DIFOT

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DIFOT (delivery in full, on time) or OTIF (on-time and in-full [delivery]) is a measurement of logistics or delivery performance within a supply chain. Usually expressed as a percentage, [1] it measures whether the supply chain was able to deliver:

Contents

Function

OTIF measures how often the customer gets what they want at the time they want it. Some consider it superior to other delivery performance indicators, such as shipped-on-time (SOT) and on-time performance (OTP), because it looks at deliveries from the point of view of the customer.

This key performance indicator (KPI) has the advantage of measuring the performance of the whole logistic organization in meeting customer service expectations. To reach a high OTIF level, all the functions of the supply chain (among which orders taking, procurement, suppliers, warehouses, transport ...) must work at their best level.

Calculation

Generally OTIF is calculated by taking into account the number of deliveries:

OTIF ( % ) = number of deliveries OTIF ÷ total number of deliveries * 100

But it can also, according to organizations, be calculated according to the number of orders or the number of the order lines.

Some organizations calculate OTIF by the percentage of the total order quantity that has been on-time. This goes against the principle of OTIF as the in-full component of OTIF has not been met.

Requirements for the OTIF measurement are :

If the orders are split at the customer request, then each delivery line is considered.

Companies which have set up a measure of the OTIF are unanimous in recognising its value.[ citation needed ] They quote among other positive aspects: the increase in operating profit due to the reduction of operating expenses (in relation with the non-quality reduction, better inventory control, better customer orders taking, higher reliability in storage and transport ...) and the increase of sales (due to a better product availability for sales).

Typically, leading practice in the [UK] retail sector identified by researchers Janet Godsell and Remko van Hoek would demand an OTIF in excess of 97 per cent measured at a stock keeping unit (SKU) level. [2] However Godsell's research also found that instances where an OTIF target was met when measured against a target of the promised delivery date stated by the supplier to the customer (the "promise date"), would often fail to meet the same performance measure when the delivery date requested by the customer (the "request date") was used as the target. [3]

The OTIF notion was extended to DIFOTAI (delivery in full, on time, and accurately invoiced), which also takes into account the quality of the invoicing. [ citation needed ]

Related Research Articles

Supply chain management

In commerce, supply chain management (SCM), the management of the flow of goods and services, involves the movement and storage of raw materials, of work-in-process inventory, and of finished goods as well as end to end order fulfilment from point of origin to point of consumption. Interconnected, interrelated or interlinked networks, channels and node businesses combine in the provision of products and services required by end customers in a supply chain. Supply-chain management has been defined as the "design, planning, execution, control, and monitoring of supply-chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally". SCM practice draws heavily from the areas of industrial engineering, systems engineering, operations management, logistics, procurement, information technology, and marketing and strives for an integrated approach. Marketing channels play an important role in supply-chain management. Current research in supply-chain management is concerned with topics related to sustainability and risk management, among others. Some suggest that the “people dimension” of SCM, ethical issues, internal integration, transparency/visibility, and human capital/talent management are topics that have, so far, been underrepresented on the research agenda. Supply chain management (SCM) is the broad range of activities required to plan, control and execute a product's flow from materials to production to distribution in the most economical way possible. SCM encompasses the integrated planning and execution of processes required to optimize the flow of materials, information and capital in functions that broadly include demand planning, sourcing, production, inventory management and logistics -- or storage and transportation.

Supply chain System for moving a product or service from where it is produced to where it is consumed

In commerce, a supply chain is a system of organizations, people, activities, information, and resources involved in supplying a product or service to a consumer. Supply chain activities involve the transformation of natural resources, raw materials, and components into a finished product that is delivered to the end customer. In sophisticated supply chain systems, used products may re-enter the supply chain at any point where residual value is recyclable. Supply chains link value chains.

Procurement is the process of finding and agreeing to terms, and acquiring goods, services, or works from an external source, often via a tendering or competitive bidding process.

An invoice, bill or tab is a commercial document issued by a seller to a buyer, relating to a sale transaction and indicating the products, quantities, and agreed prices for products or services the seller had provided the buyer.

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Performance indicator Measurement that evaluates the success of an organization

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Purchasing is the process a business or organization uses to acquire goods or services to accomplish its goals. Although there are several organizations that attempt to set standards in the purchasing process, processes can vary greatly between organizations.

