OTIF Supply Chain

What is OTIF in Supply Chain? 

On-time, in-full (OTIF) is a key performance indicator (KPI) used in supply chain management to measure the efficiency and reliability of the supply chain process. It evaluates whether deliveries are made on time (OT) and in full (IF), meaning that all the ordered items are delivered in the correct quantities and by the promised date.

It measures a supplier’s ability to have goods delivered to their distribution centers, often via freight transport, on time and at the full quantities ordered. OTIF shows the supplier’s ability to deliver on its promise and build trust with buyers. In theory, OTIF should ideally align with the objectives of retailers and manufacturers, but in practice, there is no standard definition. This means that different supply chain participants might interpret the metric in different ways, sometimes causing confusion.

Key Components of OTIF:

1. On-Time (OT):
   • Measures the timeliness of deliveries.
   • Evaluates if goods arrive at the customer’s location within the agreed-upon delivery window.
2. In-Full (IF):
   • Assesses the completeness of deliveries.
   • Ensures that the exact quantity of products ordered is delivered without shortages or excesses.

Importance of OTIF in Supply Chain:

1. Customer satisfaction:
   • Ensures that customers receive their orders when they expect them and in the correct quantities, which enhances trust and satisfaction.
2. Operational efficiency:
   • Helps identify and address inefficiencies in the supply chain, leading to improved processes and cost savings.
3. Performance measurement:
   • Provides a clear metric for assessing the performance of suppliers and logistics partners.
4. Inventory management:
   • Helps maintain optimal inventory levels by ensuring that stock is replenished accurately and timely.
5. Competitive advantage:
   • Companies with high OTIF scores can differentiate themselves in the market by providing reliable and consistent delivery services.

Improving OTIF:

1. Accurate demand forecasting:
   • Using advanced analytics and forecasting tools to predict customer demand accurately.
2. Efficient inventory management:
   • Implementing inventory management systems to keep track of stock levels and ensure timely replenishment.
3. Supplier collaboration:
   • Working closely with suppliers to ensure they understand and can meet delivery expectations.
4. Logistics optimization:
   • Streamlining logistics operations, such as transportation and warehousing, to minimize delays and errors.
5. Technology integration:
   • Utilizing Maritime AI™ technology solutions, such as Windward Ocean Freight Visibility, can help enhance supply chain visibility and control.

Important Questions to Avoid OTIF Supply Chain Confusion 

• Does “on-time” mean on the date requested by the retailer? Or does it refer to the date promised by the manufacturer?
• Does it mean within the specified delivery time allocated to the shipment? Or any time inside an agreed-upon time window? 
• Should “in-full” be measured at the level of complete orders, line items, or individual cases? 

The different answers to these questions are very important, as effective supply chain collaboration depends on a precise and common understanding of delivery performance expectations. 

To better understand this issue, the Trading Partner Alliance (TPA) and McKinsey surveyed 24 major retailers and manufacturers of consumer packaged goods operating in North America. They found that, “92 percent agreed that an industry standard for OTIF would create value. They noted that a standard definition would significantly reduce discrepancies and confusion and promote collaboration among trading partners. Collaboration would help partners resolve supply problems more efficiently and effectively—creating value for all supply-chain participants as well as for consumers.”

The On-Time In-Full Formula 

The on-time, in-full formula is a percentage of all deliveries that are shipped on time and in full. 

The formula is: 

(Orders delivered on time/Total # of orders shipped) * 100

If a supplier wants to compete with leading companies, they should aim for their OTIF to be at least 95%.