June 14, 2016
Several years ago I was in a cash-to-cash review meeting with the CFO of Pfizer, and he made the comment that, “rarely does one metric tell the full story about performance.” This is especially true for customer service where there are many different ways to measure the effectiveness of your supply chain.
But with many metrics (and variations) out there – On-Time In-Full (OTIF), Fill Rate, Line fill, On-Time to Promise, etc. – what metrics should you be tracking?
The answer is pretty simple, actually: all of them!
When it comes to improving customer service, it’s important to use multiple service metrics and know when to use one over the other to drive improvement.
For the purpose of this article, I focus on two supply chain measurements that are most widely used. On-time in-full (OTIF) and Unit Fill. With supply chain making headlines for many well-known brands these days. (Such as Target Stores.)The pressure is on for fulfillment and safe stock inventory management.
On-Time In-Full (OTIF)
OTIF is a fantastic metric for understanding your supply chain’s performance from the customer’s point of view. It’s very unforgiving in its assumptions that the customer is not happy when his/her order arrives earlier or later than expected and not in it’s entirety. Miss just one unit or arrive just one day late, and you score a zero for that order.
Supply chains and customer service teams that closely monitor and improve OTIF will have a direct and immediate impact on revenue. They will also grow market share over time. But to be truly effective as a tool for improving customer satisfaction, I recommend breaking OTIF into two additional buckets: “on-time misses” and “in-full misses.” By understanding OTIF at a more granular level, it makes it easier for teams to diagnose any order that missed the mark.
While OTIF is a great tool for understanding how customers are experiencing your supply chain, it’s not great for understanding what levers need to be tweaked in order to improve performance.
That’s why I recommend supply chain leaders also use Unit Fill.
Unlike OTIF, Unit Fill tells you how close you are to filling your order. For example, if a customer orders 100 widgets there is a big difference between shipping 95 and shipping 50 or 0, OTIF would consider any of these scenarios 0% customer service. However, if I shipped >95 units I would feel that our supply chain execution was pretty good even though it did not meet the customer’s expectations. I wouldn’t do anything drastic to improve, rather I would tweak a few levers. If Unit Fill were <60% heads would roll – probably including my own!
Unit Fill performance also gives me a better assessment of how appropriate my safety stock targets are and whether I’m achieving the targets used to calculate them. Again, if my target Unit Fill is 98% but I shipped 97% on average, I could adjust my safety stock slightly to get to my goal. If I were at 65%, I would need to look at some of the other places, like forecast accuracy.
Of course, for any measurement to be valuable, it comes down to the quality and timeliness of the information. Today, with cloud technology and data science from companies like FusionOps, it is possible to improve accuracy and relevancy of data to achieve better outcomes. To learn how your business can properly measure and, ultimately, gain the insights required to win, check out our solutions and let’s talk.