Today’s consumer industry prioritizes efficiency more than anything else. When a modern customer enters the grocery store, they expect items on shelves, a wide selection of brands to choose from, endless choices of products and more discounts and promotions than ever before.
With the e-commerce sector growing exponentially, it’s no surprise that consumers also have the expectation of receiving their orders promptly. In 2021, Amazon had 200 million Prime members, which demonstrates how many people prefer two-day shipping or even same-day delivery.
Some main challenges for players in the consumer industry are keeping costs down, reaching high-levels of product availability, controlling inventory and shipping efficiency. How can members of the complex supply chain ensure on-time deliveries for customers?
Understanding the Rise of OTIF Delivery KPIs
According to Statista, Amazon’s average click-to-delivery speed for products was under six days in December of 2015. In March of 2018, that figure shot down to 3.07 days, shaving off almost half of the delivery speed three years prior.
The main reason for this is the noticeable shift to on-time delivery KPIs, or on-time in-full (OTIF) KPIs. OTIF is an evolving customer expectation that best aligns retailers with manufacturers. Because customers have so many choices of companies to buy from, fast shipping speeds are considered a major KPI.
Deliveries expected to take over a week seem downright outrageous to most customers shopping online. Long waiting periods could even deter a customer from purchasing items in the first place. On the other hand, OTIF or early deliveries can encourage repeat purchases and customer satisfaction and loyalty.
Manufacturers, retailers, warehouses and carriers now face mounting pressures to deliver orders OTIF. Maintaining an effective, organized, reliable and responsive supply chain is essential if companies want to meet this KPI.
5 of the Best Strategies to Meet OTIF Delivery Expectations
2023 is right around the corner, meaning that members of supply chains must prepare for peak shipping season. Due to the COVID-19 pandemic, unprecedented supply chain disruptions have already caused a slew of challenges for organizations in the manufacturing, shipping and logistics and transportation industries.
While these supply chain snafus will likely persist, supply chain managers and other professionals in the logistics industry must focus on measuring and ensuring OTIF deliveries.
Below are a handful of strategies supply chain and logistics experts can improve on delivery times.
1. Use Forecasting Methods and Invest in Additional Inventory
Sharing forecasts for the next six months or year can be especially helpful in supply chain operations. Several forecasting tools are on the market to help companies gain visibility into their supply chains and determine how to prepare. There are qualitative and quantitative forecasting methods one can follow.
Here are some qualitative methods:
- Delphi method
- Market research
- Historical data
And here are quantitative methods:
- Moving average
- Exponential smoothing
- Adaptive smoothing
Companies must research and decide which forecasting method is best suited for their business. By understanding your lead time, it’ll be easier to keep a proper in-stock rate and prevent stock-outs or excess inventory. If selling on Amazon is part of you business strategy, make sure to update your SKU strategy and conduct product research each time you expand your ASIN inventory.
Consider using inventory management systems to optimize order frequency and keep costs down.
2. Utilize Microdistribution Centers
Moving goods as close as possible to receiving customers is another strategy to ensure OTIF deliveries. Petco, for example, once indicated that around 83% of its online orders were fulfilled from physical stores located in the surrounding community. This might not be possible for small or medium-sized businesses. The good news is that these companies can utilize micro distribution centers instead.
A microdistribution center transforms otherwise unused space into a hub for order processing, fulfillment and preparation. A popular choice for micro distribution centers is the antiquated shopping mall. These large spaces, if empty, are in ideal locations in most communities and could become highly useful.
3. Leverage Real-Time Transportation Data
Another strategy to meet OTIF delivery times is to invest in various supply chain management and fleet management software solutions. According to Gartner, industry players are investing in high-tech software with real-time transportation data and tracking capabilities.
These solutions enhance supply chain visibility and provide insights to help supply chain managers address delivery challenges. Any company trying to meet OTIF deliveries should leverage the latest technologies and software available.
4. Prioritize High-Margin, Fast-Moving SKUs
In the same token, these solutions can also help supply chain managers identify which SKUs should be labeled high-priority, particularly when the holiday season arrives.
This ensures the right product assortment is available on shelves when customers need it most. Suppliers can also work on big orders with only a few items with the highest efficiency, allowing carriers to achieve OTIF deliveries more frequently.
5. Improve Supplier Relationships
Last but not least, organizations must maintain solid relationships with suppliers and other members of the supply chain for hit OTIF KPIs. Companies can create a scoring system to measure supplier performance and track scores as a KPI. In this system, important factors must be considered, including, but not limited to:
- Pricing attributes
- Response and lead times
- Willingness to stock inventory
- Meeting quality specification expectations
OTIF delivery goals must be communicated to suppliers if companies want to hit them.
Effective Supply Chains Meet OTIF Delivery KPIs
Organizations that spend time implementing the strategies listed above will have better supply chain performance and security than their underperforming competitors. Not every strategy will work for every type or size of organization and it may take a method of trial and error for companies to determine which one best suits their business. Consider using these strategies to reach OTIF delivery KPIs and overcome today’s complex supply chain.
About the author
Emily Newton is the Editor-in-Chief of Revolutionized Magazine. She has over four years experience covering stories about warehousing, logistics and distribution