Written by
David Koke
Senior Marketing Manager

Beacon’s supply chain visibility and collaboration platform empowers organizations to achieve more efficient, reliable and sustainable supply chains.

In this article

February 15, 2024

Make OTIF and perfect orders standard

If it’s not early, it’s late. Next-day delivery promises have changed the way we buy, setting expectations for every purchase to turn up when we want it, exactly as we ordered it. Whether you operate in a B2B or B2C context, the ‘Amazon effect’ has trickled through to shape expectations in every area of logistics and transportation. 

Businesses are now just as demanding as end-consumers, so if you’re not taking steps to keep your own deliveries up to standard, then you risk tarnishing your reputation, incurring steep fines and losing customers.

For businesses to keep up with modern standards, they need to be investing in top-tier supply chain tracking, analytics, and visibility software, as well as the collaboration necessary to ensure smooth, timely handovers between all the different actors along the supply chain. 

What is OTIF in supply chains and how can you achieve it?

We all know that OTIF means delivery on time and in full. But we also know there are thousands of different ways for a shipment to be delayed or disrupted – making OTIF much harder to achieve than the simple acronym suggests.

As far as the data is concerned though, OTIF is a strict, black-and-white assessment. If a delivery arrives after its scheduled time, it’s late. If the order isn’t right, has too few (or too many) items, or is damaged, then it hasn’t been fulfilled in full. 

On the other side of the coin, if you are regularly achieving OTIF delivery, then you’re a lot closer to a crucial ‘perfect order’. A perfect order isn’t just received on time and in full, but also ticks all the right boxes around accurate documentation, labeling, and invoicing. The more of them you have, the more likely it is that you’re not just meeting customer expectations, but exceeding them. 

Luckily, all of this is quite easy to measure, as long as you’re collecting the right data. 

How to calculate OTIF performance

Assuming your packaging and documentation processes are up to scratch, the on-time delivery (OTD) part of OTIF is usually where perfect orders fall through. You can work this out as a percentage by comparing which of your orders arrived on time to those that didn’t, which is a handy way to see how much work you have to do. 

Simply divide your number of your late orders by the total number of orders. That will give a percentage for how many orders were late, which you can use to work out how many achieved an OTD. 

how to calculate otif performance
XcelPros, Calculating on-time delivery (“OTD”) percentage 

 Why is on-time delivery so important as a business? 

In the consumer world, late deliveries are a source of frustration that can lead to dissatisfied customers and reduced loyalty – along with reputational damage if they’re frequent enough to become the norm rather than the exception. 

All of that is equally true for businesses that ship goods and materials to other businesses. If your organization gains a reputation for failing to deliver at OTIF or perfect order standards, then it should be no surprise when some of your customers start to look for more reliable alternatives. 

The frustration can even seep into other parts of your supply chain, leading to disengaged employees, embarrassed partners, and stakeholders whose expectations are consistently being undermined. None of which is good for business. 

Last, but certainly not least, there are very real financial consequences to missing on-time delivery. These can be broken down into three separate areas. 

Firstly, there are the direct fines levied by customers towards wholesalers as a result of any late arrivals. These include chargebacks and OTIF fines, and are a clear sign of dissatisfaction as well as a financial penalty. 

Then there’s the cost of empty shelves, which only means one thing if you’re a retailer – missed sales. No matter what you’re selling, if there’s no stock, there’s no revenue.

Finally, if your deliveries are arriving to customers late, it’s very likely that you’ll be incurring some sort of penalty, somewhere along the way. That could be demurrage fees, detention charges, or a host of other unnecessary costs that every business is better off without.

Visibility and the power to improve OTIF performance

You can’t regularly achieve OTIF deliveries without a thorough understanding of all the different factors that affect it. For that reason, better supply chain visibility should be your first port of call.

With a tool like Beacon that gives you a single source of truth for all of your shipping and transportation data, you’ll be able to easily see detailed reports of where delays are happening, what’s causing them, and from there, take appropriate action.

Delays could be occurring amongst your carriers, in your distribution centers, or at critical hand-off points between partners. But wherever they’re happening, you won’t be able to address them if you don’t have the data to know what’s going on.

Just as importantly, up-to-date data can be shared with your supply chain partners. Collaboration is the key to minimizing delays, because if everybody’s singing from the same songbook, it’s far less likely that small delays will be compounded by confusion and spiral into significant ones that dent your OTIF performance.

So if you want to get better visibility into your delays and access the collaborative tools that will help you eliminate them, invest in a real-time data solution that increases customer satisfaction, boosts loyalty, and helps you avoid unnecessary penalty fees.