How to calculate your OTIF score to measure supply chain performance

Companies are increasingly using OTIF to assess and optimize overall logistics and supply chain performance. How is this metric calculated? What does it measure, how does it differ from other key performance indicators (KPIs), and what benefits does it offer? How to assess whether your score is good in relation to your customers, competitors and, more generally, your industry?

What is OTIF?

OTIF, which stands for “On Time & In Full,” is a KPI used to measure logistics performance for a company and its supply chain. It’s calculated using the following formula: OTIF = (Number of orders delivered on time and in full / Total number of orders) x 100.

The indicator can be broken down as follows:

  • On time: Were shipments delivered within the agreed lead times? In other words, did customers receive their products by the date and time they expected them?
  • In full: Did the deliveries match what was actually ordered (in terms of quantity, products, and delivery location)? In other words, did customers get the exact products they ordered, and in the right number or volume?

The OTIF metric was created by Walmart in 2017 to assess the ability of its suppliers to deliver orders on time and to penalize those that failed to honor their commitments. It was also conceived as a way to maintain product availability for customers and to manage stock more efficiently.

Also known as “Delivered In Full On Time” (DIFOT), this metric has become a key indicator in the logistics world. It’s especially popular in the age of e-commerce and omnichannel distribution: by indicating the share of orders delivered on time and in full, it gives companies an overview of logistics service quality from the customer’s perspective.

What are the benefits of using OTIF as a KPI?

While other indicators such as service level, delivery lead times, and stock rotation rate are helpful, they only provide a piecemeal picture of logistics performance.

For instance, a company with a high service level could also experience regular late deliveries. Similarly, although an optimal stock rotation rate is essential for keeping a lid on logistics costs, it gives no indication as to whether orders are processed on time.

OTIF provides a more comprehensive picture of the entire supply chain, measuring both operational performance and customer satisfaction—two key factors for building and maintaining a competitive edge. This indicator is gaining ever more traction because it helps companies quickly pinpoint corrective measures and continuously improve logistics performance.

Measuring on-time performance

Using OTIF as a metric, you can determine whether you’re honoring delivery lead times, identify which customers are experiencing delays, and determine the reasons for these issues. For instance, certain product types might be more affected than others, or delays might be caused by stock shortages, or by resource-planning, production, or carrier-related issues.

Measuring in-full performance

OTIF allows you to determine whether customers received all the products they ordered. In doing so, it tells you about the performance of your order-picking processes, while helping you detect problems such as picking errors (and their frequency), or shortages of certain products (which prevent you from satisfying demand for these products in a timely manner).

Why use OTIF to measure logistics performance?

OTIF builds a detailed picture of your logistics performance. By monitoring this metric and taking steps to increase your score, you stand to make the following gains:

  • Increased customer satisfaction: by delivering on time, in full, and without errors, you’ll gain a reputation for outstanding service quality, helping you build loyalty among your existing customers and win new business.
  • Lower costs: a higher OTIF score is good news for your bottom line because it helps you avoid late-delivery penalties, as well as the costs associated with re-shipments and disputes.
  • Optimized stock levels: maximizing your OTIF score helps you reduce stock shortages, which can negatively impact sales and customer satisfaction, and limit overstocking, which leaves stock unnecessarily immobilized and pushes up storage costs.
  • Better operational performance: by tracking your OTIF score, you can pinpoint problems, take corrective action, and even identify where you need to invest in order to optimize your supply chain (such as switching to a new WMS, mechanizing or automating certain processes, or hiring more temporary staff during specific periods).
  • A comprehensive overview of supply-chain performance: with OTIF, you can build a detailed picture of performance all along your supply chain—suppliers, logistics centers, and carriers.

Why OTIF can be difficult to calculate

OTIF gives you a more comprehensive and realistic picture of logistics performance than any other indicator. But it can be difficult to calculate for a number of reasons:

A multidimensional metric

In order to calculate your OTIF score, you need to determine not only whether orders are delivered on time, but also whether they’re accurate and in full. That means monitoring two separate dimensions at once, which is what makes this indicator more difficult to use and measure.

Data collection

Working out your OTIF score involves collecting and aggregating data from different sources. This can often prove challenging, especially in large organizations with multiple distribution channels or where some logistics processes are outsourced.