A lead time is the latency between the initiation and completion of a process. For example, the lead time between the placement of an order and delivery of new cars by a given manufacturer might be between 2 weeks and 6 months, depending on various particularities. One business dictionary defines "manufacturing lead time" as the total time required to manufacture an item, including order preparation time, queue time, setup time, run time, move time, inspection time, and put-away time. For make-to-order products, it is the time between release of an order and the production and shipment that fulfill that order. For make-to-stock products, it is the time taken from the release of an order to production and receipt into finished goods inventory.

Quality, cost, delivery (QCD), sometimes expanded to QCDMS, is a management approach originally developed to help companies within the British automobile sector. Make it work. QCD analysis is used to assess different components of the production process. It also provides feedback in the form of facts and figures that help managers make logical decisions. By using the gathered data it is easier for organizations to prioritize their future goals.

Service level measures the performance of a system. Certain goals are defined and the service level gives the percentage to which those goals should be achieved. Fill rate is different from service level.

Supplier relationship management (SRM) is the discipline of strategically planning for, and managing, all interactions with third party organizations that supply goods and/or services to an organization

Purchasing is the formal process of buying goods and services. The purchasing process can vary from one organization to another, but there are some common key elements.

Order fulfillment

Order fulfillment is in the most general sense the complete process from point of sales inquiry to delivery of a product to the customer. Sometimes order fulfillment is used to describe the more narrow act of distribution or the logistics function, however, in the broader sense it refers to the way firms respond to customer orders.

Supply-chain operations reference (SCOR) model is a process reference model developed and endorsed by the Supply Chain Council as the cross-industry, standard diagnostic tool for supply chain management. The SCOR model describes the business activities associated with satisfying a customer's demand, which include plan, source, make, deliver, return and enable. Use of the model includes analyzing the current state of a company's processes and goals, quantifying operational performance, and comparing company performance to benchmark data. SCOR has developed a set of metrics for supply chain performance, and Supply Chain Council members have formed industry groups to collect best practices information that companies can use to elevate their supply chain models.

Delivery schedule adherence (DSA) is a business metric used to calculate the timeliness of deliveries from suppliers. It is a commonly used supply chain metric and forms part of the Quality, Cost, Delivery group of performance indicators.

A transportation management system (TMS) is a subset of supply chain management concerning transportation operations and may be part of an enterprise resource planning system.

Merge-in-transit (MIT) is a distribution method in which several shipments from suppliers originating at different locations are consolidated into one final customer delivery. This removes the need for distribution warehouses in the supply chain, allowing customers to receive complete deliveries for their orders. Under a merge-in-transit system, merge points replace distribution warehouse. In today's global market, merge-in-transit is progressively being used in telecommunications and electronic industries. These industries are usually dynamic and flexible, in which products have been developed and changed rapidly.

Delivery reliability is one of the five attributes in supply-chain management according to SCOR-model, developed by the management consulting firm PRTM, now part of PricewaterhouseCoopers LLP (PwC) and endorsed by the Supply-Chain Council (SCC) as the cross-industry de facto standard diagnostic tool for supply chain management, SCOR measures the supplier’s ability to predictably complete processes as promised. It is measured by perfect order fulfillment and demonstrates the degree to which a supplier is able to serve its customers within the promised delivery time.

The DR-DP-Matrix summarizes the main methods to measure delivery reliability (DR) and delivery performance (DP) within supply chains. It categorizes the methods by three criteria:

  1. Type of reference: first confirmed date/ wish date
  2. Type of measurement: volume (V)/singular(S)
  3. Type of view: on time (T)/ delivery (D)
Supply chain finance

Unlike traditional factoring, where a supplier wants to finance its receivables, supply chain financing is a financing method initiated by the ordering party in order to help its suppliers to finance its receivables more easily and at a lower interest rate than what would normally be offered. In 2011, the reverse factoring market was still very small, accounting for less than 3% of the factoring market.

References

  1. ↑ APICS Dictionary Archived June 5, 2016, at the Wayback Machine , accessed 7 May 2016
  2. ↑ Godsell, J. and van Hoek, R., Fudging the supply chain to hit the number: five common practices that sacrifice the supply chain and what financial analysts should ask about them, in Supply Chain Management, 14/3 (2009) 171–176, accessed 7 May 2016
  3. ↑ Godsell, J. et al (2006), "Customer responsive supply chain strategy: an unnatural act?", International Journal of Logistics: Research and Applications, Vol. 9, No. 1, pp 47-57
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