OTIF stands for On-Time In-Full, and it is an increasingly important performance metric in the logistics industry. The OTIF score measures how well a company or supply chain is performing in terms of delivering goods to customers on time, and in full. It is an indicator of efficiency and customer satisfaction.
Quick Insights: The Short Version of This Blog
- What is OTIF: Stands for On-Time In-Full, a key metric in logistics indicating efficiency and customer satisfaction.
- OTIF Components: "On-Time" measures timely delivery, while "In-Full" evaluates the accuracy of delivery.
- OTIF Calculation: Expressed as a percentage. Example: AA Logistics had an OTIF score of 86.4% over a month.
- Importance of a High OTIF Score: Leads to customer satisfaction, higher retention rates, supply chain efficiency, improved partner collaboration, and informed decision-making.
- Business Impact: A high OTIF provides a competitive advantage, fosters trust with partners, and indicates streamlined operations.
Here’s what OTIF stands for:
On-Time: This part of the metric focuses on the timely delivery of products. It measures the percentage of orders that are delivered by the agreed-upon or expected delivery date.
In-Full: This component relates to the accuracy of the delivery. It measures the percentage of orders that are delivered with all items requested by the customer, without any missing products or quantities.
How is it calculated?
The OTIF score is expressed as a percentage, calculated by dividing the number of on-time and in-full deliveries by the total number of orders or shipments over a specific period (e.g., monthly, quarterly, or annually).
Here’s an example to illustrate; over the course of a month, AA Logistics processed 500 orders, and they want to calculate their OTIF score for that period.
Out of the 500 orders, 450 were delivered on or before the agreed-upon delivery date (on-time deliveries). However, 50 orders were delivered after the expected delivery date (late deliveries). Out of the 500 orders, 480 were delivered with all items requested (in-full deliveries), while 20 orders had missing or incorrect items (incomplete deliveries).
Calculation of OTIF Score:
On-Time Delivery Percentage = (Number of On-Time Deliveries / Total Orders) x 100
On-Time Delivery Percentage = (450 / 500) x 100 = 90%
In-Full Delivery Percentage = (Number of In-Full Deliveries / Total Orders) x 100
In-Full Delivery Percentage = (480 / 500) x 100 = 96%
OTIF Score Formula = On-Time Delivery Percentage x In-Full Delivery Percentage
OTIF Score = 90% x 96% ≈ 86.4%
An OTIF score of 86.4% indicates that AA Logistics is performing relatively well in meeting their delivery commitments. However, there is still room for improvement. Part 2 of this series will elaborate on some strategies to improve your OTIF score.
Relevance of an OTIF score
A high OTIF score indicates that a company is meeting its delivery commitments consistently and accurately. This can lead to increased customer satisfaction, reduced costs, and improved relationships with customers and partners.
Meanwhile, a low OTIF score suggests that there are issues in the supply chain that need to be addressed, such as inventory management, transportation, or order processing problems.
Here are some reasons why a high OTIF score is good for business:
Customer Satisfaction: Delivering products on time and in full is essential for customer satisfaction. When customers receive their orders as expected and without any missing items, they are more likely to have a positive experience with the company.
Customer Retention: Meeting delivery commitments consistently can lead to higher customer retention rates. Customers and vendors are more likely to remain loyal to a company that consistently delivers on time and without errors. This positive relationship is beneficial in highly competitive markets where customers and partners have several options to choose from.
Supply Chain Efficiency: The OTIF score is a valuable tool for identifying inefficiencies within the supply chain. If a company consistently has a low OTIF score, it indicates potential issues in inventory management, order processing, transportation, or other aspects of the supply chain. Addressing these issues can lead to more streamlined operations.
Incentivise collaboration with Partners: Many companies in the logistics industry work with various partners, including suppliers, manufacturers, carriers, and distributors. A high OTIF score fosters better collaboration and trust among partners. Reliable partners are more likely to work together effectively, leading to smoother supply chain operations.
Data-Driven Decision Making: Tracking the OTIF score provides valuable data to make informed business decisions. Companies can analyze trends over time, identify patterns, and take corrective actions to improve performance. Data-driven decision-making helps optimize logistics operations and ensures resources are allocated effectively.
Competitive Advantage: Maintaining a high OTIF score can provide a competitive advantage in the market. Companies with a reputation for reliable and efficient deliveries are more attractive to customers and partners. It sets them apart from competitors who may struggle with meeting delivery commitments.