May 9, 2016
One of the most critical metrics for measuring supply chain performance is “on time in full”, more popularly referred to as OTIF. It is the end result of all the activities in supply chain bundled into a singular view of business performance. It’s also the single best way for understanding how your customers are being satisfied with your supply chain. Makes sense. In our daily lives; imagine your child getting a PlayStation but only the console and no controllers – devastation! It’s also really hard with the number of things that have to happen to make it work.
To do well in OTIF, your end-to-end supply chain needs to be a well-oiled machine. Planning, sales, procurement, inventory management and order fulfillment all need to work together without failure. A breakdown at any one place – wrong inventory mix, inaccurate forecast, incorrect order entry – can really hurt in revenue impact and more importantly, in the eyes of a customer. The impact is felt immediately and for a long time to come.
In working with hundreds of supply chains worldwide, we’ve come up 5 keys to improve OTIF.
1. Go real-time. Make your sales and customer service teams smarter and always updated on delivery and revenue execution. Supply chain intelligence isn’t just for the supply chain anymore. In order to achieve revenue and OTIF goals, sales teams need real-time insights into the status of sales orders in the order to ship process. Waiting 10-12 hours for an order book report to process, or relying on a select few data whizzes to get answers won’t allow your sales team to be responsive to changes in your supply chain. Everyone should have real-time access to where orders are getting stuck and how they need to be handled tactically to avoid missed shipments (expedite inbound stock, remove credit holds, substitute products, etc).
Proactively assess enterprise-wide delivery and revenue execution to identify key problem areas impacting revenue targets and customer satisfaction.
2. Measure what you want to improve and get all key stakeholders involved. Executing OTIF efficiently means that internal schedules are being met and materials are flowing efficiently between distribution centers, plants and warehouses. If you’re falling behind in your internal execution, your customer OTIF may be coming at a high price: expedited shipping costs. Measuring OTIF at the end customer level as well as within your supply chain becomes a critical way of holding all stakeholders accountable. Sharing in the outcomes and visibly knowing what needs to change is a great start in fixing the process in the long run.
The Plant Cockpit provides detailed schedule adherence and iOTIF analytics for inter-company shipments making it easy to find where slowdowns occur.
3. Set the right inventory and safety stock targets. Easier said than done. Many will take a look at OTIF and the logical thought is that the right target is 100% OTIF. Well, there is a cost associated in inventory to make sure you deliver regardless of issues faced. Targeting a 95% (or higher) on-time, in full may not make sense for your business. To set the right goals, make sure you’ve fully considered the tradeoffs (anyone can get 100% with infinite inventory). The best place to start is getting your cost-optimized service level and inventory number. This number balances the cost of disservice with the cost of high service (carrying more inventory). From there, weigh the costs of carrying extra safety stock with the benefits of achieving a higher service level. You may find that you haven’t been setting the right goals.
Inventory Optimization Dashboard uses machine learning and data science to prescribe a cost-optimized service level based on your forecast.
4. Monitor for sustaining performance. Be proactive with OTIF and quickly understand when there are disruptions. As discussed earlier, OTIF tells you how well your end-to-end supply chain is executing from the perspective of your customer. There are many issues that can potentially impact performance long the way to getting products out the door to your customers (forecast accuracy, inventory levels, supplier performance, schedule adherence, and others). They key to mitigating issues is leveraging diagnostic analytics that link OTIF with the underlying drivers across the supply chain. A root cause tree that includes all of the key factors that could potentially impact OTIF is central to managing improvement.
Root cause analysis uses diagnostic analytics to link OTIF performance with the underlying business drivers across supply, inventory, forecasting and schedule adherence.
5. Standardize OTIF across your supply chain. Inconsistent calculations across plants, DCs or regions make it hard to know how well you are actually servicing customers. Because OTIF is a proxy for customer service level, we recommend standardizing OTIF calculations as close as possible to how the customer will be measuring your performance. This means measuring OTIF against the requested delivery date by the customer (in addition to your commit date). Even better still, incorporate last mile information to confirm that your carrier actually made the delivery on time to the customer.
OTIF analytics dashboard shows where best to focus their attention by comparing %OTIF of the promised delivery date and the customer’s requested delivery date. This information is mapped across customers, warehouses, and business units.
As a supply chain intelligence company, we like to think everyone is getting OTIF right. However, if you feel like there may be kinks in your supply chain (i.e., delivering only the console and no controllers?) we are here to help you not only master OTIF but improve overall business performance.