Tracking key performance indicators is a terrific way to assess your eCommerce fulfillment. One essential eCommerce KPI is OTIF: on time and in full. Your OTIF rate can highlight problems with your pick and pack processes so you can correct them. Persistently low OTIF numbers are often an indicator that it’s time to switch fulfillment companies. Here’s what you need to know to track OTIF performance and make sure your 3PL is meeting your needs.
OTIF definition
OTIF is a measurement of the percentage of your orders delivered on time and in full. Let’s break down the two parts of this metric.
On-time delivery
On-time delivery means delivery within the window that you’ve given your customers. But customer perception of on-time delivery may not match your definition.
For example, suppose a customer places an order on the 10th of the month and chooses standard shipping with a three- to five-day delivery window. The customer expects to get their package between the 13th and the 15th, or perhaps a bit later if there’s a weekend in between. If your fulfillment warehouse doesn’t get to the order for several days and shipping takes five days, the customer won’t feel like their package was delivered on time.
Other factors affecting delivery time are warehouse location and shipping delays. If you ship from a fulfillment center on the coast, perhaps near a port city, your orders will have to travel through many shipping zones to reach some customers. People may experience those long transit times as late deliveries.
Of course, sometimes packages are delayed in transit. You and your 3PL don’t have much control over that, though your fulfillment company may be able to provide alternate delivery options when problems with carrier capacity arise.
Order delivered in full
An “in full” order includes:
- All the items the customer ordered
- The correct products, colors, and sizes for the order
Errors in picking lead to orders that fail the OTIF metric. Again, customer experience is paramount. For example, you might fill the order in full, but products arrive in multiple shipments on different days due to backordered SKUs or poor inventory distribution among warehouses. When the first package comes, the customer may believe that they didn’t get their complete order, even if the rest of the items arrive soon after.
Only orders that meet both metrics are considered on time and in full. To track your OTIF rate, you’ll need to analyze when packages left the warehouse and when they were delivered to customers, as well as the fulfillment error rate.
Why on time and in full is an essential eCommerce KPI
Fast and accurate order fulfillment is one of the best ways to earn loyal customers, so your OTIF KPI is a measurement of your eCommerce business growth potential. On the flip side, late deliveries and incorrect orders can lead to bad reviews that discourage others from trying your products.
The foundation of online shopping is trust. Consumers trust that when they give you their credit card information and click the Buy button, you will deliver the products in their cart within your promised time frame. If you fail the OTIF test, you’ve lost that trust.
What’s a realistic OTIF rate?
It’s unrealistic to expect 100% order accuracy, though top fulfillment companies like Red Stag Fulfillment strive for perfect OTIF. Factors beyond your control will sometimes delay orders. Bad weather can temporarily shut down delivery routes, and human error is always possible, even in warehouses that have excellent quality controls.
If you run your fulfillment operations in-house, the OTIF KPI measures the performance of your warehouse operations. This KPI tracks your staff, warehouse management, and inventory management. For smaller eCommerce companies, one careless employee can lower your on time and in full numbers and, with them, your customer reviews.
When you use a third-party logistics company, you can and should expect a higher on time and in full rate. The good news is that order fulfillment accuracy has gone up, thanks to advancements in fulfillment software and order handling processes. However, not all 3PLs achieve the highest possible quality standards. At a minimum, your 3PL should have a 90% to 95% OTIF rate. If it doesn’t, that could be a sign it’s time for you to switch fulfillment companies.
Knowing when it’s time to switch fulfillment companies
At Red Stag Fulfillment, we hear from many online sellers who want to switch fulfillment companies because of bad experiences with their current 3PL.
There are several reasons that a fulfillment warehouse might not work for you, and they don’t all relate to OTIF. Here are some of the reasons you might need a new 3PL:
The warehouse is not set up to process the types of products you sell.
You need a 3PL with processes in place to handle your products correctly. If your 3PL doesn’t have the right equipment, systems, or packaging for your product type, merchandise could get damaged in the warehouse or shipped in the wrong packaging, leading to an OTIF fail. If you’re contending with a higher-than-expected rate of orders arriving damaged, it could be time to switch fulfillment companies to one that is better equipped for your items.
The 3PL doesn’t have quality control systems in place.
A high number of incorrect orders points to a problem with the warehouse management system or picking process. For example, Red Stag Fulfillment can pick and pack orders with around 99% accuracy because we have a system of barcodes that double-checks order accuracy at each step in order fulfillment. That allows our pickers to move quickly without making mistakes.
The fulfillment company is slow to fill orders.
If your 3PL has a backlog of unfilled orders, today’s orders might not go out till next week. Red Stag Fulfillment offers same-day delivery to our clients because we have found that speedy fulfillment is one of the best ways to improve on time delivery rates.
Your warehouse is not in a central location.
When you choose a fulfillment company, you also select your warehouse locations. A fulfillment company in New York may be close to some East Coast population centers, but your customers in the middle and western parts of the U.S. will have extended shipping times. Red Stag Fulfillment placed our national fulfillment warehouses in Knoxville, TN, and Salt Lake City, UT, so we can ship your orders to 96% of U.S. households in two days or less.
Whether your 3PL can’t provide the quality of fulfillment you need or it isn’t a good match for your products, it might be time for you to switch. Working with a 3PL that supports your business will pay dividends and increase your OTIF rate.
How Red Stag Fulfillment achieves one of the highest on time and in full rates in the industry
Perfection isn’t possible, but we strive for it at Red Stag Fulfillment. Instead of taking in business indiscriminately, we only work with clients we know we can serve with excellence. We’d rather grow more slowly and build a solid foundation for our business and yours.
We develop SOPs for each client tailored to their business needs. And we foster a culture of continuous improvement where everyone from seasoned managers to the newest floor worker can contribute ideas to refine our procedures.
Red Stag Fulfillment clients have been able to grow and scale their businesses because we deliver on time and in full. Are you ready for the Red Stag difference?
More about accurate fulfillment:
- 2021 Fulfillment Report Card: How Would You Rate Your 3PL
- How Does RSF Achieve Such Low Fulfillment Error Rates?
- How Accurate Fulfillment Drives Repeat Sales
