Digitalization

Like clockwork: 5 ways to leverage data to improve OTIF

The supply chain performance metric “on-time and in-full” (OTIF) highlights the need for technology and communication in supply chains. In the face of ever-increasing disruptions, now’s the time to make sure you’re getting the most out of your data and digital platforms.

Improving OTIF with mechanical precision

If you have ever worn a mechanical watch, you may have spent a few moments idly observing the second hand tick along while the minute hand follows ever so gradually. Stare long enough and you’d see the hour hand do the same – every time, on time, without exception.

To the naked eye, it seems effortless. But examine the watch’s inner workings and you’ll find countless tiny pieces moving in harmony. A perfect machine put together with expert precision.

In logistics, it’s all too easy to take a smoothly running supply chain for granted. However, much like a clock, the business of transporting things from A to B is complex. There are millions of moving parts. Literally. That’s why many customers, such as retail companies, closely monitor supplier performance – and why “on-time and in-full” (OTIF) has become a central supply chain performance metric.

What is on-time and in-full?

The term on-time and in-full (OTIF) has been around for more than 20 years in retail, logistics, and supply chain management as a quality KPI combining warehousing and transportation performance.

The definition of OTIF is straightforward: when a shipment arrives within the agreed lead time and in the total quantity promised (i.e., no missing or substitute goods) it is considered on-time and in-full.

Today, OTIF is a familiar term in the world of supply chains, but the logistics industry has not yet aligned on a precise formula for how to calculate a fixed OTIF benchmark. Instead, most supply chain managers consider anywhere from around 85% to 95% of orders delivered within the set lead time and in the set quantity to be a good benchmark. But in practice, OTIF is usually determined on a case-by-case basis, depending on supply chain managers’ capacity and the most crucial determining factors – customer needs and expectations.

The importance of improving OTIF

11,642

Supply chain disruptions in 2021, up from 3,700 in 2019

$184 million

Average annual losses per company due to supply chain disruptions

3%

Some retailers fine suppliers up to 3% of the cost of the goods

Why is improving OTIF important?

A handful of delayed shipments may not be catastrophic, but they can send ripple effects through the supply chain. When it happens regularly, the ripples can form destructive waves that break down supply and communication lines.

Supply chain disruptions are on the rise, from 3,700 in 2019 to 11,642 in 2021, according to Statista. The pandemic waves and adverse weather events have certainly played a role, but the trend is likely to continue, making it increasingly tricky to achieve a stable OTIF.

Retailers can’t afford to have empty shelves, which is why on-time and in-full shipments are so valuable to them right now. Suppliers who consistently fail to keep up with changing circumstances and take little-to-no action to improve OTIF put their customer relationships on the line and hurt their ability to thrive in a competitive market.

With the right tools, information, and processes in place, you can improve OTIF and maintain that high quality in your supply chain. You’ll be able to resolve bottlenecks and other disruptions as they develop rather than picking up the pieces after the wave washes back out to sea.

Improving OTIF is about breaking down barriers by leveraging all relevant, accessible data. Barriers include communication – particularly where hierarchical structures, processes, and potentially outdated technology infrastructures are concerned – or external disruptions such as supply chain crises, natural disasters, and geopolitical events.


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5 ways to leverage data to improve OTIF

With the power of data and communication in mind, here are five strategies for improving OTIF in your supply chains:

1. Enhance your network configuration

The last few years have seen no shortage of game-changing societal, technological, and environmental transformations in our industry. There’s no better time to re-evaluate whether your network configuration is really facilitating the best possible services or whether you can transform – or at least tweak – it to be more efficient.

Start by looking for ways to cut down transportation time across the board. Are your key receiving locations needlessly far from your warehouse providers? Are there now closer solutions that weren’t available when you first set up operations?

Do you have the capabilities to monitor your supply chain end to end? Get notified of any relevant events that help you take control of your supply chain.

Another area to review is tracking and monitoring. Do you have the resources to track shipments across entire regions and continents? Do you have the capabilities to monitor your supply chain end to end? With disruptions happening on all levels, logistics providers with extensive regional and global networks are the ones winning the race to optimize OTIF.

Data plays a crucial role in these enhancements. Use it, for example, to optimize routing and utilization capacity. But, of course, an end-to-end supply chain management system can’t function without constantly receiving new data to feed into decision-making processes. That’s where digital tools and the internet of things (IoT) come in. 

2. Get real-time visibility

Without real-time order tracking, calculating OTIF is virtually impossible. For suppliers operating on an international or intercontinental scale, this means working with a logistics provider that has the technological capability to provide you with maximum transparency and real-time shipping updates.

Interconnected sensors and transmitters have automated some of the most vital communications across the supply chain. This doesn’t just save time and resources spent on status checks and location updates. It also means detecting any issues in time to replace damaged or otherwise unsellable goods before missing deadlines. You simply won’t be able to report competitive OTIF metrics without the ability to see potential problems during transport before they become critical.

