What is OTIF? Meaning, formula and how to improve

What OTIF measures

• It measures a business’s ability to meet customer expectations, the efficiency of its logistics and accuracy of its inventory management
• Specifically, it gives you the percentage of orders that were delivered to customer expectations
• It tracks two specific criteria: whether the order was delivered to the customer’s address within the agreed timeframe; and, whether it contained every item and quantity originally ordered by the customer
• Tracking these two variables provides a more comprehensive view of supply chain reliability than simply tracking delivery speed and/or stock availability.    

Why OTIF matters in supply chains

• It matters because it’s one of the most powerful customer-centric measurements of supply chain management performance
• Unlike other metrics that measure order speed or accuracy independently, on-time in-full reflects the customer experience
• It can indicate issues like inaccurate demand forecasting, inventory data and lead times as well as issues across the planning, warehousing and transport process.

What is on-time in-full?

It’s a performance metric that tells you how effectively orders are fulfilled with respect to customer expectations. It looks at fulfilment from the customer’s perspective to measure two key factors: whether the order was delivered within the agreed timeframe and whether it contained all the items ordered.

What “on-time” means

This refers to the timeframe in which the order must be delivered to the customer, as agreed with the seller when they placed their order. The delivery may have been promised by a specific date, or it may be within a certain time window. 

If a delivery date is changed by the seller and accepted by the customer, this becomes the on-time benchmark.

What “in-full” means

This means that the order received by the customer contained all items – namely, the correct type and quantity – requested in the purchase order. The metric is binary, which means the order must have contained 100% of what was ordered. Any discrepancy from the original agreement is classed as a failure.

For instance, if the customer ordered 100 items and only received 98, the order is not in-full. This is similarly the case if they received all ordered items, but two of them were a different colour to what was ordered. Damaged items can also render the order a failure by the metric’s strict standards.

Let’s look at how the metric compares to others typically used by fulfilment businesses:

OTIF vs on-time delivery (OTD)

While the former measures whether an order was delivered within the agreed delivery window and with all items requested, OTD only measures whether the order was delivered on time.

Fill rate vs OTIF

Fill rate is an inventory-centric metric that measures how much of a customer’s order you could satisfy with stock immediately available. It doesn’t measure whether the delivery made it to the customer in the agreed timeframe.

Delivery performance metric comparison matrix

Here are the main ways it helps businesses improve fulfilment:

Customer satisfaction and service levels

• Consistently hitting on-time in-full targets means that customers are receiving their orders as expected when they made a purchase
• Tracking the metric is therefore critical for uncovering operational issues that lead to customer complaints and returns or cause them to switch to a competitor 
• It helps improve fulfilment so that customers can trust that your business can capably fulfil future purchases.

Inventory and cost control

• Not meeting on-time and in-full targets can necessitate having safety stock on hand as a backup for incomplete orders, which drives up warehouse costs
• For orders not delivered on time, a business can also waste money and labour on expedited shipping and processing returns
• Meeting targets helps a business operate with less inventory and more predictable costs.

Supply chain visibility and planning accuracy

• Tracking on-time in-full helps a business spot bottlenecks in the warehouse or delivery process
• It also helps to flag incorrect demand forecasting, so a business can adjust its inventory levels and replenishment cycles
• Because the metric uses data from both the warehouse and logistics, it forces different teams to share information, improving the end-to-end fulfilment process.

Let’s work through the steps needed to calculate your score:

Step 1: Establish your definitions

First, you need to define what’s meant by “on-time” and “in-full.” These definitions will generally be: 

• On-time: The delivery arrived at the customer’s address within the time period or by the date agreed to at time of purchase
• In-full: 100% of items were delivered at the correct quantity, with no damage 

Your definitions could be slightly different, however. For instance, on-time could be defined as when the order arrived at the customer’s address or was ready for pick-up by the customer. 

Step 2: Select the reporting period and identify orders delivered

Next, define the timeframe that you’ll measure. This could be the past day, month, quarter or a specific timeframe like a promotional period. You then need to source every purchase order or sales order that was scheduled for delivery during that timeframe.

Step 3: Determine which orders were delivered on-time and in-full

Remember, the metric is binary, so the order must meet both conditions. For example, if it was delivered by the delivery date but was missing an item, this counts as a failure.

On-time orders can be identified by reviewing carrier tracking data, while in-full orders can be identified by reviewing shipping logs.

Step 4: Calculate the OTIF formula

To calculate the formula, you need to take the figure obtained in step three and divide it by the figure obtained in step two, then times that figure by 100. The full formula to use is:

OTIF = (total on-time and in-full orders / total orders issued) x 100

This will give you the percentage of all orders issued during your selected time period that were both delivered on-time and in-full.

OTIF calculation example

Keeping the aforementioned steps in mind, here’s how the calculation would look on paper. For this example, we’ll assume the total number of orders issued during the previous six months was 500.

These 500 orders are reviewed, which reveals that 460 were delivered on time. Meanwhile, 450 orders were packed with 100% item accuracy and quantity. This means that:

• 10 orders were received late by the customer, but had all items
• 20 orders were received on time but were lacking items
• 30 orders were both late and incomplete.

