If you’re looking to supercharge your supply chain’s efficiency, then mastering Key Performance Indicators (KPIs) is essential. So, let’s focus on the king of supply chain KPIs: On-Time, In-Full (OTIF). This powerful metric is your go-to gauge for how timely and accurate your supply chain delivers. However, to get the most out of this metric, it is crucial to measure it right. Also, OTIF isn’t just focused on on-time delivery performance. Indeed, it is much more comprehensive, enabling exceptional insights across your entire supply chain. This includes from the very moment an order is placed all the way through to its final destination. As a result, the OTIF metric enables smoother operations, slashed costs, and delighted customers.

In this article, I’ll examine the significance of the On-Time, In-Full metric and guide you through its calculations. Furthermore, I’ll share essential insights and answer questions on how best to measure OTIF to meet and exceed your particular operational goals. This includes considerations like: early arrivals, delivery windows, promised dates, and data quality to name a few. Lastly, I’ll highlight the advantages and cautions of using OTIF.

1. What is OTIF, How to Calculate, and Why is It Important?

On-Time, In-Full (OTIF) is a performance metric that evaluates how well sellers deliver orders to their customers accurately and on time. Below, I’ll share with you what it is, how to calculate it, and why it is important.

a. On-Time, In-Full Metric Definition.

Below is a definition of OTIF.

“… measures a supplier’s ability to fulfill its delivery promises, meaning a customer receives exactly what was ordered, in the amount requested, at the correct location, and within the agreed upon timeframe.”

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What I like about the OTIF metric is that it is truly a supply chain metric that measures what is most critical across many logistics functions. This includes order placement to order fulfillment through final delivery. Also, indirectly it is measuring other logistics functions such as planning, supplier management, and procurement.

b. How OTIF Is Calculated?

At least on the surface, this multi-functional metric is simple to measure. The OTIF calculation is as follows: 

OTIF (%) = (on-time, in-full orders / total number of deliveries) x 100

So, the closer your OTIF rate is to 100%, the better your supply chain operation is doing!

c. The OTIF Metric Provides Visibility to Three Crucial Supply Chain Performance Indicators.

OTIF matters because it answers these three crucial questions:

• are customers getting what they want?
• is inventory moving efficiently?
• are operations running smoothly?

Without a doubt, today’s customers, both commercial and residential, have no tolerance for late or incomplete shipments. Indeed, they’ll simply find another retailer or supplier that can deliver On-Time, In-Full. That’s why tracking OTIF isn’t just about measuring performance—it’s about staying competitive in a market where perfect delivery is the expectation, not the exception. For a more detailed discussion on the OTIF metric, see Interlake Mecalux’s article, OTIF: on-time, in-full order delivery.

“… the closer your OTIF rate is to 100%, the better your supply chain operation is doing!”

2. Walmart Successfully Pioneered the OTIF Metric as a Way to Increase Supplier Performance.

When discussing OTIF, it is important to look at how Walmart uses this metric. This is because they are the company that pioneered the use of this important supply chain metric. Below are details on how Walmart got started with using the On-Time, In-Full metric to manage their suppliers’ performance. Also, I’ll provide an example of how Walmart calculates OTIF and how it applies penalties for suppliers that fall short, either late or incomplete deliveries. Lastly, I’ll highlight the unique way Walmart measures and uses their On-time, In-Full metrics to meet their specific service performance goals.

a. 2017 – Walmart Pioneers the OTIF Metric.

It was just in 2017 that Wamart launched the first-ever On-Time In-Full (OTIF) initiative. Within inner supply chain circles, the Walmart OTIF initiative has become legendary as a way to manage suppliers and achieve supply chain excellence. Basically, Walmart (as many other companies are now doing) uses the OTIF metric to measure supplier performance and apply financial penalties if this metric’s benchmark is not met. Indeed, this has proven key for Walmart for keeping items in stock. So, especially for companies with a lot of suppliers, following Walmart’s example goes a long way toward achieving supply chain excellence.

b. How Walmart Calculates and Uses OTIF to Drive Supplier Performance.

By setting stringent OTIF requirements, Walmart achieves consistency and reliability of its inventory replenishment processes. Additionally, this initiative not only improves the efficiency of Walmart’s supply chain operations but also encourages suppliers to tighten their delivery schedules and improve their forecasting. To illustrate, below is what can happen when a Walmart supplier fails to meet both the On-Time and In-Full standard for a purchase order (PO). In this example, this is what happens if a single Purchase Order (PO) in not On-Time, In-Full.

