What Is OTIF KPI? How To Calculate + Importance For eCommerce
Are you aware of the Order-Timely In Full (OTIF) key performance indicator (KPI)? As an eCommerce business owner, it's essential to understand the value of OTIF and how this metric ultimately impacts your bottom line. The goal of on-time delivery is a core focus for today's businesses — big or small. To be competitive in today's market, knowing what OTIF KPI is and understanding its Importance is essential. Keep reading to learn about OTIF KPI, including what it measures and calculates and how it can help drive success in your eCommerce initiatives.
What is OTIF (On Time And In Full)?
OTIF (On Time And In Full) is a service-level agreement between a supplier and buyer that guarantees the supplier will deliver all ordered goods, in full quantities, on the scheduled delivery dates set by the buyer.
The purpose of an OTIF agreement is to:
- Reduce inventory costs for both parties
- Eliminate delivery delays that lead to customer dissatisfaction
- Improve supply chain efficiency through better demand/supply planning
An OTIF contract requires accurate demand forecasting from the buyer and reliable order fulfillment planning from the supplier. Both parties share responsibility for meeting on time and in full metrics.
Key Benefits of OTIF
Achieving OTIF delivery performance provides many benefits:
- Higher customer satisfaction from reliable order fulfillment
- Increased sales through improved brand reputation and loyalty
- Lower costs by reducing waste and improving supply chain efficiency
- Better carrier relationships through consistent on-time shipping
How to Calculate OTIF
OTIF measures two key metrics:
On-Time Delivery: (Scheduled Delivery Date) - (Actual Delivery Date) In-Full: (Number of Cases Delivered)/ (Total Cases Ordered)
Tips for Achieving OTIF Goals
- Understand each customer's OTIF requirements
- Closely track all delivery schedules and purchase orders
- Partner with a reliable 3PL provider
- Look for process improvements to prevent errors
By making OTIF a key performance metric, companies can significantly improve customer satisfaction, supply chain efficiency, and their bottom line.
Recommended: 8 Supply Chain Metrics & KPIs You Need For A Successful Business
FAQs
What is the definition of OTIF?
OTIF stands for on-time and in-full. It is a metric tracking if all ordered goods are delivered in full quantities before the scheduled delivery date.
Why is OTIF important for ecommerce?
OTIF is crucial for customer satisfaction, preventing returns/refunds, supply chain efficiency, and managing costs.
How do you calculate OTIF performance?
OTIF measures on-time delivery date vs. scheduled date and number of units delivered vs. total units ordered.
What are some tips to improve OTIF?
Tips include understanding customer requirements, tracking all orders, partnering with a reliable 3PL, and finding process improvements.
What are the benefits of good OTIF metrics?
Benefits include higher customer loyalty, increased sales, lower costs, better carrier rates, and improved team efficiency.
How can 3PLs help achieve OTIF targets?
3PLs can provide warehouse and transport management services to improve order fulfillment accuracy and on-time shipping.
What happens if a company fails to meet OTIF standards?
Consequences of poor OTIF include lower customer satisfaction, more returns/refunds, supply chain inefficiencies, and higher operational costs.
How often should OTIF metrics be tracked/reported?
OTIF should be monitored daily or weekly to quickly catch any fulfillment issues and improve processes as needed.
