More than half of global freight is late. A recent Wall Street Journal report reveals that only 40% of global container ships were arriving in ports on time as of March 2021.
According to the WSJ report, the poor global delivery numbers are "the result of a large-scale restocking by businesses as consumer demand improves." This corresponds to tied-up "vessel capacity, adding to a shortage of sea containers." In turn, this has sent "shipping costs soaring as container freight rates rise at a historic pace." Also, "the delays are part of an array of headaches disrupting supply chains."
It makes you wonder—what's going on with the global supply chain? What has happened to delivering OTIF (on time, in full)?
Today, we'll investigate whether we can ever get back to respectable OTIF numbers.
Why OTIF Matters
OTIF numbers clearly reflect the health of a business and its supply chain. OTIF is a performance benchmark of a freight shipment that's delivered to a final destination at the agreed-on time, in the agreed-on amount. According to McKinsey.com, "OTIF measures the extent to which shipments are delivered to their destination according to both the quantity and schedule specified on the order."
We'll dive deeper into OTIF below.
- We'll clarify how we measure OTIF.
- We'll look at the factors that lead to an OTIF delivery.
- And then we'll identify tools and tech that promise to help improve OTIF numbers. Because wow—things are pretty bad right now.
OTIF and the Refrain of Post-Pandemic Pain
First of all, what's preventing orders from being on time and in full these days? Tell me if I've got the post-pandemic narrative memorized by heart.
In the wake of the COVID-19 pandemic, the entire globe tried to ramp back up at once. We survived the pandemic with a lot of help from e-commerce and online orders. So the extra demand created a bunch of problems. Raw materials prices (including lumber) skyrocketed. Component parts (such as semiconductors) became scarce or nonexistent. That then led to shortages (and higher prices) of finished goods, such as cars and houses. There was also suddenly a shortfall of labor (including truck drivers and dockworkers) despite a massive hiring blitz.
In summary, global demand for goods shot off the charts. At the same time, global supply chain delivery OTIF numbers fell off the table.
Honestly, this talk of OTIF, and the thought of all that freight sitting on the dock of the bay—it conjures in me those melancholy chords of Otis Redding.
But there are certainly lessons to learn from this moment in history. And businesses that make the right moves will capitalize on the many opportunities to deliver OTIF.
Song of the Summer: 1968's "(Sittin' on) The Dock of the Bay"
On the other hand, we could just put up our feet. Write it all off. Call "(Sittin' on) The Dock of the Bay" the song of the summer. After all, its salty, soulful, sea sounds mix so well with one's tears.
Sittin' in the mornin' sun
I'll be sittin' when the evenin' comes
Watching the ships roll in
Then I watch 'em roll away again, yeah
I'm sittin' on the dock of the bay
Watchin' the tide roll away, ooh
I'm just sittin' on the dock of the bay
But "I can't do what ten people tell me to do," as the song goes. And we sat around enough in 2020, didn't we? No repeats! C'mon, let's get in there, Mav!
OTIF: The Goal of Every Functional Supply Chain
I'm pretty sure I heard on a self-help podcast that goals help one avoid, and/or rebound from, malaise. In terms of supply chain logistics, OTIF is the fundamental goal.
Your OTIF numbers are a measurement of your relative success. Your suppliers' OTIF numbers are a measurement of the efficiency of your supply chain. Of all key performance indicators (KPIs) we track in business, OTIF is up there with the bottom line. That's because, if we're being honest, OTIF is a front-runner of future profits.
Keep your customer happy, deliver on time, and you have a higher likelihood of keeping them as a customer.
What else do we call this simple metric?
- OTIF: on time, in full
- DOTIF: delivered on time, in full
- DIFOT: delivery in full, on time
They all mean the same thing. And regardless of which acronym your organization and customers use, the key is that you speak the same language. This is vital—even when you speak different languages! Let me explain.
Where Things Go Wrong for OTIF...and Why
As noted above, OTIF is the goal of everyone up and down the supply chain.
Unfortunately, the reality in business is that sometimes we miss the mark. Hey, no one's perfect.
Perhaps we're on time, but we shipped the wrong product or missed the count. Other times, we delivered in full, but late. Worse yet, we shipped the wrong number of the wrong product—and delivered late! Some days, especially in post-pandemic days, OTIF might seem like a pipe dream!
What's the root cause of the problems? First of all, you, your suppliers, and your customers must all agree on what OTIF delivery means. This may seem like a no-brainer, but it's critical to establish what "on time" means. This is what I mean by speaking the same language.
For example, does on time mean when the shipment leaves the supplier's dock—or when the customer receives it at its dock? What if something happens (like a container ship gets stuck in the Suez Canal) halfway in between?
You Must Determine the Chain of Custody
It's vital to agree on those chain-of-custody questions (in writing) ahead of time. What else can you do to improve your OTIF numbers? That's a harder question to answer. You know your organizational bottlenecks best.
That said, in general terms, the entire supply chain could benefit from greater visibility and collaboration. We're in this thing together.
The global supply chain is such an integrated network that small, yet extended, bottlenecks have the ability to stack up (like containers on the dock of the bay) to debilitating levels. Unless we want the issues we face to compound, we must shift as an industry toward greater visibility.
How to Achieve Supply Chain Visibility
In reality, digitization tools are the bedrock of the shift toward visibility. For example, Vector's software eliminates the bottleneck in logistics that paperwork creates.
Think about it. Up and down the supply chain. Up and down the org charts. So much wasted time.
Vector's software clearly delineates the chain of custody. That removes doubt and dispute. Disputes waste time and resources.
The global freight OTIF bottleneck won't get smoothed out overnight. But with the incremental elimination of inefficiencies, we can get this thing moving again.
The One Decision That Eliminates 100 Decisions
In my opinion, adopting digitization is that one decision.
Still not sure that now's a good time to act? Consider this. Did you know that Otis Redding died three days after he recorded "(Sittin' on) The Dock of the Bay"?
So let's get after it. Rest our bones if we need to. But do so with the intention that we're building strength and resources for a bold move.
No more wastin' time. The pandemic taught us that the world as we know it can change pretty quickly.
But also, let that loneliness roll away. We're all in this together. And we can figure this all out together.
This post was written by Brian Deines. Brian believes that every day is a referendum on a brand’s relevance, and he’s excited to bring that kind of thinking to the world of modern manufacturing and logistics. He deploys a full-stack of business development, sales, and marketing tools built through years of work in the logistics, packaging, and tier-1 part supply industries serving a customer base comprised of Fortune 1000 OEMs.