Case Study: Walmart Supplier Fined for Missing OTIF on One Purchase Order

1. Purchase Order Delivery Terms. PO states that the supplier will ship 100 cases that will arrive on January 10. With 3% penalty, if late.
2. Supplier Fails to Meet PO Delivery Terms. The shipment misses the delivery date and is short on the number of cases, per agreed upon in PO. Specifically, the following delivery promises were broken:
   • Late Delivery. Supplier’s shipment is one week late, and only 85 cases were shipped.
   • Short Delivery. Also, the supplier only shipped 85 cases, 15 cases short.
   • OTIF Calculation: OTIF (%) = (on-time, in-full orders / total number of deliveries) x 100
3. Walmart Late Penalty Calculations. So in this case the delivery terms had an OTIF metric of > 90% and a 3% penalty if not met. As a result, the buyer (Walmart) would fine the supplier as follows:
   • Penalty for Not On-Time: 3% cost of goods for the 85 cases that arrived late.
   • Penalty for Not In-Full: 3% cost of goods for the 15 cases that did not ship.

Again, this example is just for one purchase order. Also, Walmart will look at overall OTIF delivery rates for each supplier. If the supplier continues to perform below expectations, eventually Walmart would terminate the supplier relationship. I thank 8th and Walton for this excellent example from their article, Walmart OTIF: A Supplier’s Guide to On-Time In-Full. Additionally, this article provides a detailed discussion of how Walmart uses the OTIF metric to keep items in stock from their thousands of suppliers.

c. Walmart’s Unique OTIF Approach to Meet their Specific Service Performance Goals.

Though Walmart is extremely effective in both measuring and leveraging the OTIF for their specific service performance objectives, these unique business practices may not be effective for other businesses. For one, Walmart’s use of the OTIF is focused solely on their suppliers. Also, Walmart incorporates within their suppliers’ contracts the OTIF metric and associated performance penalties. So, Walmart’s specific OTIF approach may not work for a small business or a retailer focused on residential deliveries. Also, unlike Walmart, many businesses may not have access to quality service performance data to adequately measure OTIF. At the same time, the OTIF metric is a powerful tool that most, if not all, supply chains should leverage to improve service performance.

“… Walmart … uses the OTIF metric to measure supplier performance and apply financial penalties if this metric’s benchmark is not met.”

3. How Best to Use Supply Chain Data To Implement the On-Time, In-Full Metric.

Getting OTIF right starts with good data. First, you’ll need to track the following: suppliers’ delivery times, the promised date, and that the shipments are complete (In-Full) based on your purchase order (PO) delivery requirements. Without a doubt, modern tracking systems have the data to tell businesses where their supply chain is falling short. Moreover, if this data is shared with your supply chain partners – from suppliers to carriers – everyone can work together to fix problems faster. Below, I’ll share with you tips on how you can best prioritize OTIF goals for your particular business and how best to measure this metric based on your particular service performance goals.

a. First, Identify Your Primary Objective For Using the OTIF Metric.

To best use the OTIF metric for your particular supply chain operation, you need to identify what you are trying to achieve. For instance, Walmart’s use of the OTIF metric is to enhance their supplier’s performance and accountability. For your supply chain operation, this may be a concern, but it may not be your top priority. Now, identifying the primary reasons for using an OTIF metric will determine exactly what aspects of on-time and in-full that you should measure and prioritize. So, to assist you in determining your priorities, below is a list of common OTIF goals.

Reasons For Implementing an OTIF Metric

• Enhance Supplier Performance and Accountability. Encourage suppliers to achieve higher standards of performance and stronger accountability. Indeed, this is Walmart’s focus.
• Improve Inventory Management. Provide feedback for inventory control. Thus, helping to minimize both shortages and excesses.
• Increase Forecast Accuracy. Refine forecasting models by providing data on delivery success rates. Thus, this leads to more accurate and reliable production scheduling.
• Achieve Delivery Reliability. Improve the customer’s delivery experience and gain their trust.
• Reduce Costs Associated with Late Deliveries. Minimize the costs associated with late deliveries such as return charges, bad customer reviews, and high customer churn.
• Identify Bottlenecks and Delays. Conduct post-diagnostics analysis to uncover and address the root causes of bottlenecks and delays. Thus, this facilitates smoother and more efficient operations.
• Enable Proactive Exception Management. Leverage OTIF measurements in real-time to proactively manage potential exceptions..
• Optimize Overall Supply Chain Performance. Use the OTIF metric to serve as a catalyst for overall supply chain optimization. As a result, this helps to pinpoint areas for process enhancements and strategic decision-making.

