Blog Post
From online shopping to Uber Eats, we’re all familiar with the disappointment when an expected order isn’t delivered in full, on time. For B2B customers, the frustration is intensified when late or incomplete orders are vital for their business.
According to new research, the number one priority for manufacturing and distribution leaders is customer experience, while the second most important goal is increasing perfect orders. Each year, you risk losing 10% of your customers to competitors, and the top cause of churn is failing to deliver a perfect order, which depends on your ability to process sales orders fast and accurately.
That’s why it’s crucial to track your DIFOT/OTIF (on-time in-full) metrics and always look for opportunities to reduce inaccuracy and inefficiency in your fulfillment process.
Read on to learn how automation can improve your DIFOT/OTIF rates and boost customer satisfaction and loyalty.
What is DIFOT? What is OTIF?
DIFOT is short for ‘Delivered In-Full, On-Time,’ a key performance metric that tracks the percentage of customer orders that are fulfilled successfully within the promised delivery window.
What is the difference between DIFOT and OTIF?
OTIF, meaning ‘On-Time In-Full,’ focuses on the timely and complete delivery of orders to customers. If that sounds familiar, it’s because there really is no difference between DIFOT and OTIF meanings. They're interchangeable.
That said, while the terms seem to identify a simple metric, the definitions of ‘On Time’ and ‘In Full’ are more complicated than they might appear and there's no standard industry-wide definition. For example, does ‘On Time’ mean meeting the delivery slot requested by a customer or the time you promised? If your customers collect their orders, do you track the time the order becomes available to the customer or when they arrive to pick it up? The definition of ‘In-Full’ might be based on complete orders, individual line items, or individual cases of products.
This is worth highlighting because inconsistency leads to inefficiencies and disagreements among manufacturers, retailers, and carriers. A survey conducted by the Trading Partner Alliance (TPA) and McKinsey found that 92% of major retailers and manufacturers believe a standardized OTIF definition is needed to reduce discrepancies and foster better collaboration. Until a standard is established, it’s necessary to bear in mind that your suppliers and customers may be operating under varying definitions of DIFOT and OTIF, and even these may evolve over time.
Why Are DIFOT and OTIF Important in Measuring Performance?
DIFOT/OTIF metrics are important in measuring performance because they directly impact customer satisfaction. The seamless OTIF experience delivered by B2C e-commerce giants like Amazon has recalibrated the standards of B2B customers. Failing to live up to these expectations can mean leaving your customers disappointed and looking for other solutions.
Let’s take a closer look at how improving your DIFOT/OTIF metrics can benefit your company:
- Increases Customer Satisfaction: Ensuring customers receive their orders accurately and on time fulfills their expectations and results in increased satisfaction, fosters loyalty, reduces churn, and attracts new customers.
- Lowers Costs: Having processes in place that enable you to meet your DIFOT/OTIF targets reduces the storage costs associated with carrying excess inventory, lets you avoid penalties for late deliveries, and prevents the need to pay extra to expedite delayed shipments.
- Improves Inventory Management: Keeping your DIFOT/OTIF metrics within your goals helps ensure precise inventory management and free up space to accommodate newly manufactured goods or inbound deliveries.
- Provides a Competitive Advantage: Delivering the DIFOT/OTIF metrics your customers expect demonstrates reliability, enhances your brand's reputation, and sets you apart from competitors. This encourages repeat business and positive word-of-mouth referrals, all of which contribute to a stronger market position.
- Enables Continuous Improvement: Focusing on raising DIFOT/OTIF KPIs means driving continuous improvement in supply chain processes, leading to efficiency enhancements and better performance over time. Additionally, leveraging technology to track and analyze delivery performance data can provide valuable insights that let you fine-tune your supply chain operations.
How Are DIFOT and OTIF Calculated?
Despite the lack of an agreed standard, the calculation of DIFOT/OTIF is relatively straightforward. It involves dividing the number of your orders that were delivered on time and in full by your total number of orders and then multiplying the result by 100 to express it as a percentage.
For example, if you delivered 45 orders out of 50 on time and in full, the OTIF calculation would be:
(45 / 50) x 100 = 90%
Giving you a DIFOT/OTIF rate for that period of 90%.
What Are the Challenges of Achieving On-Time, In-Full Delivery?
There can be many obstacles in your way when it comes to meeting your targets for On-Time, In-Full (OTIF) delivery. Let’s look at the potential problems in more detail.
- Supply Chain Complexity: The complexity of supply chains spanning multiple countries and involving a variety of transportation modes can lead to coordination problems, unpredictable lead times, and the risk of disruptions.
- Inventory Management and Inaccurate Demand Forecasting: Forecasting demand inaccurately can either lead to stockouts, which hurt your ability to meet OTIF targets, or surplus inventory, which ties up capital and storage space. Balancing your inventory and having enough on hand to meet customer demands can be an ongoing challenge.
- Transportation Delays: Traffic congestion, weather, customs clearance delays, or logistic provider issues, can all significantly impact your OTIF/DIFOT metrics. These are outside your direct control and add an element of unpredictability to every delivery.
