Do you ship products and orders for your business? Then you probably already know how important your supply chain is. From wondering how to ship wine, how to ship food, or something else, you might be wondering how to improve your supply chain.
You should prioritize improving your supply chain because your business can benefit from a better system. One benefit is increased customer satisfaction. One metric to measure your supply chain efficiency is called OTIF.
OTIF stands for “on-time and in full”. You should try to understand the OTIF meaning as best as you can. Your business and supply chain operations can improve if you increase your OTIF score.
Whether you run a wholesale candy business or a flour distribution business, you need to know the ins and outs of OTIF. Let’s dive into OTIF and how it applies to your business.
OTIF: What Is It?
You may be wondering what exactly OTIF means. Understanding the OTIF meaning is the first step to making your supply chain better.
OTIF stands for “On Time & In Full” and it is a supply chain performance metric. OTIF measures how effective your product delivery is and how well you meet customer demands. Delivering something OTIF means that product delivery took place within the appropriate time frame. It also means the correct amount of product arrived.
Sales metrics and supply chain metrics use OTIF to measure how efficient your business operations are.There are 2 aspects of the supply chain that OTIF measures and these include:
On-Time
The product arriving on time is the first part of OTIF delivery. It’s important to make sure customers receive their order within the time frame you provided them. Achieving the on-time delivery aspect of OTIF means you meet the customers’ delivery time expectations.
In Full
The second part of achieving OTIF is the quantity of the order. It means that the order contains the correct amount of items. It also means that the order arrives in the expected condition.
Key Takeaway: OTIF is a metric to measure the effectiveness of delivering products. OTIF means the order arrives on time and in full.
Importance of OTIF
Good OTIF performance is vital for your business. Your business can have major problems if you have poor OTIF performance.
One impact of your products not arriving on time & in full is a negative customer experience. Late or incomplete deliveries are bad for your business. Customers expect timely and accurate shipping and handling when they place an order. Failing to meet expectations can harm your business.
This can hurt your reputation. You can lose future customers if you don’t regularly meet OTIF expectations. This also gives competitors a chance to take your current (and even future) customers.
There are also increased costs when orders don’t arrive OTIF. Additional costs can include refunds and expedited shipping. Your labor cost will also be higher as you try to fix mistakes. It can end up being more expensive to correct supply chain mistakes.
When your business has high OTIF scores, you can reap some benefits. Customer satisfaction and loyalty can improve when orders consistently arrive OTIF. Consumers appreciate it when their orders arrive when they expect them and how they expect them.
High OTIF also improves efficiency. It means that business is running smoothly and all parts of the supply chain are working. Efficiency can help you reduce costs and increase profit margins.
OTIF Formula
Calculating the OTIF performance of your company is simple. Just plug your data into the formula.
The formula to calculate OTIF performance is:
OTIF% = (Number of Deliveries On Time and In Full / Total Number of Deliveries) x 100
Let’s break down each aspect of this formula.
The first number is the number of successful deliveries. A successful delivery is one that arrives within the specified time window, in the right amount.
The second number is the number of attempted deliveries within the time frame.
One important thing to note about the formula is what “on-time” means. A common way to measure on-time is to use a time window. For example, you could consider deliveries made within 15 minutes of the specified delivery time to be on-time.
Key Factors
Internal factors within your business and supply chain influence your OTIF score. These factors include transportation, order management, and inventory management. Make sure that all of these systems are running smoothly.
Events outside of your control can also impact OTIF performance. Weather conditions, supplier issues, or other events can happen. Many times, there isn’t much you can do to prevent these external factors. You should have backup plans and procedures in place in the event that these external events occur.
How To Improve OTIF
Now, you understand the OTIF meaning and the factors that affect it. You are likely wondering how to improve your OTIF score. You can do a few key things to make your OTIF performance better.
The first thing you can do is implement accurate demand planning. Demand forecasting can help you make sure you are prepared to prepare and deliver your products. It can help you to know how much inventory you should have on hand. Sales forecasting is an important part of improving your OTIF score.
Another strategy is to improve your production schedule. Many factors influence OTIF performance. Your production schedule is one of these factors. Improving your production and planning process can reduce delays.
Another way to improve your OTIF score is by hiring help from outside your company. Working with logistics or supply chain experts can improve your supply chain. Professionals who specialize in improving supply chains can be invaluable. They can take a look at your data and business activities and offer you solutions that can make sure your orders consistently arrive OTIF.
Technology can also help to improve your OTIF scores. Many technology resources are designed to make your business run effectively.
Tracking programs can help you monitor your orders in real time. Order management software can also help maximize efficiency.
Frequently Asked Questions About On Time & In Full
OTIF performance is a useful metric for your business. Understanding your OTIF score can help you improve your business. Whether you’re a new business owner, sales manager, or supply chain coordinator, these frequently asked questions can help you understand OTIF.
How do you calculate your OTIF score?
Calculate your OTIF score using this formula: OTIF% = (Number of Deliveries On Time and In Full / Total Number of Deliveries) x 100. The percentage from this formula shows your performance in meeting customer delivery expectations. You can use your OTIF score to analyze your supply chain and improve your deliveries.
What factors affect OTIF score?
Transportation, inventory levels, weather conditions, and supplier issues impact your OTIF score. Factors inside and outside of your business can affect your OTIF performance.
It’s important to have good procedures in place to help you deal with any negative factors. Make sure you have backup plans for unforeseen circumstances. Traffic, bad weather, or inventory hold-ups can affect your OTIF performance. It’s important to consider factors both at your supply or distribution center and your products’ destination
Why is a high OTIF score important for your business?
Your OTIF performance is important because it can increase your customer satisfaction, cost efficiency, and supplier relations. OTIF should be a priority for your business. There are several benefits to having a high OTIF score. OTIF performance can help you understand how well your business fulfillment is running. Efficient order fulfillment positively impacts your business and reputation.
Also, when you have a good OTIF score, you save money in a few ways. You spend less on correcting mistakes or giving out refunds. High OTIF scores generally mean your deliveries are happening efficiently.