Organizations have measurement system, but often do not know why they have the metrics. And more often, they do not know what it takes to improve the levels of metrics. This trivializes importance of measurement system. Here is one such case.

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Copyrights 2013 © Shridhar Lolla. All Rights Reserved.
OTIF! For Whom?
It is an organizational metric.
Draft (to be edited)
To be completed…sorry for typos and grammatical errors.
Last Monday when I visited Michael, he said, "We have a big problem... We fared awfully
bad in the customer satisfaction survey conducted by a third party. This is despite our OTIF
being at 97%."
And then he said, "Unfortunately, an investigation revealed that the OTIF calculated by our
customers was between 30 to 44%."
I remembered that whenever I asked about the reliability of Infraproducts' supply, I was
always given high 90s. I always had doubt because those numbers were achieved by very
few highly disciplined organizations.
And whenever I asked for improving reliability of supply, often I would be fed with urgent
initiatives on cost reduction, quality improvement, process stability, process development,
continuous improvements etc. I knew that all these are important, but in a fiercely
competitive environment, I felt that reliability of supply is becoming the key metric
customers have started measuring organizations on.
A further investigation into the process of deriving OTIF revealed a mega difference in what
Infraproducts and what the customers meant by OTIF.
Michael's team calculated OTIF based on the last 'mutually agreed' delivery dates, while the
customers had a detailed procedure for calculating the OTIF. Customers calculated OTIF
based on 'the first agreed' due date, because it was on those promised dates, the orders
were given to Michael's team. Further, the definition of 'Full' in OTIF meant not only
delivery of all quantities, but also right items as per invoice including spare parts,
documentation and without any change in purchase order terms. No doubt, in reality, the
OTIF of Michael's organization was less than half that estimated by its customers. So, much
to the perception and reality of how an organization measures its key performance index.
Most organizations know that their OTIF performance is important. But seldom
organizations know why OTIF is needed and least about how its high levels can be obtained.
They often land up into manipulating the calculations leading to optimistically high OTIF
numbers and such high numbers often dilute the rigorous review mechanism required to
improve the process underpinning a good OTIF. Such practices, only make OTIF worse with
time in reality. Also, very few organizations indeed try to place their OTIF numbers vis a vis
expectations of their customers. In most of the cases, they would conduct an elaborate
blind and so called random survey, to derive an entirely unrelated customer satisfaction
index.
Often it is also found that organizations assign responsibility of achieving target OTIF to
production or delivery teams.

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Copyrights 2013 © Shridhar Lolla. All Rights Reserved.
OTIF is not a stylish or a 'good to have' performance parameter, to satisfy investors, media,
or auditors. OTIF is a key measurement about the reliability of delivery of an organization.
Often used in multiproduct or multi lot orders. It stands for On Time In Full. Your clients
would normally place an enquiry for supply of a set of products or a set of lots to be
supplied by a definite date, which is not for any wrong reason. And, the suppliers would be
asked to deliver the products and every other accessories and attributes in time. Knowing
the growing competitive importance of OTIF, progressive organizations extend its definition
DIFOTAI (Delivered-In-Full-On-Time-Accurately-Invoiced)
OTIF is a key performance metric at organizational level. Production, delivery, sales, quality
etc all are responsible for ensuring that the right promise is made to the customer and
deliveries are made as per the promise. And this promise on delivery is measured by OTIF.
OTIF is becoming one of the key preferred index in overall customer satisfaction index.
Indeed, as competition becomes fierce and cost and quality become only qualifying
attributes, reliability of delivery will be the winning attribute for doing business today as
well as in future.
It then becomes imperative for organizations to dramatically improve OTIF, which is not
just the right calculation but also a deliberate process to achieve high OTIF as organizational
metric.
Under such situation, OTIF is defined as a competitive edge and a progressive organization
comes out with processes and procedures to improve reliability of its supplies. In a growing
and complex supply chain this is not easy. It leads to restructuring of its activities,
reengineering of the process of order handling, aligning different functions and building the
culture that is geared to achieve high OTIF. Having an OTIF as a decisive competitive edge
means that an organization develops the capability to improve OTIF to a level that
differentiates it dramatically in the market place. And not just its products but its high OTIF
becomes a strong value proposition to its customers.
When OTIF becomes a strong value proposition of an organization, sales teams assure that
they do not over promise and take orders that would jeopardize their promise to deliver
high OTIF. They ensure that the offers made to customers do not leave any gap between
the expectation of customers and capability of the organizations. They ensure that there is
clear communication and agreement with delivery teams. In turn the delivery ream works
on the key drivers of bad inventory like non standard orders, special orders, over produced
orders, stock outs etc. and optimize inventory to improve flow across the supply chain. In
turn, the delivery teams ensure that they have a priority system that allows all the planned
orders within a sales order finish in Full by the due date. And then, the manufacturing
ensures that it schedules work orders as per the priority given by the delivery teams. And
since with time, the expectations from customers grow, the manufacturing need to
improve its ability to deliver more in less time. It continuously need to improve its
operations; the cycle time and the lead time.
It is often tempting to have one single OTIF parameter for an organization or a BU.
However, tolerance time of customers often necessitates products to be classified in
different ways. In case of Made to Stock products the delivery is made from stock and an

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organization needs to ensure that enough stock is always available to fulfill orders in a time
that is close to transportation time. But all this must be done without too much stock outs
and over stocks. In Made to Order products, the customer tolerance time and lead time is
often longer. The biggest problem an organization faces is when it has mixed classification
of products and when they pass through common flow lines. Confusion often galore in
terms of prioritizing work orders and organization needs to come out with a disciplined
priority system so that fire fighting and chaos is avoided and high OTIF is achieved. In fact, it
is more difficult than said. It requires real behavior change in the organization to fulfill its
promise to customers by improving OTIF to high 90s.
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For knowing how organizations are achieving high availability and reliability of their
products and in turn, how they are improving business performance on an ongoing basis,
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