On time in full

What Is On Time In Full (OTIF)?

On Time In Full (OTIF) is a crucial metric within supply chain management that measures the effectiveness of a supplier or company's ability to deliver products to a customer exactly when promised and in the exact quantity ordered. It falls under the broader financial category of operations and logistics, serving as a key indicator of operational efficiency and customer commitment. Achieving a high OTIF score is vital for businesses aiming to optimize their order fulfillment processes and enhance customer satisfaction. A complete OTIF delivery means that the right product, in the correct amount, arrives at the specified location, within the agreed-upon delivery window.

History and Origin

The concept of On Time In Full (OTIF) gained significant prominence and widespread adoption in the logistics industry around 2017, largely driven by major retailers like Walmart. Walmart began to rigorously evaluate its suppliers based on their ability to deliver orders precisely on time and in full, often levying fines for non-compliance, including early arrivals which could disrupt warehousing and receiving schedules.¹⁶, ¹⁷ This initiative by a dominant player in the retail sector forced suppliers to implement more precise and disciplined logistics operations. The focus on OTIF quickly spread across various industries, establishing it as a critical key performance indicator for assessing supply chain performance and supplier reliability.¹⁵

Key Takeaways

• On Time In Full (OTIF) is a dual metric measuring both the timeliness and completeness of deliveries.
• It serves as a vital indicator of a company's supply chain management efficiency and reliability.
• A high OTIF score directly correlates with improved customer satisfaction and reduced operational costs.
• Companies can face significant financial penalties and reputation damage for consistently low OTIF performance, particularly in consumer goods and perishable industries.
• Optimizing OTIF requires robust inventory management, accurate demand forecasting, and strong supplier collaboration.

Formula and Calculation

The On Time In Full (OTIF) percentage is calculated by dividing the number of orders delivered both on time and in full by the total number of orders placed, then multiplying by 100.

The formula is expressed as:

Where:

• Number of Orders Delivered On Time and In Full refers to the count of individual orders that met both the specified delivery time window and included all items in the correct quantities.
• Total Number of Orders represents the total count of orders that were supposed to be delivered within a given period.

This simple formula provides a comprehensive view of overall logistics success, consolidating two critical delivery aspects into a single key performance indicator.¹⁴

Interpreting On Time In Full (OTIF)

Interpreting an On Time In Full (OTIF) score involves understanding what the percentage signifies about a company's supply chain management capabilities. A higher OTIF percentage indicates greater efficiency and reliability in meeting customer commitments. For example, an OTIF of 95% suggests that 95 out of every 100 orders were delivered exactly as promised, both in terms of timing and quantity.

Conversely, a lower OTIF score, such as below 85%, often points to underlying issues within the supply chain, including potential problems with procurement, supplier reliability, transportation, or inventory management.¹³ Companies typically aim for an OTIF benchmark between 80-90%, though this can vary significantly by industry due to different complexities and customer expectations.¹² A consistently high OTIF rate demonstrates a company's commitment to customer satisfaction and operational excellence, while a low score can lead to customer dissatisfaction, increased operational costs, and potential loss of business.

Hypothetical Example

Consider "GadgetCo," an electronics distributor that processes 500 customer orders in a month. At the end of the month, GadgetCo reviews its delivery performance:

• Total Orders: 500
• Orders delivered on time and in full: 450
• Orders delivered on time but with missing items: 30
• Orders delivered in full but late: 15
• Orders delivered with missing items and late: 5

To calculate GadgetCo's On Time In Full (OTIF) for the month:

Number of Orders Delivered On Time and In Full = 450
Total Number of Orders = 500

Using the formula:
OTIF (%) = (450 / 500) × 100 = 0.90 × 100 = 90%

GadgetCo's OTIF score for the month is 90%. This indicates a relatively strong performance in their order fulfillment process, with the majority of orders meeting both timeliness and completeness criteria. This level of performance generally contributes positively to customer satisfaction.

