How to Improve Your OTIF Performance
Each supply chain metric provides different insights into your operations. One of the most telling performance metrics is on-time in-full (OTIF). OTIF provides important information regarding efficiency, supply chain relationships, customer satisfaction and process effectiveness. Since the OTIF metric provides valuable information to help you improve various areas of your operation, you should understand what it is and how it can impact your supply chain.
Improving your OTIF performance will also help you improve various other aspects of your supply chain, which is crucial for overall performance.
What Is OTIF?
OTIF is a supply chain metric that refers to the percentage of deliveries made correctly and on time. OTIF measures a supplier's ability to fulfill customers' orders as promised. An OTIF delivery means the correct item was delivered in the right amount, to the proper location and within the estimated timeframe.
The OTIF supply chain metric is relatively new and was first implemented by Walmart in 2017. Since then, numerous companies and retailers have adopted the policy. Clearly defining OTIF is challenging because every retailer and manufacturer has different standards, which often leads to confusion. For example, some companies may consider early deliveries to be on time, while others would not. Each retailer may also have different policies and standards regarding OTIF performance. Since policies and definitions can vary between companies, you'll want to determine your own standards.
OTIF metrics have increased the need for more precise supply chain operations across numerous industries and applications. It helps managers increase proficiency and reduce costs across their supply chains.
How Is OTIF Used to Measure Performance?
OTIF is a percentage of the total number of deliveries made. While companies may aim for different results depending on their specific standards, the basic calculation remains the same. To calculate OTIF performance, take the number of OTIF deliveries divided by the total number of deliveries, including any that were late or incomplete. Then, take that number and multiply it by 100 to determine the percentage of OTIF deliveries. For example, let's say 174 out of 200 deliveries were OTIF:
- 174 divided by 200 is 0.87.
- 0.87 multiplied by 100 is 87.
- The result is that 87% of deliveries were made OTIF.
One of the primary uses of OTIF as a metric is to measure carrier performance. It primarily helps determine the success of a company's delivery process. Your delivery process is critical, as it can have a significant impact on your customers' experience with your brand. A higher OTIF percentage indicates your carriers' performance is high. Setting OTIF standards for your carriers and other entities in your supply chain helps your company achieve an efficient delivery process.
Various stakeholders — including manufacturers, suppliers and third-party logistics companies — can impact the effectiveness and efficiency of your supply chain. Measuring OTIF also increases visibility into these processes to help you improve. For example, OTIF can help you identify inefficiencies or situations that cause delays or may impact your ability to make deliveries OTIF. Finding these issues in your supply chain allows you to make the necessary changes to improve your percentage of OTIF deliveries, as well as factors like efficiency and customer satisfaction.
What Happens if You Don't Meet OTIF?
One of the aspects of OTIF that makes it essential for shippers is that failure to meet OTIF requirements results in penalties. OTIF penalties will vary depending on how companies measure OTIF, though delivery fines are the most common. Most companies will charge a specified percentage of the cost of the products being delivered. For example, a manufacturer may charge shippers 4% of the shipment's value if they fail to deliver OTIF.
As mentioned above, penalties vary depending on what a company considers OTIF. For example, some companies may not count early deliveries against OTIF measurements. Depending on the company, early deliveries may be acceptable and convenient. Other companies may penalize carriers for making early deliveries. In some cases, early deliveries can cause issues. For example, let's say a retailer has limited storage space to hold products between shipments. If the next shipment is delivered early, the retailer may not have space for the new inventory.
In addition to penalty fees, failure to meet OTIF can result in losing sales or customers. When customers or retailers don't get their orders on time or they get an incorrect order — or both — their experience will be negative. A negative experience could lead them not to want to do business with you or order your products again. Ultimately, poor OTIF can give your company a negative reputation and harm your business relationships.
The consequences of not meeting OTIF can also vary between industries. OTIF compliance in the pharma industry has been challenging in recent years due to increased demand putting a strain on supply. In an attempt to compensate, the industry tried to push high levels of inventory without enough space to store it properly.
These types of issues quickly lead to backlog and delays. In addition to delivery fines and other penalties, failure to meet OTIF in the pharma industry puts people at risk of going without their medications or vaccines.
The pharma industry faces unique supply chain challenges, many of which are related to strict regulations. Pharma companies and contract development manufacturing organizations (CDMOs) are challenged with regulatory supply chain burdens regarding the chain of custody, clinical trials, development, manufacturing and compliance.
The Food and Drug Administration (FDA) closely monitors every aspect of the drug discovery, manufacturing and distribution processes. While CDMOs work to deliver pharma shipments OTIF, they also have to ensure compliance with FDA regulations regarding how drugs and vaccines are handled during manufacturing and distribution.
In addition to these unique industry challenges, CDMOs face many other broad challenges that carriers, manufacturers and retailers in other industries also face. Here are several OTIF challenges that can impact delivery times:
Lack of Automation
Many companies may struggle to meet OTIF standards because of their resistance to using modern software and technology. Shipping tools increase automation across the supply chain, leaving less room for human error. Automated delivery tools save significant amounts of time, money and other resources, though many companies are reluctant to utilize them. Missing out on opportunities to use automation and technology may cause shipping companies to struggle to achieve high OTIF rates.
Shortage of Carriers
Something many industries face is a shortage of carriers and the amount of product carriers are able to transport. For example, if manufacturers can get carriers to transport their goods, they may be limited in the number of products the carrier can transport and deliver. The carrier's capacity limits the number of deliveries made, increasing the difficulty in meeting OTIF.
Differences in Delivery Locations
While you may deliver the same or similar products to each location, a common challenge that carriers face is failure to plan for the differences in delivery locations. Each retailer or customer may have a different pick-up or drop-off process, which needs to be accounted for and is often forgotten. Failing to plan for such differences can make OTIF rates take a hit.
