arrive By Date (MABD) requirements.
• Better retailer relationships with vendor scorecard performance.

On the downside, there may be an initial cost to implement a program. Every trailer that a carrier takes out of over-the-road service is lost revenue, so to recoup it, there will be a cost for a drop trailer. Of course, this cost will pay for itself because there should never be any detention fees.

Drop trailers should not become warehouses; the maximum time a trailer should sit is a week. In most drop trailer programs, trailers turn two or three times a week.

Final Thoughts

There’s a lot of up-front heavy lifting to implement a drop trailer program. Not all carriers supply a drop trailer service therefor finding one that does can be time-consuming. Trailers make carriers money, if one of your carriers doesn’t want to drop a trailer, simply look at using a different one.