What is that one way for any eCommerce brand to ensure absolute customer satisfaction without spending any additional dime? The answer is surprisingly simple: deliver customer orders on time and in full quantities.
Logistics experts have formulated the ‘On time In Full’ (OTIF) metric to evaluate how efficient a company’s fulfillment and shipping processes are. A higher OTIF score naturally translates to heightened customer favorability with a brand. In this article, we present the nitty gritty of OTIF and how eCommerce businesses can measure it.
Defining On Time and In Full (OTIF)
The OTIF metric measures the number of times an order is accurately delivered to the customer within the promised delivery date or time. In other words, it assesses the success rate of an eCommerce business in fulfilling customer orders within the estimated delivery date.
Calculating the OTIF rate can help businesses avoid the penalties of late or missed deliveries in the form of subtracted customer loyalty. A study conducted by Voxware reveals customers' high expectations for accurate deliveries-
It found that 69% of the surveyed customers abandon an online shop if the orders aren’t delivered within two days of the EDD. Moreover, 16% of its surveyed customers would cancel a retailer in case of an incorrect delivery date and 14% in case of a late delivery time just one time.
Other studies have found that 23% of all returns are attributed to the wrong product received. Needless to say, the margin of error for late order arrivals or inaccurate orders is zero. The OTIF metric can come in handy to thoroughly examine the state of any company’s supply chain performance.
Let’s part the term to understand each one better:
1) On-Time Delivery
On-time delivery means delivering the customer's orders within the stipulated time frame they choose at checkout. However, it is often observed that the window for on-time delivery has different significance for the brand and the customer.
Take, for example, a case when a customer places an order selecting a standard shipping time of 3-5 days on the 1st of April. The expected delivery time falls between the 3rd and the 5th of April. The customer would ultimately prefer the order reach them on the 3rd.
However, this window includes the time required for order fulfillment and last-mile shipping. So, the retailer must dispatch the order on the 1st or 2nd of April to reach the customer on time. Anything beyond this, and the order won’t reach the customer on time.
On-time delivery, therefore, requires strategic planning, including selecting warehouse locations and excellent carrier partners.
2) In-Full Delivery
In-full delivery is a metric of order accuracy. An order is deemed as ‘in-full’ delivery if the items are of the right size, color, weight, and appearance as the product description. An in-full delivery drastically reduces the chances of product returns and exchanges.
Executing a successful in-full delivery can become tricky in cases of split orders. Customers may feel that the order is incomplete if multiple products arrive at different intervals or if there are backorder SKUs. In such cases, it is best to include packing slips inside the shipment to inform customers of the full order details.
The Significance of On-Time In-Full Metric in eCommerce
1) Measures the Efficacy of Warehouse Operations
OTIF is a metric that delves deep into the overall order fulfillment operations. Consequently, it looks at supply chain aspects that control fulfillment processes like warehouse performance or product procurement.
The first step in preparing an order begins with keeping SKUs in stock. Therefore, in measuring the OTIF score, retailers can examine their procurement process, SKU control, and storage required to keep inventory.
At the same time, a low in-full delivery rate can indicate inadequate picking practices, delays in retrieving SKUs, and inventory disorganization. When such problems are highlighted, eCommerce retailers can take action to correct them or switch their fulfillment partners.
2) Assesses the Shipment Planning and Performance of Carriers
OTIF is a direct yardstick for analyzing the efficacy of a company’s shipping strategy. How an eCommerce company tracks orders, plans shipping routes, and distributes inventory has a direct bearing on order shipment.
Last-mile deliveries are prone to shipping exceptions like port congestion, trucking issues, incorrect shipping documentation, etc. In many cases, these factors are handled by the carriers. OTIF directly measures the capacity of a carrier to maneuver these obstacles and deliver orders within the estimated arrival time.
3) Identifies Late Delivery and Order Inaccuracy
One of the primary concerns of any customer shopping online is to receive their orders on the given EDD without incurring any damage. A higher OTIF score indicates that the designated carriers avoid late deliveries, a prime reason for customers switching to other brands.
Similarly, OTIF highlights the successful delivery of accurate order counts, demonstrating the potency of a business’ order and inventory management.
Businesses can enhance their inventory monitoring to bring up the OTIF score.
This can help them avoid stockout, replenish the stock in time, and reduce split shipments and backorders. In doing so, they can increase their order fulfillment accuracy and in-full delivery rate.
