Is OTIF The Right Way to Measure Availability?

To answer this question effectively, let’s look back at the groundings of OTIF (or ‘On Time, In Full’) and how it helped improve one the world’s biggest businesses.

Walmart, a company that knows a little something about supply chain management set about improving their supply chain. The intention was to track supplier performance, create improvements in-store and increase customer satisfaction.

In its most simplistic sense, On Time in Full (OTIF) is a supply chain metric. And its sole purpose is to measure a company’s ability to fulfil customer orders.

Perfect then as a legacy of Sam Walton, Walmart founder, who’s quoted as stating “There is only one boss. The customer. And he can fire everybody in the company from the chairman down, simply by taking their business elsewhere.”

Creating a system of analysis based on a companies’ ability to do just this, seems like a thoroughly sensible move.

If supply chain excellence is on your agenda, On Time in Full (OTIF) can reveal a lot of detail about your supply chain performance you’d otherwise miss.

It can tell you how well you’re satisfying your customers. Whether your suppliers are delivering as promised. And even if you’re doing your internal supply chain justice.

And yet, I’d guess there’s a huge number of businesses that have never thought about measuring OTIF in the supply chain.

OTIF Vs. Availability

Every business in the world wants just the right amount of availability.

As we touched on in this article, there’s a sweet spot with this. You never want too much, lest you fall into excess stock worries and obsolescence. And you never want to be caught short either, or missed sales opportunities and unhappy customers will soon follow.

But measuring availability’s a difficult practice to master.

Firstly, OTIF & availability are related. But they are not the same.

Sure, high availability levels will probably help you to attain a strong OTIF. But not if your small number of availability issues impact your most important product lines!

The next challenge is that availability means different things to different people.

Do you look at OTIF? Are fulfilment rates a good benchmark? What’s the best way to measure the availability and why is there such confusion over a relatively simple question?

The answer’s not so straightforward. Primarily due to a lack of standard OTIF definition.

Thus, whenever there is a conversation about product availability, everyone is speaking in different languages.

Think about your own business.

What does ’on time’ mean to your logistics provider or supplier? What does it mean to your Finance or supply chain department?
And how misaligned are those two dates?

What about the “In Full” part? Do you have a consensus as to what classes as ‘completed’ orders?

This is before we get onto the differences between specific suppliers and manufacturers, and who we hold to account when the “On Time” part of this deviates from what has been agreed.

Most people will agree that an under delivery is a problem. But what about an over delivery?

Receiving more stock that agreed is clearly a failure in process. But how should we account for this?

How to calculate OTIF? What does the On Time, In Full formula tell you?

On paper, the OTIF formula is pretty simple.

We take the total number of orders that were made on time and were complete and then divide this by the total number of orders.

In its more simplistic form, On-time (OT) simply assesses whether your outgoing orders have arrived on time.

The In Full (IF) part looks at whether the correct volume was received.

Measuring both components as a whole then analyses how satisfied your customers are, assuming the orders are in good condition once they arrive at their destination.

How can we use OTIF?

Throughout this article, we are going to talk about OTIF from two perspectives:

Inbound OTIF – This is where we track the supplier’s OTIF against their purchase orders.

Outbound OTIF – This where we measure OTIF on your own outbound orders to your final customers.

How can we use OTIF to measure supplier performance?

OTIF can also be a powerful supplier benchmark.

After all, we can use ON Time In Full (OTIF) to explore some important questions:

• Are your suppliers living up to the promises they gave you in the first place? 
• Are they damaging your reputation and relationships with customers? 
• Do you have data to back up your misgivings?
• And can you present this back to those holding the purse strings?

Not to throw too many acronyms at you, but OTIF KPIs are fantastic tools to take theoretical practise and relate it to real life. They allow you to look at cold hard facts and improve business performance almost instantly.