Data interpretation

“On time” and “in full” can mean different things from one organization to the next, or even from one department to the next within the same organization. For instance, is a delivery considered “on time” if it arrives at the end of the day on the promised delivery date? The same goes for “in full”: does this mean the exact quantity ordered by the customer, or is there a tolerance margin built into the contract?

External factors

Transport delays, sourcing problems with individual suppliers, shortages of particular products and components, and customs hold-ups can all affect your OTIF score. These are all external factors outside the control of the logistics platforms that receive and pick orders.

Integrating multiple applications

You can only work out your OTIF score if your various software programs and applications (ERP system, OMS, e-commerce platform, WMS, CRM system, TMS, fleet management system, and more) are interfaced and capable of exchanging data in real time.

How to calculate your OTIF score

To calculate your OTIF score, you’ll need to use the following formula: (Number of orders delivered on time and in full / Total number of orders) x 100.

The higher your score, the better your logistics performance. Conversely, a lower score suggests that you have room for improvement. A score of 95% or higher is generally considered good. But every industry has its own standards—either for the overall score or for the indicator’s two constituent components (on time and in full). An overall score of 95% might be seen as excellent in one industry but average in another.

OTIF can be broken down as follows:

 

Indicator Description
On-Time Delivery Rate The percentage of deliveries arriving on or before the agreed date.
In-Full Delivery Rate The percentage of deliveries containing all items ordered by the customer.
Order Accuracy Rate The percentage of deliveries arriving with no quantity or product errors.
Damage-Free Delivery Rate The percentage of deliveries arriving with no damaged products.
Order Lead Time The time between order placement and delivery.
Return Rate The percentage of orders returned owing to problems such as errors or damage.

How to set your target OTIF score

To determine your target OTIF score, you’ll need to take several factors into account:

  • Industry benchmarking: standards vary from one industry to another. For instance, in the e-commerce and consumer goods sectors, an OTIF score of 95% or higher is the accepted standard. Yet in industries such as aerospace and automotive, which have more complex products or supply chains, the standard is generally lower.
  • Competitive benchmarking: what promises do your competitors make to their customers?
  • Historical performance: your target OTIF score will depend on your current logistics performance (in terms of on-time delivery and service levels), and on customer feedback and comments.
  • Internal targets: these targets should be ambitious, but also realistic and aligned with your company’s overall strategic objectives, such as increasing sales, reducing churn rate, retaining customers, or addressing identified problems.

How to improve your OTIF score

There are various ways to improve your company’s OTIF score. These include:

  • Better predicting demand in order to avoid stock shortages and overstocking.
  • Optimizing transport and routes.
  • Rolling out tools to support collaboration with suppliers and carriers.
  • Introducing mechanized or automated systems to speed up the order-picking process and reduce errors.
  • Deploying a warehouse management system (WMS) or replacing your existing system.

The importance of a WMS cannot be overstated. This piece of software plays a key role in driving up your OTIF score by automating and optimizing various processes in your logistics warehouses —such as incoming goods, stock and storage-location management, and picking and packing—as well as dynamically reallocating resources in real time in order to honor delivery lead times.

A WMS system also allows you react more quickly to fluctuations in demand and supply, which in turn helps you avoid stock shortages and overstocking. What’s more, by streamlining and automating warehouse operations, a WMS reduces order-processing errors and delays, helping to push your OTIF score to new heights.

OTIF vs. OTD

OTIF (On Time & In Full) and OTD (On-Time Delivery) are both logistics and supply-chain performance indicators. But they measure different things.

As its name suggests, OTD focuses exclusively on punctuality: were the goods delivered by the agreed time on the agreed date? OTIF, as we explained earlier, is a more comprehensive indicator because it looks not just at punctuality, but also at accuracy and completeness.

OTD is therefore just one key component of OTIF, which provides a broader picture of logistics efficiency and performance.

What you need to know about OTIF

OTIF (On Time & In Full) is an indicator that lets you measure whether orders were delivered on or before the deadline agreed with your customers, and whether they arrived in full and with no errors. It’s an increasingly popular metric among logistics experts because of its focus on customer satisfaction.

OTIF is harder for companies to calculate and use than other metrics because it involves collecting and aggregating data from different applications and software systems. But it provides a comprehensive overview of both operational efficiency and overall supply-chain performance.

This broad picture helps companies identify areas for improvement and continuously optimize their logistics operations, which in turn builds trust and drives up customer loyalty.