OTIF – On – Time – In – Full DIFOT – Delivered – In – Full – On – Time
OTIF is a KPI (Key performance indicator) that unites a company. What is the meaning of DIFOT? And is OTIF meaning something different?
(It can almost be said to be the measurement of the businesses’ ability to work together.)
It measures whether your company delivered your commitment to your customer! Many factors enter into calculating OTIF or DIFOT from the initial managing of the customer’s expectations to the delivery driver’s attitude towards the goods! I have tried to make a list of the factors, and the departments affected, below,
Salespersons should make realistic commitments when processing the order. (And be prepared to go back to the customer if they have got it wrong!)
Purchasing needs to work with accurate forecasting to ensure that they have optimum stock levels in the warehouse.
Finance will support the restocking more willingly if the level of service can be better measured.
Customer Services can confidently resolve out of stocks and late deliveries, knowing that the entire organisation is committed to backing up their commitments.
Warehousing gets a better understanding of why the stock needs to be clean and labelled, quantities correct and in the right Bin Locations so that miss-picks become rare.
Dispatch works according to delivery dates which have been communicated to the customer. (Any queries’ regarding substitution of “out of stock product”, having been previously resolved)
Logistics are empowered to deliver accurately and carefully, knowing that the company relies on them to provide the final service that maintains or improves its OTIF rating.
Management has an “at a glance” metric to monitor that can be discussed with every department when conducting performance reviews or planning operational changes.
How do you measure OTIF?
A delivery day and time must be on each order. Sales staff may need training on what an acceptable commitment looks like. (by Thursday the 22nd) and not (“ASAP “).
Track your performance on each order. (You may be able to extract this data from your computer system) However, technology is not necessary to track OTIF or DIFOT. Use a checkmark for “on-time” and an ‘X’ for “not on-time.” Indicate this on the dispatch sheet and then enter it in an Excel Spreadsheet. Take this opportunity to include the reason any items were not shipped.
Work out the result as a percentage of the total number of orders.
Have a daily meeting to discuss outstanding issues affecting OTIF meaning your discussion based on “Fails” from the previous day. Whatever the solution, the fact remains that several departments are now united in solving a performance problem that affects them all.
Concentrate on your rate of improvement. (Rather than blindly chasing the 100% mark) Bear in mind that this KPI has the potential to change the character of your organisation. Especially the levels of active communication between departments.
Be prepared to modify or challenge the way you do things. If the definition of Insanity “doing things the same way and expecting a different result” holds. Changes to procedures and processes will be necessary to achieve higher results.
What should our OTIF or DIFOT be?
If you have never managed this metric in some form up till now, your OTIF will likely be in the 70s-80s. Don’t despair! It is normal for the implementation of OTIF alone to bring about an improvement of around 10 Points!
If your OTIF is above 90, you are probably already known for excellent service! And the implementation of OTIF will help you maintain that. If your OTIF is above 95, WELL DONE! This is World Class performance, and it is likely that you already are managing OTIF, although you may have called it something else!
The Self-Cleaning Oven
OTIF falls into a category I like to equate to the self-cleaning oven! You could deliver an order on time if you do not bother to provide them in-full! Moreover, if you are not worried about delivering on-time, you have all the time in the world to delivery in-full. It is the very fact that these two metrics are opposed that makes OTIF such a successful KPI! They keep each other in shape!
Managers that realise this and learn to create opposed KPIs for their departments will soon have an organisation that keeps itself clean (or lean!)
If we take OTIF as a company-wide KPI and choose a further KPI that works against it, you will soon see the benefits within your organisation. Let us look at the examples below using the departments that have already been mentioned;
Sales – Focus every Salesman on Growth. Whether you KPI them on Turnover or Profit Margin, having them buy into OTIF meaning, they understand it is crucial to managing customer expectations.
Purchasing – The KPI most used in Purchasing Departments is Stock Turn. However, your stock’s value is meaningless unless you take other factors such as growth into account. By monitoring Stock Turn in conjunction with OTIF, you will find a dramatic improvement. (in both the timing of orders and also the carrying of the correct stock items.)
Customer Services – (or Internal Sales as it is sometimes known) resist the temptation to deliver at any cost, especially when their performance is measured using Profit Margin and OTIF together.
Warehousing – finds Stock Accuracy and OTIF combined a winning combination!
Dispatch – This is undoubtedly the area where OTIF is owned. This KPI alone is enough to keep this department focused.
Logistics – To control one of a business’s highest costs after wages, why not use Transport as a Percentage of Sales? And with OTIF meaning you ensure service levels remain while prices are driven down?
However, you choose to use OTIF meaning (or DIFOT) in your organisation; you must measure it! In the current economic conditions, customers have a multitude of choices regarding where they buy. Only companies that retain the confidence of the client by providing consistent service are likely to grow and succeed,
On-Time and In-Full!
From time to time, I share some of the experiences gained in contract packaging and packaging materials and manufacturing businesses (over the last quarter of a century and on three different continents!) The topics will cover best practices for packaging. (in the Transit Packaging field)
And proven tips to implement in any operational field. (or Owner Managed Business.) Hyper-links to other resources on the topic covered would be most welcome in the comments section below, that way, we all keep learning.
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