AI and new automated data collection software are advancing at a rate we’ve never seen before, and they’re undeniably making our lives – and jobs – easier. Our commitment to digitalizing supply chains by investing in IoT technology and visibility platforms (such as MySupplyChain) is an example of how we are set up to maintain real-time, end-to-end visibility and continuously monitor our global operations.

MySupplyChain provides near real-time visibility of warehouse and transport operations and allows you to manage your inventory remotely and securely.

3. Manage expectations

The larger the scale of operation, the harder it is for businesses and suppliers to control every aspect of the process. But no matter how massive the supply chain, managing expectations can make or break your client relationships. Therefore, supply chain managers must communicate regularly and proactively to help reduce uncertainty, keep everyone in the loop, and even prevent internal bottlenecks.

Stay in close contact with your logistics provider so that they have as much time as possible to ensure your shipments go smoothly. On top of that, adding an extra day or two to your lead times will make your operations seem more efficient and resilient. Increasing your lead time may sound counterproductive initially, but this accounts for anticipated minor disruptions and doesn’t set customers up for disappointment.

Keeping promises and deadlines: DHL constantly evolves and presents the needed features that fit your business.

It’s important to keep in mind that “on time” doesn’t just mean “not late”. For customers using a Just-in-time (JIT) model of inventory management, shipments arriving too early can cause just as many problems as those arriving too late. But in response to supply shortages both during and since the pandemic, companies are increasingly moving away from a JIT model to build up more inventory buffer. This need to adapt to changing external circumstance is just one example of why embracing advances in digital supply chain technology – including blockchain and digital twins – has never been more critical.

Digitalized supply chain infrastructures are set to make managing expectations smoother than ever by allowing partners to determine disruption probability and plan lead time accordingly. Naturally, person-to-person collaboration will remain necessary to ensure OTIF compliance. But digital tools are making that more accessible, too – in some cases as easy as sharing a post on social media. Maintaining personal relationships while taking advantage of technology will ensure you establish realistic milestones and transparent processes, leading to improved OTIF metrics. 

4. Keep an ear to the ground where you operate

As overplayed as it might sound, the fact is we are living through some very turbulent times. We have already witnessed one supply chain crisis after another this year, whether in connection with geopolitical crises, raw material shortages, or personnel shortages. In January 2022, PwC reported that 71% of executives see geopolitical events as a threat.

For example Europe: Reach your customers in key European markets next day with the DHL European Fulfillment Network.

To limit the effects disruptions have on your business and supply chains, supply chain managers need to stay informed about current events in the areas and regions in which they operate so they can plan accordingly and trigger backup solutions quickly. Preventative measures during the picking process can also go a long way to improve the accuracy of shipments. For example, effective training in picking, moving from paper check forms to digital scanners and establishing (more rigorous) quality control procedures in a given sorting facility will help to improve supply chain transparency. After all, you can’t manage what you can’t see.

This is where globally networked logistics providers have the unique capacity to offer flexible solutions and, ultimately, ensure stable OTIF performance. Being aware of the social climate in the regions where you operate and having the digital infrastructure in place to find alternative solutions could make or break your ability to maintain, let alone improve your OTIF. 

5. Never stop improving OTIF

Anyone who’s been in the supply chain business for a while knows to expect the unexpected. Although global supply chains have been pushed into the spotlight in recent years, logistics has always been a business of managing an ever-changing environment. Supply chain managers who recognize this understand that maintaining competitive OTIF performance is a never-ending process. Treat it as a one-off project and any improvements will quickly fall by the wayside.

Approach OTIF as a continuous improvement process. Focus on efficiency, update your technology, and hold your people accountable. This will ensure you keep your finger on the pulse of the rapidly changing supply chain industry.

Barriers and disruptions can come from a variety of sources, but so can leverageable data. These include digitally accessible transport schedules, automated technology to provide real-time shipment visibility, internal and customer data – where available or attainable on request – and even credible news platforms.

Disruptions are inevitable. But continuously taking steps to access the right information that will help to prevent or overcome them are vital to sustaining and improving the OTIF machine.h passive and active scanning technologies are revolutionizing how inventory is recorded and located.

Working with robots bringing a lot of benefits like increase of productivity, reduction of the learning curve and reliability in order picking.

OTIF around the clock

How you calculate on-time and in-full will depend on your – or your customer’s – definition of OTIF. But like reading your watch, that’s the easy part. To improve and maintain top OTIF performance, you need to expertly navigate the complex logistics machine behind the supply chain.

In today’s digital world, the power of data will deliver the expertise you need to improve your OTIF and get real value out of supply chains. Digital technology provides visibility, optimizes processes, and enhances communications – all of which are vital in a world where success is increasingly measured in terms of how well crises are managed. Those whose systems run like clockwork will stand the test of time.

DHL Supply Chain

The world’s leading contract logistics provider


Published: September 2022


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