You need to add these figures together, giving you 60 orders that didn’t meet the conditions of on-time and in-full. Subtract that from 500, which gives you 440 orders that were a 100% success. Then, calculate the formula as follows:

On-time in-full = (440 / 500) x 100 = 88%

This means that 88% of orders fulfilled during the previous six months were delivered on-time and in-full.

To truly understand what your result means, you need to compare it to those of similar businesses. 

Typical OTIF benchmarks by industry 

Let’s look at the most common reasons for a low score: 

Inaccurate inventory and demand planning

• Poor demand forecasting can lead to ordering too little inventory, leading to stockouts and therefore delayed orders
• Inaccurate inventory tracking can cause stock to be available at the point of sale, but it may not be physically present in the warehouse
• Overlooking spikes in demand due to seasonality or promotions can also lead to not having enough stock on hand to ensure orders are in-full.

Poor logistics and transportation execution

• Unreliable carriers that miss pick-ups or experience driver shortages or vehicle breakdowns can affect the on-time component
• Factors that often can’t be planned for, like extreme weather or traffic congestion, can cause even the best-planned deliveries to be late
• If a business has limited visibility of in-transit deliveries, they won’t be able to intervene quickly if delays occur.       

Supplier and vendor unreliability

• Delays in receiving stock or receiving only partial stock from suppliers means stock is unavailable for customer orders already received
• Inaccurate supplier lead times or a lack of visibility of them makes it hard to plan for stock availability and provide realistic delivery dates to customers
• Suppliers that don’t adhere to strict quality control measures could see damaged items or incorrect quantities delivered to the warehouse.

Process and coordination gaps

• If sales and planning teams aren’t communicating adequately with the warehouse, there could be misalignment between what’s promised to the customer and what can be fulfilled
• Unrealistic fulfilment targets may cause undue pressure, resulting in partial orders being dispatched
• A lack of standardised pick and pack procedures and poor handoffs between the warehouse team and carriers can cause shipment delays. 

Step 1. Improve inventory accuracy

Ensuring stock accuracy means performing regular cycle counts. Rather than an annual stocktake, a regular count allows you to spot and correct discrepancies continuously rather than months after the fact.

Depending on your industry, it may be a good idea to count a small subset of inventory every day that focuses on high-velocity items that can impact your score. 

Another way to improve accuracy is to use barcode or RFID scanning at every fulfilment touchpoint, which helps eliminate human error. For instance, pickers using barcode scanners will be alerted in real-time if they pick the wrong item or quantity. 

A warehouse management system can also help improve accuracy by providing real-time visibility of stock as it moves through every stage of fulfilment.

Step 2. Strengthen demand forecasting

An order management system can enable you to automate demand forecasting using historical sales data, while also taking into account market trends, seasonality and your business’s promotional periods.

Better forecasting means you can help ensure high-velocity items are always in stock and better prepare for peak periods. 

Step 3. Optimise logistics and routes

Your choice of carriers can have a huge impact on delivery times. When selecting partners, do so based on service performance and reliability rather than price alone. Ensure you establish service-level agreements with partners and have the ability to track their performance. 

Using a 3PL management system can help you simplify your relationships with third-party logistics providers. It offers a single, consolidated overview of all your relationships and can automatically select the most optimal partner for every order.

Step 4. Improve supplier coordination

Receiving stock late or in the wrong quantity can have a ripple effect down the entire fulfilment process. Ensure you set clear lead times and expectations with suppliers and that they’re aware of your demand forecasts.

Also, make sure you’re tracking supplier performance over time so you can raise any concerning trends.  

Step 5. Increase supply chain visibility

This is where an integrated tech stack comes in. A cloud-based system that integrates order, inventory and warehouse management capabilities allows you to track and control the end-to-end fulfilment process in real-time. It can give you insight into where exactly in the process there are issues or bottlenecks, so you can quickly rectify them. 

Here are some of the cloud-based tools that help automate processes and provide the visibility needed to improve your score:

Inventory management systems

Inventory management systems give you real-time visibility of stock as it moves through the fulfilment process. But perhaps more importantly, they can automate myriad processes to reduce human error and dispatch times. 

For instance, an inventory management system can automatically track sales data and stock levels so that new items are automatically added to inventory. It can also automatically route orders to the optimal warehouse, based on stock levels or proximity to the customer. 

Order management systems

An order management system (OMS) helps speed up fulfilment and improve accuracy by consolidating orders from multiple sales channels in one place.

Because it can detect when there isn’t sufficient stock to fulfil an order, the system can automatically flag the order as a backorder. The order is then held in the fulfilment process until new stock is scanned into the warehouse. 

An OMS can also automatically generate shipping labels and facilitate barcode scanning, which helps improve picker accuracy. 

MRP tools

Typically used by manufacturers, material requirements planning (MRP) tools help businesses look ahead to prevent incomplete orders. They allow you to plan, schedule and control the raw materials needed for production, synchronising production schedules with expected customer demand to help prevent stockouts. 

Supply chain analytics platforms

Supply chain analytics platforms consolidate data from every stage of a business’s supply chain, from procurement and manufacturing to warehouse operations to shipment. They help identify where issues are popping up in the fulfilment process, allowing you to drill down into the root cause as well as track carrier on-time records.