For example, one delivery location may have limited unloading docks, so early arrival can cause issues. Another location may only accept deliveries during a specific timeframe. These differences can create unique challenges of their own if they're not accounted for when planning deliveries.
Poor Communication and Warehouse Management
Poor communication and warehouse management are some of the top challenges for making OTIF deliveries. Efficient delivery requires many supply chain entities to communicate with each other. Poor communication or an ineffective communication channel can significantly hinder OTIF metrics. Similarly, poor warehouse management increases difficulty when completing orders, which will delay delivery.
Lack of Adaptability
OTIF rates are also often impacted by carriers' inability to adapt to challenges in real time. While some challenges can be planned for ahead of time, others may appear unannounced. Adapting to changes as they happen is key. Some carriers operate with a lack of adaptability, which makes making OTIF deliveries challenging.
Ineffective Inventory Management
When inventory is ineffectively managed, manufacturers, retailers and other suppliers face increased difficulty getting shipments out on time or accepting incoming deliveries efficiently. For example, ineffective inventory management makes arranging orders, storing products and other processes more difficult than necessary. Ineffective processes decrease efficiency and OTIF rates.
Another challenge many shippers or carriers face is shipment theft. When a shipment gets stolen, the delivery will be incomplete and OTIF metrics will decrease. When a shipment gets stolen in the pharma industry, many of the drugs or vaccines stolen will go bad, especially those that must be stored at certain temperatures. Shipment theft also disrupts the chain of custody, which means the stolen drugs must be disposed of.
How to Improve OTIF
Since many factors can impact OTIF metrics, you can improve your OTIF rates using several methods. Knowing how to improve OTIF pharma deliveries will help your CDMO increase efficiency. Increasing OTIF takes dedication and hard work, as improvement takes time. Here are some supply chain tips for OTIF to help you begin making changes.
Integrate and Align Supply Chain Processes
OTIF metrics heavily depend on effective supply chain processes. When each partner in your supply chain operates independently of you and others, there's an increased risk of delays. Various processes across your supply chain should be aligned to reduce the chance of miscommunication, confusion and other issues that lead to delays. Integrating various areas of your supply chain can help reduce delays and increase OTIF.
For example, get everyone in your network on the same page regarding production and transportation schedules. While these two processes may operate independently, integrating communication and aligning the schedules can help ensure each team knows where they should be to keep the timeline moving.
Utilize Multi-Enterprise Networks
Multi-enterprise networks involve working alongside multiple businesses and logistics parties to optimize various business processes throughout supply chains. It also involves integration, as you'll collaborate with others in the network to adjust connected processes to create an improved customer experience.
Build a network with your preferred retailers, carriers and other supply chain entities. Having improvement-focused supply chain partners is how CDMOs can improve OTIF. Multi-enterprise networks also allow you to exchange information with supply chain partners. Increased communication provides a better understanding of processes upstream and downstream of your position in the supply chain, increasing your ability to adjust your processes accordingly.
Identify Sources of Delay
The only way to reduce delays is to take time to identify sources of delay in real time. Identifying specific sources of delay across your supply chain requires a certain level of transparency across your supply chain network. Otherwise known as E2E visibility, supply chain transparency is most effective when there are defined processes and tracking tools in place.
For example, defined processes create a baseline for what is to be expected in various areas of your network, which enables your partners to anticipate what comes next. Tracking tools provide visibility into shipment movements. If there's a hold-up, you'll be able to determine where and find out why. Identifying sources of delay allows you to address problem areas to reduce future delays and improve OTIF.
Plan for Disruptions
Supply chain disruptions are inevitable. While you can't always prevent them, you can plan for disruptions and aim to mitigate their impact. Planning ahead is one of the best OTIF planning tips to keep in mind, as it better prepares you and your network to respond effectively to disruptions. Disruptions can vary significantly, ranging from product shortages to a lack of staff. Your disruption responses should be compliant, timely and reliable. Minimizing the impact of disruptions is crucial to maintaining efficient processes.
For example, consider your procedure for when you're short-staffed. Rather than letting the situation completely slow down your operation, how can you plan to make timely adjustments to maintain momentum? You may call in off-duty employees to cover shifts or step into the action yourself. Planning responses to various disruptions better equips your teams to overcome disruptions efficiently. The sooner disruptions are resolved, the more improvement you'll see in your OTIF metrics.
Implement Supply Chain Technology
Since connection, collaboration and communication are vital for increasing OTIF deliveries in pharma, it's best to implement technology that enables you and your supply chain partners to do just that. Implementing the right supply chain platform will enable you to collaborate, share data and increase visibility across your network.
The right supply chain platform will also enable you to create automated processes for predictable disruptions using AI recommendations. AI can predict and recommend ways to improve your supply chain. You can also use digital twin technology to model scenarios that might lead to poor OTIF, which will help you learn even more ways to improve. Predicting OTIF issues and automating their processes will help you improve your end-to-end supply chain.
Supply chain software like ParkourSC is designed to help CDMOs improve OTIF and various areas of operation with a more effective process management system and automation.
Improve Your OTIF and More With ParkourSC
The pharma industry supply chain has unique needs and challenges, which require unique process management solutions. Many factors can affect your OTIF metrics in pharma, and our CDMO solutions at ParkourSC are designed to help you effectively manage various areas that can impact OTIF deliveries. For example, our software will help you improve visibility while ensuring compliance and reducing costs. You'll be able to maximize efficiency and minimize disruptions to create patient-centric OTIF solutions across your supply chain network.
Work with ParkourSC for a supply chain platform designed to help you meet OTIF deliveries. Contact us to learn more.