“… identifying the primary reasons for using an OTIF metric will determine exactly what aspects of on-time and in-full that you should measure and prioritize.”

So, once you determine the primary reason for using an OTIF metric, the next step is to determine how best to measure OTIF to achieve the desired results.

b. Eight Tips for Effectively Measuring On-Time, In-Full Deliveries.

For businesses to truly improve their supply chain’s efficiency and service levels, it is critical that they both understand and accurately measure OTIF. As such, there are many things to consider when setting up to measure OTIF. For instance, are you tracking inbound shipment against POs or outbound shipments to your customers? What data is available and how to accurately measure OTIF? In fact, it is amazing all the things to consider when measuring OTIF. See below for insights and answers to key questions for both effectively measuring OTIF and taking corrective action to improve your OTIF rate.

Eight Insights and Essential Questions to Ask for Effectively Measuring OTIF

Establishing An OTIF Metric for Supply Chains: Practical Advice You Need To Know

1. OTIF vs Inventory Availability: Are they the same?
2. Is Arriving Early Bad?
3. How Big Should the Delivery Window Be?
4. Measuring On-Time Dates Correctly: Identify data and time delivered and the promised delivery date (ex. delivery window, No-Later-Than date and time)
5. Is It Better to Measure Based on the Shipment’s Case Count or By the Purchase Order’s Product Item Count?
6. Consequences of Setting OTIF Standard Too High Or Too Low.
7. How Poor Data Quality Affects Both OTIF Measurements and the Ability to Take Corrective Action.
8. Do We Need an Universal Standard for OTIF Or Just Make It Understandable?

For more detailed advice on maximizing the effectiveness of measuring OTIF, see my article, Establishing An OTIF Metric for Supply Chains: Practical Advice You Need To Know.

“For businesses to truly improve their supply chain’s efficiency and service levels, it is critical that they both understand and accurately measure OTIF.”

4. Advantages and Cautions for Using OTIF.

Without a doubt, an operation’s OTIF rate not only reflects on its ability to meet its delivery commitments but also is an indicator of the overall health of its supply chain operations. Specifically, utilizing OTIF effectively offers businesses a clear snapshot of their logistical prowess, highlighting areas of strength and pinpointing opportunities for improvement. However, while OTIF can drive substantial benefits, it is important to navigate its implementation thoughtfully to avoid potential drawbacks. Below are the principal advantages and cautions of using OTIF as a key performance indicator.

OTIF Advantages and Cautions

The Powerful OTIF Metric For Logistics: Spectacular Advantages, Its Cautions

• Direct Cost Savings: Lower Shipping Costs & Fees and Frees Up Capital.
• Increases Customer Satisfaction and Trust.
• Lowers Supplier Network Cost By Measuring and Incentivizing Better Performance.
• Increases Operational Velocity While Decreases Volatility.
• Improves Administrative Efficiencies and Increases Negotiation Power.
• Increases Cross Functional Cooperation And Interoperability.
• Major Cautions With Using OTIF Metric: Poor Data, Bad Measurements, Overzealous Use.

For a detailed examination of the advantages and cautions of the OTIF metric, see my article, The Powerful OTIF Metric For Logistics: Spectacular Advantages, Its Cautions.

“… while OTIF can drive substantial benefits, it is important to navigate its implementation thoughtfully to avoid potential drawbacks.”

More References.

Also, for more reference and discussions on measuring the OTIF metric, see:

• Slimstock’s article, Is OTIF The Right Way to Measure Availability?
• Zipline Logistics’ article on how to improve your OTIF rate – 15 Tips to Improve On-Time and In-Full Delivery (OTIF).
• Supply Chain Data Analytics: Data Analysis Examples To Best Overcome The Challenge Of Supply Chains
• On-Time Delivery KPIs: The Best On-Time Delivery KPIs to Make Your Customers Delighted

The Best On-Time Delivery KPIs To Make Your Customers Delighted

Lastly, do you need help with an innovative solution to make your supply chain analytics actionable? I’m Randy McClure, and I’ve spent many years solving data analytics and visibility problems. As a supply chain tech advisor, I’ve implemented hundreds of successful projects across all transportation modes, working with the data of thousands of shippers, carriers, and 3rd party logistics (3PL) providers. Moreover, I specialize in launching new analytics-based strategies, proof-of-concepts and operational pilot projects using emerging technologies and methodologies. If you’re ready to supercharge your analytics or if you are a solution provider, let’s talk. To reach me, click here to access my contact form or you can find me on LinkedIn.

For more from SC Tech Insights, see the latest on these topics: Data, Interoperability, Decision Science, Shipping.