What OTIF Programs Mean for the Supply Chain

The Road to On-Time In-Full

The ability to meet customer demand is a primary measure of success. Consumer demand is a driving force for the production of goods and services. Increasing demand places pressure on companies to produce more faster to whoever their customers may be. 

The Amazon effect has shifted everyone’s perspective on how quickly items should be delivered. Customers aren’t sympathetic to delays, even if they are due to weather. Companies that are consistent in delivering products as expected gain a competitive advantage, prompting them to require their suppliers to do the same. Increasingly more companies are, therefore, implementing on-time in-full (OTIF) programs that charge suppliers a fee if they fail to deliver a full order of unblemished products on the date (or even specific time of day) expected.

Related: Use Weather to Reduce Freight Spend

The effect of a delayed, partial, or damaged shipment creates more than a minor incident. In fact, it impacts the entire supply chain. Non-OTIF shipments increase costs, consume resources, and erode customer satisfaction. Obviously, late items result in inventory problems and empty shelves. Items that arrive sooner than expected have no shelf space at all, causing another type of inventory issue that must be managed. Then, there are the damaged products that cannot be sold or used in production and must be either returned or disposed of and then reordered, again, consuming time and resources. McKinsey reported an estimated $15-20 billion is lost in sales every year because items are out of stock or otherwise unsaleable.

By setting the OTIF standard, Walmart transformed supply chain operations, forcing companies up and down the supply chain to follow the standard or be left behind. SupplyChainDive.com says, “No matter how stiff the competition in any category of manufacturing, delivering what you say you’re going to deliver when you say you’re going to deliver it is a primary challenge for any supply chain. That’s why the metric on-time and in-full (OTIF) causes so much consternation.”

The challenge is often tied to transportation delays that are difficult to predict and, therefore, prevent. From weather and seasonality to distance and geography, variables are often unpredictable, dynamic, and uncontrollable. 

Shippers Need Visibility

Shippers without visibility into the supply chain are driving blind, so to speak. They need insight into what’s going on or could go on with an order early enough in the process to plan and make changes. As Gartner puts it, “Shippers who embrace supply chain visibility solutions can expect up to 10% increase in ‘The Perfect Order’ performance metric.” The “Perfect Order” meets those OTIF standards. Visibility brings greater certainty and confidence, even with risks as unpredictable as the weather.

Related: Reduce Risk with Supply Chain Predictive Analytics

Real-time visibility benefits suppliers, shippers, and LSPs, revealing potential risks that threaten their ability to meet OTIF standards. It’s not enough to know the weather conditions in the locations of pick up and delivery. They need to identify weather risks throughout the shipment’s entire route, their potential severity, and the chances of them impacting a specific shipment at a specific time. The earlier this is understood, the sooner they can make alternative plans to avoid disruptions to OTIF delivery.

Companies can have it all – adherence to OTIF standards to please their customers while still being efficient and profitable. They need visibility into accurate, real-time data and reports that combine historical data with this fresh data to paint a realistic picture of what can be expected and options. This kind of insight is powerful any time of year, but particularly when weather and other unpredictable events are on the horizon.

Setting The Right Expectations

It’s one thing to have visibility; it’s another to optimize the data to inform decisions and set the right expectations with customers. As Gartner said, companies can’t make commitments they can’t keep. OTIF deliveries are based on expectations. ETAs need to be precise and realistic. Sometimes, the customer defines those expectations and other times the shipper communicates the ETA. Either way, the end customer expects variables such as the weather are factored in.

Related: Riskpulse Announces the Launch of Riskpulse OnTime

The good news is, sophisticated technology has caught up. Riskpulse, for instance, offers an OTIF solution that analyzes a considerable amount of data to generate probability scores for OTIF delivery. It combines predicted data across more than 60 factors, including weather, natural disasters, infrastructure outages, equipment type, locations, and lanes to give companies a view into where their risks are and how likely they are to occur (with a score) while a shipment is in the vicinity. Using this data, companies can shift schedules, lanes, transportation modes, and/or equipment type to still meet OTIF requirements, or they can set the proper expectations with the customer.  

Having a score that says as a shipment has a 60 percent chance of making its ETA is much more powerful than simply knowing there will be rain in the area. Leaders can see all of these scores based on a variety of factors so they can test “what if” scenarios to make smarter decisions.

Don’t Drive Blind

Whether you are a shipper and want to better understand your chances of delivering OTIF products before you make a commitment or you are a receiver that could benefit from knowing if ETA promises can be trusted, you need technology that provides the required visibility and data analysis. Riskpulse analyzes massive amounts of data, presents it in a visual way that speeds understanding and action, and offers alternatives to consider. Using their API, companies can quickly access the data they need to make more informed decisions with confidence.

OTIF requirements are challenging to meet, but companies can do it much easier when they have reliable data. ETA probability scores help leaders plan for the risks that are most likely to occur. Whether it’s deciding to change a route to mitigate bad weather or setting the right expectations with the customer using data to justify why there may be changes in a delivery, companies that have actionable insight have a competitive edge.

ETAs are less of “estimated time of arrival” and more “expected time of arrival.” Companies up and down the supply chain have more confidence in where their products are and whether they’ll be where they need to be on time and in full. This enables smarter, earlier planning that can reduce costs, eliminate wasted resource time, and ensure greater customer satisfaction.

Keep in mind, not all risks are avoidable. Some things are simply unpredictable and all that can be done is to minimize their impact. But, having the right data in hand as early as possible can at least give companies time to plan ahead. Being proactive is always better than reactive. As customer demand doesn’t appear to be waning, organizations who take a data-driven approach will receive better OTIF scores and greater confidence in their decision making capability.