- Supplier Reliability: Your production schedules and ability to meet final delivery commitments can depend on your suppliers delivering raw materials or components on time and in the quantities you need.
- Production Delays: Equipment breakdowns, labor shortages, or inefficiencies in the manufacturing process can all create a backlog in the production schedule and affect your ability to meet your OTIF/DIFOT targets.
- Lack of Visibility: Without clear visibility into every stage of the supply chain, from supplier inventory levels to real-time order status, companies struggle to anticipate and mitigate the issues that lead to delivery delays and poor OTIF/DIFOT rates.
- Order Fulfillment Challenges: The manual picking, packing, and shipping process can be fraught with inefficiencies and allow errors to creep in, leading to incorrect or incomplete orders and delayed shipments, all of which impact your OTIF performance.
- Regulatory Compliance: It can require significant expertise and resources to grasp the complex and evolving web of international trade regulations, safety standards, and environmental laws. However, non-compliance can result in delays, fines, or the seizure of your goods, hitting OTIF rates.
- Manual Document Handling: Manual sales order and invoice handling are tedious tasks that occupy a significant amount of employee time, often introduce expensive errors, and cause bottlenecks in your order fulfillment process. Moreover, reliance on manual entry limits your scalability, with efficient handling becoming increasingly difficult as order volumes rise.
As you can’t account for every eventuality, it pays to optimize those variables you do have control over.
Werner Electric Supply implemented Conexiom’s automation solutions to handle its vast inventory of over 24,000 SKUs. With automation, Werner improved order cycle time, reduced errors, and achieved average time savings of around 6,263 hours per year.
How Do You Improve DIFOT and OTIF Performance?
Improving your DIFOT/OTIF KPIs requires a comprehensive approach to supply chain management. With automation, you can significantly enhance efficiency and accuracy across your value chain, helping you to meet your DIFOT/OTIF targets in the following ways:
- Strengthen Your Supply Chain: Automation and cloud technologies can enhance data sharing, improve transaction transparency, and streamline coordination across your supply chain. Real-time data allows you to monitor orders, inventory levels, and potential disruptions at every stage, improving decision-making and response times and enabling you to minimize disruptions and reduce overall lead times.
- Improve Inventory Management: Advanced analytics and machine learning algorithms can analyze historical sales data, market trends, and other relevant factors to sharpen the accuracy of your demand forecasting, helping you to balance inventory levels and reduce the risks of stockouts or excess inventory.
- Optimize Supplier Relationships: Supply chain management software can automate the tracking of supplier reliability providing you with the data you need to be confident they will deliver your materials and components on time and in full.
- Streamline Transportation: Automated transportation management systems (TMS) can optimize route planning, track shipments, and predict potential delays in real-time. By providing alternate routes or modes of transport, TMS helps you minimize the impact of delays outside your control, improving the reliability of your delivery schedules.
- Improve Production Efficiency: Technologies like Internet of Things (IoT) devices and predictive maintenance algorithms can anticipate equipment failures before they happen, reducing downtime and maintaining production schedules.
- Enhance Warehouse Management: Automated warehouse management systems (WMS) and robotics can streamline your inventory tracking and order fulfillment processes, from receiving deliveries to picking, packing, and shipping. These solutions reduce human error, improve accuracy, and speed up the fulfillment process, directly boosting your OTIF performance.
- Regulatory Compliance: Compliance management software can automate the tracking and management of regulatory requirements across different regions for all your products. This reduces your risk of non-compliance, allows all necessary documentation to be accurately and efficiently processed, and helps you ensure that shipments are not delayed by regulatory issues.
- Automated Order Processing: Machine Learning algorithms and AI can eliminate manual bottlenecks by efficiently automating the handling of critical trade documents such as sales orders, advance shipping notices, and invoices with complete accuracy. These solutions reduce costly errors, accelerate order processing times, and improve scalability, directly contributing to improving your OTIF/DIFOT rates.
When Field Fastener implemented Conexiom’s automated solutions, they cut order processing time from hours to minutes while achieving 100% accuracy. Automating just one customer’s orders allowed the company to reclaim 400 employee hours a year to reinvest in revenue-generating activities.
Improving On-Time, In-Full Delivery With Conexiom
Enhancing your DIFOT/OTIF metrics isn't just about saving your customers from the frustration of late or incomplete deliveries — it's becoming a strategic imperative for any business aiming to boost customer satisfaction, reduce operational costs, improve inventory management, and gain a competitive edge.
Conexiom’s automated, 100% accurate sales order processing lets you provide superb customer experiences and meet their expectations of seamless, intuitive ordering. Conexiom slashes the time it takes to manage all types of critical business documents from hours to minutes, reducing cost per order and minimizing error rates without the need for additional employees. The Conexiom platform lets you scale your business and refocus your staff on the tasks they do best.
Discover more about how Conexiom can automate your sales, procurement, and orders, save you time and money, and improve your DIFOT/OTIF metrics.