Tracking key performance indicators (KPIs) is a fundamental step toward e-commerce success. Without close attention to the data that matters, you’re likely losing money and customer trust. In this blog, we’ll help you understand what OTIF (on-time and in-full) stands for, why it matters, and how improving your OTIF rate can help you grow your e-commerce business.
OTIF Definition
OTIF (on-time and in-full) is a measurement of the percentage of orders delivered to the destination on time and with all the necessary inventory. Essentially, it means that you or your logistics partner are able to deliver an order to its final destination within the specified time range and without any pieces of the order missing.
We’ll split this KPI into two subcategories for further analysis: on-time delivery and in-full delivery. But first, let’s explore why OTIF matters and where it comes from.
Why OTIF Matters
A large part of understanding OTIF’s meaning is learning why it matters. A truly excellent order fulfillment strategy is one of the best ways to earn a customer for life as an e-commerce company. The OTIF KPI will help your business do just this, as it will reveal areas where you’re not servicing your customers as well as you could be.
The foundation of e-commerce is trust. Customers are often giving their credit card information to a company they can’t touch and feel. When an online shopper clicks the buy button, they’re entering into an agreement that you will deliver the products in their cart on time and with accuracy. Failing the OTIF test will result in a loss of trust.
A History of OTIF
Seriously tracking the OTIF KPI originated in 2017 with Walmart. Walmart began evaluating suppliers based on their ability to deliver orders on time. More than that, they levied fines on companies that failed to comply.
Originally designed to improve in-house store operations at Walmart, OTIF was quickly adopted by other companies, leading to a series of major changes. More than ever before, companies and retailers are eager to understand where supplies are, how much they cost, and when they can get a hold of them.
As a result, OTIF has given rise to a greater need for precision in supply chain operations — and a greater desire to capitalize on that precision.
On-Time Delivery Definition
On-time delivery is a KPI that tracks whether your order was delivered to your customers within the specified window of days. However, customer perception of on-time delivery may not always match a company’s definition of the term.
Suppose a customer places an order on the 5th of the month and chooses standard shipping with a three- to five-day delivery window. From the customer’s perspective, they’re expecting their package to arrive between the 8th and the 10th of that same month. Perhaps a little later if they ordered it close to the weekend.
However, if your fulfillment center doesn’t prepare the order for several days — with shipping taking between three and five days — the customer will feel as though their package didn’t arrive between the agreed-upon shipping window. While your fulfillment center held true to its promise of standard three- to five-day shipping, the customer’s frustrations are still very much real.
Warehouse location can also affect delivery time. If your fulfillment center is on one side of the country — perhaps near a port city — your orders will have to travel through a lot of shipping zones to reach customers on the other side of the country.
Customers may experience those long transit times as late deliveries. Some may not even order from your business if the projected delivery dates are a week or more.
Sometimes packages are delayed in transit and there’s not much you or your 3PL can do about it. However, an experienced third-party logistics provider (3PL) may be able to provide alternate delivery options when problems with carrier capacity arise.
In-Full Delivery Definition
An in-full order includes the correct product, colors, and size of all the items the customer purchased. A healthy “in-full” metric is directly related to your fulfillment center’s order picking accuracy.
Mispicks — whether they be incorrect items or an incorrect quantity — lead to orders that fail the OTIF metric. Even if your fulfillment center completes the order in full, if your products arrive in multiple shipments on different days (due to backordered SKUs or improper inventory distribution across warehouses), then customer experience will suffer.
Only orders that meet both metrics are considered on time and in full. You can track your OTIF rate by analyzing when your packages left the warehouse and when they were delivered to your customers, as well as the fulfillment error rate. Your fulfillment center should be able to provide you with this data, assuming they’re functioning with up-to-date fulfillment technology.
What’s a Good OTIF Rate?
After understanding what OTIF stands for, it’s important to look at a good OTIF rate. Everybody aims for 100% accuracy, but eventually, something will happen that will affect a perfect score. Factors like severe weather, supply chain delays, and human error are always a possibility — even in warehouses with the most advanced systems, layout, and quality controls.
Order fulfillment has gone up in the past few decades or so thanks to fulfillment software and more advanced order handling processes. However, not all 3PLs have the same standards. We recommend looking for a 3PL with an OTIF rate of 90-95%.
Improving Your OTIF Rate
If you’re looking for ways to improve your OTIF rate, you’re not alone. Below are a few common ways to raise this important KPI.
- Provide up-to-date whereabouts. Dispatching another shipment that will arrive on time when the original shipment is experiencing a delay, is important — but this is only possible if you know when a package is held up in transit. Be sure to partner with a 3PL that has established these throughways of communication with third-party carriers.
- Identify sources of delay. You should have the ability to monitor your carriers and receive real-time information from your 3PL. If delays are becoming a common occurrence, your 3PL should be able to analyze the situation and start addressing the root cause of the delay — whatever it may be.
- Order accuracy. This one begins with the 3PL, and it’s something directly within their control. Be sure to ask your current fulfillment partner about their order picking rate, strategy, and warehouse layout. If your 3PL doesn’t have one — or it’s shaky at best — then it’s time to find a new fulfillment partner.
So, what does OTIF stand for? In addition to on time and in-full, you could also think of it as standing for your continued e-commerce success. A lack of attention to OTIF means a lack of focus on customer satisfaction. And without customer trust and loyalty, your business will struggle to continue to grow.
Improving your fulfillment strategy is paramount. Contact us today to see how we can help you improve customer satisfaction and grow your business.
