Over the past several years, on-time in-full (OTIF) has grown in importance throughout the logistics industry, largely driven by major companies like Walmart. OTIF fines can very easily reach seven- or even eight-figure expenses for product-based companies, such as those within the Food & Beverage and CPG verticals.
In this post, we’ll go over the origins of on-time in-full, its impacts throughout the industry to date, and some ways that you can best meet rising expectations for on-time in-full within your supply chain.
What is On-Time In-Full (OTIF)?
On-time in-full, frequently abbreviated as OTIF, is a form of measuring carrier performance popularized by Walmart and several other major shippers back in 2017.
OTIF is really two different metrics that were combined together into a single acronym. Let’s break it down:
- On-time is essentially equivalent to another commonly tracked metric within supply chain: on-time delivery, or OTD. It’s a service metric, and it’s used to track how closely the delivery came to meeting its agreed-upon delivery time.
- In-full, on the other hand, has to do with the quantity of product itself. Based on the purchase order, is the customer getting exactly the right amount of material, or are they getting an amount that’s above or below that requested amount?
OTIF was designed to improve store operations within WalMart itself, and quickly led to a lot of major changes as it was quickly adopted by other retailers and companies. Most notably, because it penalized loads arriving early as well as late, it gave rise to a greater need for executing supply chain operations with pinpoint precision – and in the process necessitated more accurate insight into the status and disposition of supply chain assets than ever before.
Learn more about the ROI of Real-Time Transportation Visibility
Companies that enforce OTIF standards don’t always validate the fines they issue, leading to disputes. Much like detention, better visibility can help resolve these disputes for both parties.
With OTIF, one of the biggest challenges to reliably calculating your score is actually consolidating the data from within your carrier base into a single place, then validating that for quality and consistency. Once you do so, tools like FourKites’ Advanced Analytics suite can help you monitor that data to assess performance over time, and identify bottlenecks and issues that are negatively impacting your score with your target customers.
One FourKites customer in the CPG industry has already used these capabilities to improve OTIF performance with its major retail customers. By sending FourKites pallet- and SKU-level information that lets us track both the on-time performance of their loads in addition to the in-full component, the customer was able to challenge and resolve disputes from numerous customers who did not have the data on their end to validate claims of an OTIF violation. When you consider that these fines can easily amount to thousands or tens of thousands each month, the payoff of having such a system in place becomes immediately apparent.
What is a good OTIF benchmark?
In an ideal world, companies would strive for 100% compliance with on-time in-full across their customer base. Since this is the real world, however, a pretty solid OTIF benchmark to shoot for is the high 80% or even 90% range.
Since its inception in 2017, Walmart has been one of the biggest forces driving OTIF adoption throughout the supply chain industry, making the company a good barometer of best practices in this still-developing space.
“In the years since rolling out OTIF in 2017, their standard on-time in-full target for their suppliers has steadily increased from 75% in August 2017 to 85% in January 2018, to 87% in March 2019.”
Given that it’s something of a moving target, and that requirements will vary across industries and even individual retailers, it’s clear that companies should focus on getting their score to be as high as possible with the highest degree of consistency possible. A higher OTIF capability will always to help you get more business, and keep that business once you’ve secured it.
How can you improve OTIF?
All of this begs the question of how to improve your on-time performance. And if you’re asking that question, then you’re certainly not alone. Fortunately, there are plenty of things you can do to improve your performance over time. Here are a few common ways we’ve seen this done over the years:
- Get a single point of truth. This allows you to notify your customer as soon as a delay occurs, and potentially even allows you to save that load by dispatching another shipment that will arrive on time. Obviously this is a challenge due to the fragmented nature of global logistics, particularly in North America and Europe. It’s not at all a simple matter of having the driver call ahead as soon as he or she has experienced a delay.
- Identify sources of delay on your end. Ideally, you should be closely monitoring your carriers, your distribution centers, your warehouses and all of the other moving parts within your supply chain to be on the lookout for patterns that are impacting your overall OTIF performance. Once you find the areas where delays most often occur, then you can go in and start addressing the root cause of the delay. As we’ve said before, you can’t fix what you can’t see!
- Validate any fees or fines. In addition to identifying the sources of delay within your own operation, you should also keep a close eye out for delays that result from the customers’ actions as well. For example, if you can prove that your truck arrived on time to a given facility, but was detained outside that facility due to delays occurring on the retailer’s side, you can prove that the delay wasn’t your fault and dispute any fines the retailer tries to leverage against you for that particular load.
Case studies in successful OTIF improvement
These steps really do pay off. To take one of the most extreme examples, FourKites customer Smithfield improved its on-time performance from 87% to 94% by improving visibility across all the moving parts of its supply chain. To give a little bit more context to this, Smithfield ships about 1,000 truckloads of product per day in the U.S. alone, and it hires more than 230 separate trucking companies to do that. That’s a lot of moving parts and a lot of disparate systems. By unifying that into one single platform, it suddenly becomes much easier for companies to identify the patterns behind their OTIF performance scores.
Another great example is Kraft Heinz. When OTIF first came onto the stage, Kraft Heinz made a number of changes to its operating structure to accommodate the higher expectations, first by prioritizing larger asset-based carriers over one-off brokered loads, then by leveraging FourKites to improve supply chain reliability and strengthen relationships with its partner carriers. In so doing, the company improved its overall OTIF score by 5% over the course of one year.
Once you have that, then you’re ultimately able to book more accurate delivery times with your retailers and adjust those windows proactively when delays occur. For most retailers, the bottom line is this: If your appointment is scheduled for 10:00, the expectation is that you’re going to be there at 10:00.
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With OTIF performance, as with many other areas of modern supply chain management, it all comes down to proactive decision-making. In other words, instead of making decisions when it’s too late, you want to have the information that empowers you to react in advance and be able to rectify any obstacles before they stand in the way of your shipments.