Improving 'OTIF' with real-time transportation visibility

One of the most fundamental measurements of logistics or delivery performance within a supply chain is the ‘On time, in full (OTIF)’ metric. Also known as ‘Delivery in full, on time (DIFOT)’, it’s applicable in almost all industries, such as manufacturing and services, in both B2B and B2C businesses. It effectively measures, as a percentage, how successful a supply chain is at carrying out its primary objective by quantifying whether it was able to deliver:

• the expected product (reference and quality)
• in the quantity ordered by the customer
• at the place agreed by the customer
• at the time expected by the customer.

Any problems relating to order accuracy and timeliness can have significant impacts on an organization’s cash flow and reputation, making them key areas of focus and control for management. An incorrect order can delay payment, incur additional costs and result in poor customer experiences and even brand damage.

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OTIF is often considered more useful compared to other delivery performance indicators as it assesses deliveries from a more customer-oriented perspective. It also requires a concerted effort from all supply chain functions, such as suppliers, warehouses, transport and procurement, to work in harmony and at their best level.

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Measuring OTIF

In order to improve anything you must of course measure it. The basic formula for calculating OTIF is:

Each organization defines for itself exactly how measurements are made, for example whether the ‘on time’ aspect is defined by the original date/time requested by the customer or the date/time promised by the supplier. The latter is obviously easier to manage from a shipper perspective but is less customer centric.

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Improving OTIF requires a data focus

Given the significance of this metric for many organizations, there has been an ever-increasing focus on improving accuracy and reliability of operational data collected across delivery processes. This is enabled through supply chain digitalization, where data-driven practices and processes are adopted to help reduce costs, improve customer satisfaction and increase reliability and agility across the value chain.

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Visibility’s role in improving OTIF

Real-time, end-to-end supply chain visibility involves the collection and analysis of live shipment data to aid supply chain management in optimizing processes and decision making. The objective data, automatically captured, is a critical ingredient for making accurate and reliable OTIF calculations possible. These platforms offer significant advantages over outdated manual methods of data collection and management, which often rely on paper based forms and the use of spreadsheets.

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Shippeo uses its own API to enable flexible and compatible data exchange between a range of supply chain transport systems. These include TMS, telematics, AIS and Parcel APIs and allow free-flowing real-time data to be harnessed to produce instant actionable insights on live supply chain performance for workers and managers, aiding in better, faster and more confident decisions. They also unlock the potential to automate processes, creating further efficiencies and allowing teams to focus their time and energy on value-adding tasks.

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Real-time Transport Visibility (RTTV) platforms have become one of the most important software tools used by market leaders within the transport industry. According to a report from Gartner, 50% of global leading enterprises will have invested in real-time transportation visibility solutions by 2023.

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How RTTV addresses problems to help improve OTIF

According to Gartner, shippers can expect up to 10% increase in ‘the perfect order’ performance metric with supply chain solutions. RTTV platforms help organizations address the key problems that commonly impact on OTIF. Examples include:

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Stock-outs

Forecasting required inventory can be difficult. Stock-outs can be caused by seasonal or industry trends, shifts in customer buying habits or other unforeseen events. Better delivery visibility in retail stores helps store staff to quickly identify delivery delays that will impact inventory, and reorganize shelves to keep them full. In manufacturing processes, knowing delays in advance helps supply chain management take quick actions to expedite specific deliveries to mitigate impacts on production lines.

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Human error

Reliance on manual and sometimes paper-based processes can lead to inaccuracies in information, as well as delays in its collection, slowing down reactivity of management. RTTV platforms ensure full, accurate and up-to-date information and insights are always at decision-makers’ fingertips. These platforms also enable automation of processes to reduce the reliance on people, reducing the potential for human error.

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Better communication

Automatic notifications on delivery status and ETAs, portals displaying real-time locations of shipments, live performance scorecards and now new collaborative workflows are all features of RTTV solutions that help improve communication between ecosystem partners across the supply chain, regarding the whereabouts of shipments.

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More organized distribution sites

When warehouses or distribution centers are disorganized, the resulting inefficiency can be costly. Real-time visibility solutions offer a way to overcome the time consuming manual chasing of shipment delivery statuses by phone or email and instead benefit from live updates, making it possible to dynamically adjust operations to maximize operational efficiency.

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Process analysis

By using the historical data captured by RTTV platforms to perform unequivocal root cause analysis, organizations can gain a better understanding of which suboptimal processes are impacting OTIF.

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In addition to improved OTIF, RTTV platforms like Shippeo bring a range of direct and indirect benefits to supply chain operations. Download our white papers to discover the 5 reasons why you need supply chain visibility, learn about the business value of accurate and reliable ETAs and find out how to ensure you choose the right transportation visibility provider for your RTTV project. Or you can get in touch with our team of experts.