Practical Applications

On Time In Full (OTIF) is a critical metric with widespread practical applications across various sectors of the economy, particularly in areas involving the movement of goods. In e-commerce and retail, a high OTIF rate is paramount for customer retention and brand reputation, as consumers expect timely and complete deliveries. For manufacturers, OTIF helps evaluate raw material and component suppliers, ensuring production lines run smoothly and without costly interruptions.

¹¹Beyond individual company performance, global OTIF rates are influenced by broader economic factors. For instance, global supply chain disruptions, as experienced during the COVID-19 pandemic, significantly impacted delivery times and the ability of companies to fulfill orders in full, leading to decreased OTIF performance across industries and contributing to inflation. T⁹, ¹⁰he International Monetary Fund (IMF) has highlighted how such disruptions can shave off global economic growth and add to core inflation, underscoring the systemic importance of reliable supply chains. I⁷, ⁸mproving OTIF often involves enhancing strategic planning, investing in supply chain visibility technology, and fostering stronger collaboration among all stakeholders, from suppliers to distribution centers.

⁵, ⁶## Limitations and Criticisms

While On Time In Full (OTIF) is a powerful metric, it has certain limitations and faces criticisms. One common critique is its rigidity; it's a binary measure (either 100% on time/in full or 0%), which doesn't account for partial successes or near misses. For instance, an order that arrives 15 minutes late or is short one minor item out of a large shipment still counts as a "failure," potentially masking otherwise efficient logistics.

Another limitation arises from external factors beyond a company's direct control. Unforeseen events like natural disasters, geopolitical issues, or port congestion can severely impact delivery performance despite a company's best efforts. The International Monetary Fund (IMF), for example, has extensively documented how global supply chain disruptions have contributed to inflationary pressures and challenges for monetary policy, impacting even the most robust supply chains.

³, ⁴Additionally, focusing solely on OTIF might lead companies to incur excessive transportation expenses or hold excessive buffer inventory management to meet strict targets, potentially undermining overall cost-efficiency. It also might not fully capture the root causes of performance issues, which could stem from problems in procurement, production, or poor communication with carriers. Addressing these requires a deeper analysis beyond the single OTIF percentage. Researchers at the MIT Center for Transportation & Logistics (MIT CTL) emphasize the need for integrated and analytics-driven supply chain design to account for risk management and uncertainty, which goes beyond simply tracking outcome metrics like OTIF.

¹, ²## On Time In Full (OTIF) vs. On-Time Delivery

On Time In Full (OTIF) and on-time delivery are both important metrics in supply chain management, but they measure different aspects of delivery performance. On-time delivery focuses exclusively on whether an order reaches its destination within the agreed-upon delivery window. It does not consider the accuracy or completeness of the order. An order is considered "on-time" if it arrives within the specified timeframe, regardless of whether it contains all the correct items or quantities.

In contrast, On Time In Full (OTIF) is a more comprehensive metric. It requires that an order be both on time and in full to be counted as successful. This means not only arriving within the scheduled window but also containing every item ordered, in the correct quantity, and without damage. The primary confusion between the two arises because on-time delivery is a component of OTIF, but OTIF adds the crucial "in full" dimension, providing a more stringent and complete assessment of order fulfillment success.

FAQs

What is considered a good OTIF score?

A strong On Time In Full (OTIF) score typically ranges from 90% to 99%, indicating highly efficient supply chain management and strong customer satisfaction. However, what constitutes a "good" score can vary by industry, product type, and customer expectations. Some industries with complex logistics might have slightly lower benchmarks.

Why is On Time In Full (OTIF) important?

OTIF is crucial because it directly impacts customer loyalty, operational costs, and profitability. A high OTIF rate leads to increased customer trust and fewer issues like stockouts or expedited shipping needs, reducing unnecessary transportation expenses. It's a holistic key performance indicator that reflects overall supply chain health.

What causes a low OTIF score?

A low On Time In Full (OTIF) score can stem from various issues, including unreliable suppliers, poor inventory management leading to stockouts, inefficient [warehousing] operations, logistical errors during transit, inadequate [demand forecasting], or unforeseen external disruptions like port delays or labor shortages. Identifying the root cause is essential for improvement.