Improving OTIF Performance

How Shippers Can Enhance On-Time Performance in Compliance with OTIF Standards Through Real-Time Freight Visibility

While OTIF (on-time in full) certainly is not a brand-new topic within the transportation and logistics industry, it seems to be getting far more discussion since large retailers are setting stricter standards. In the past, retailers had relatively broad OTIF standards, allowing delivery windows to span several days. Today, retailers are tightening their timelines, requiring deliveries to be made within one to two-day windows from the original plan. Shippers, 3PLs, brokers, and carriers will be closely monitored and evaluated with respect to their on-time performance and reliability of all shipments.

If these logistics service providers (LSPs) are not consistently meeting the OTIF standards, their customers will begin imposing hefty fines that could quickly add up and impact their bottom line. Though OTIF fines may be steeper than ever, they are not unavoidable. Shippers and LSPs can be proactive when they know there are going to be disruptions in delivery times, and they should be able to reschedule enough in advance to still meet the OTIF delivery window. Willingness to accommodate in the event of these disruptions varies from one retailer to the next, so proper planning and exception management are crucial. Thus, logistics service providers are under a lot of pressure to monitor the in-transit status of all their shipments.

Real-time global freight visibility platforms, such as MacroPoint, offer users all the tools needed to proactively monitor shipments that are at risk of deviating from their scheduled arrival. Using predictive analytics and exception management technology, Shippers and LSPs can identify and respond to potential supply chain disruptions before they occur.

• The Challenge - Meet increasingly high consumer demands
• Action Required - Increased visibility and communication across the supply chain
• The Solution - Descartes MacroPoint Real-time Visibility Platform
• Conclusion - Increased customer satisfaction translates into more business

“The new rules begin in August, and [Walmart] said they will require full-truckload suppliers of fast-turning items — groceries, paper towels — to ‘deliver what we ordered 100 percent in full, on the must-arrive-by date 75 percent of the time.’ Items that are late or missing during a one-month period will incur a fine of 3 percent of their value. Early shipments get dinged, too, because they create overstocks. By February, Wal-Mart wants these deliveries to be on-time and in-full (known as 'OTIF') 95 percent of the time. Its previous target was 90 percent hitting a more lenient four-day window.” - Bloomberg Businessweek, July 12, 2017

The Challenge

Today, consumers have increasingly higher expectations for retailers to fulfill. In turn, retailers must raise the expectations they have for their suppliers and carriers, which puts a significant amount of pressure on the supply chain. For example, timeliness of deliveries has become a performance metric that leaves little to no margin for error.

The push for perfection is a direct result of rising consumer demand. It is essential for retailers to secure product availability in all their stores all the time. Stock outs have an immense impact on customer satisfaction scores and retention, so retailers are relying heavily on their suppliers to be on time every time to keep up with this demand. Not having complete visibility of all your shipments as they move in transit hinders your operations in the sense that you are not able to predict potential supply chain disruptions and enable corrective action to overcome them. Companies who are still employing milestone-based tracking with EDI are hindering themselves because they lack the real-time quality of data you can ascertain from an API instead.

Action Required

So, how can Shippers ensure all their shipments to their customers are adhering to their delivery schedules and conforming to OTIF standards? One of the most effective ways is to communicate better across the supply chain, primarily with respect to shipment location information.

Shippers need to be able to view the movement of their freight in real time and repurpose that information into actionable processes that can improve on-time performance and delivery reliability. The first critical piece of communication needs to happen among the Shippers and their customers. As a supplier, you need to understand the OTIF standards enforced by the retailers you work with, as they vary from company to company.

Develop and execute a strategy to ensure that you are complying with those standards. Retailers keep scorecards that will reflect your performance with their OTIF standards. These scorecards will account for the origin of any issues that cause shipments to be off-schedule to help maintain fault across the supply chain. Proactively communicating with your retailer customers can help boost your ratings on these scorecards, especially if you mitigate potential disruptions before they impact the timeliness of your deliveries.

Consider implementing a visibility solution, if you have not already, to more closely monitor the movement of your shipments across the supply chain. Look for a visibility solution with exception management and predictive analytics capabilities, as these tools will offer you the best data necessary to constructively communicate in advance of any issues with your customers.

The Solution

Descartes MacroPoint is your single global logistics platform for real-time visibility. With its exception management and predictive analytics capabilities, this technology provides your team with the tools necessary to view the movement of all your freight in real time, at one time. Using this information, Shippers and LSPs can view, analyze, predict, and report supply chain disruptions that could cause shipments to deviate from their tight delivery schedules.

When a problem arises, LSPs can take quick, proactive action to notify shippers and retailers which deliveries are at risk of arriving late. If possible, retailers can try to accommodate by rescheduling the appointment for later that day. Often LSPs will still have to pay a rescheduling fee, but generally these fees are significantly less costly than the fees imposed for suppliers who are not meeting OTIF standards.

To remain compliant with their OTIF standards, you will need to reschedule the appointment within the retailers’ required delivery window (i.e. one day). If you are unable to do so, that shipment will then be considered noncompliant in terms of OTIF standards. However, none of the major retailers are demanding 100 percent OTIF performance, so the occasional delivery running off-schedule does not cause drastic levels of damage in the greater scheme. If you are actively communicating with your retailers, the better off your business-to-business relationship will be.

The Conclusion

The important fact to remember is that OTIF standards are not going away. In fact, the industry is trending toward even stricter standards, so it is best to act now to improve your operations such that on-time performance and delivery reliability will not be a constant worry to you. By leveraging real-time visibility data and proactively communicating with your customers, it is a near guarantee that your customer satisfaction ratings will improve.

Enhanced customer satisfaction translates into more business. You will also see a sizable return on investment, as you will save both time and money by implementing an automated visibility solution that can provide your team with the necessary tools to improve on-time performance in compliance with your customers’ OTIF standards.