4) Evaluates Supply Chain Planning and Bottlenecks
Deliveries are ultimately the result of a long-drawn supply chain management process. It involves manufacturing products on time, arranging first-mile shipping for bringing cargo into the warehouse, and avoiding lead times. There the OTIF metric can come in handy in evaluating supply chain performance.
For a successful on-time delivery, businesses have to first inspect the quality and quantity of the products at the time of receiving. They have to arrange the right storage system and label SKUs correctly. They have to incorporate the picking techniques and packaging requirements to avoid the wrong products from getting picked and fragile packaging.
Moreover, businesses have to find the right carrier and fulfillment partners and choose the right shipping method to avoid shipping bottlenecks. Thus, OTIF is a metric that’s connected to all aspects of the supply chain.
How to Measure On-Time and In-Full Delivery Rates?
To calculate the on-time and in-full delivery rate requires two factors:
- Total number of deliveries in a time period
- The number of deliveries done right on time
- The number of orders containing all the items
The formula for measuring the OTIF delivery is-
Total no. of deliveries completed on time and in full ÷ total deliveries done × 100
Here is an example:
Let’s say the total monthly deliveries made are 500. Of this, 355 were completed on time and in full. Then the OTIF rate would be-
355 ÷ 500 × 100 = 71%
Top 6 Ways to Optimize On Time In Full Rate for eCommerce Businesses
1) Facilitate Order Accuracy with Warehouse Management Software
Order accuracy is attained when there is end-to-end inventory monitoring. Supervising the inventory levels and labeling SKUs accurately can greatly diminish the possibility of stockouts after orders are placed by customers. To keep track of inventory, picking, and packing, having warehouse management software is the ideal solution.
2) Implement Inventory Distribution and Order Consolidation
If the inventory is kept in facilities far away from transportation hubs or demand-centric zones, shipping delays become common. To lower delivery times, businesses can distribute inventory locally and fulfill orders faster at lower costs.
Similarly, if brands consolidate multiple orders into a single batch, they can facilitate faster order fulfillment. Customers can be satisfied with the entirety of their order arriving on time and in full.
3) Incorporate Route Planning and Network Configuration
Well-planned routes are the best solution for delivering orders on time, bypassing the issues that arise at the last mile. Route optimization involves measures like guiding delivery drivers with directions to customer locations.
Route planning takes into account factors like one-ways, roadblocks, prevailing weather conditions, weight capacity, stop priority, etc. Businesses can also create custom routes according to their preferences for low shipping costs or faster deliveries.
4) Set up an Order Tracking System for Real-time Visibility
Tracking orders in real-time is essential if retailers are to monitor their shipments across every milestone in last-mile shipping. Doing so allows them to be vigilant of any delays and communicate with the carrier to resolve the issue.
Moreover, retailers can notify customers of order status, relieving them of any anxiety about the delivery. They can also be informed of any change in delivery status, which helps them prepare to receive it at a later date. In the case of curbside delivery or locker delivery, order notifications carry information about where customers can pick up their delivery.
5) Strategise Ways to Leverage Lead Time
In order to fulfill orders on time, it is important that production is completed on schedule. Lead time in inventory management denotes the time needed for suppliers to deliver the finished products after receiving a purchase order. Lead time decides if retailers will face a stockout situation.
For an OTIF delivery, retailers can devise ways to reduce lead time. One way is to add new product lines when production time is running low. Another way is to have local suppliers or manufacturers who can ship merchandise on time rather than wait for cross-border shipments.
6) Carry Out End-to-End Supply Chain Visibility
On-scheduled deliveries are the result of a well-organized supply chain. To increase the OTIF performance, retailers can establish OTIF key targets across every product line.
This will allow them to plan ahead in time to communicate with suppliers, manufacture products, and track inventory. Having end-to-end supply chain viability can enhance inventory management and shipping time.
The on-time, in-full delivery is a key performance indicator (KPI) of excellent logistics management, and, by extension, customer retention. It is said that the foundation of customer engagement is trust, and OTIF delivery achieves this. Keeping this in mind, we hope that our guide will help businesses get a better grasp of the OTIF metric and ways to optimize it.
1) What is an optimal OTIF rate?
It is highly unlikely for any eCommerce company to get 100% accurate, on-time, in full deliveries. Irrespective of the variations in industry standards, the optional OTIF rate is somewhere between 80% to 90%.
2) What is the OTIF formula?
The OTIF formula is- Total no. of deliveries completed on time and in full ÷ total deliveries done × 100. Businesses must track the total number of deliveries made in a month and the number of deliveries completed on time and in full quantity.