03/20/2024

On-Time, In-Full Delivery: Why It Matters to Retailers & Brands

Discover the importance of on-time, in-full deliveries, impacts on the supply chain, and how retail consolidation can help you avoid fines and enhance your retailer operations.

Your retail brand's success relies on delivering the right products to the right retailer at the right time. One way that big-box retailers measure how well you're doing is through a metric called "On-Time, In-Full" (OTIF) delivery. Consistently meeting your OTIF service levels helps to strengthen relationships with retailers which can enhance your brand's visibility. Failing to meet OTIF can expose you to fines from retailers and damage your relationships.

We'll explain what OTIF is, why it matters, and how to meet a retailer's requirements.

Key takeaways

On-Time, In-Full is a key KPI used by many big-box retailers
OTIF ensures that brands and vendors are meeting their delivery commitments
Failing to meet OTIF agreements may result in retailers fining vendors and applying other penalties
You can improve OTIF rates and lower transportation costs by using retail consolidation services
Low OTIF rates can highlight problems elsewhere in your supply chain
You can resolve these issues to improve performance and optimize your retail logistics

Why does OTIF matter to brands and retailers?

Retailers increase revenue and profit margins by maximizing product availability and enhancing consumer choice. That means getting a wide range of products onto their shelves without delay.

The OTIF KPI measures how effectively brands are meeting retail needs. That matters because any disruptions in getting stock delivered has an impact on the retailer, including:

Not having staff available to transfer products from trucks to storage
Causing congestion at loading docks
Delaying other trucks that need to deliver products
Dealing with empty shelves and lack of availability
Disappointing consumers who can't get their favorite products

As a result, brands that don't achieve the OTIF requirements of big-box retailers often face penalties or fines. Meeting OTIF commitments can keep retailers happy, which matters if a brand wants to increase shelf space and product visibility.

What is OTIF?

On Time, In Full, or OTIF, is a target and KPI that measures the percentage of orders successfully fulfilled, specifically for delivery time and product quantity. It's split into two parts:

Products arriving at the retailer at the scheduled delivery time (on-time)
The number of products that are ordered successfully arriving at the retailer (in-full)

These parts might be tracked and measured separately, or combined into one overall KPI.

Large retailers will often penalize businesses if products arrive early or late (not "on-time") or if there are more or fewer items delivered than expected (not "in-full"). OTIF is used throughout the supply chain whenever goods are transported and delivered between suppliers, manufacturers, retailers, and consumers.

How does OTIF impact the supply chain?

End-to-end supply chains are often vast, interconnected, and international networks with lots of moving parts. A small delay in one part of the supply chain can cause significant downstream issues and delays. That's why it's important to maintain high OTIF standards between all the different partners and nodes throughout the supply chain. Although retailers are the most visibly impacted by OTIF issues, it's important to have on-time, in-full deliveries between suppliers, manufacturers, logistics partners, and others.

How is OTIF calculated?

The most common way to calculate your overall OTIF rate is to take the number of deliveries that are mad on time and in full, divide that by the total number of deliveries made, and multiply that by 100%. You would calculate this for each individual retailer and store.

This can be expressed as:

Overall OTIF rate = [(Total number of deliveries made on time and in full) / (total number of deliveries made)] * 100%

For example, in one month you make 80 overall deliveries, but only 70 are delivered on time and in full:

Divide 70 (your on-time, in-full deliveries) by 80 (your overall deliveries) and multiply by 100 to get an OTIF rate of 87.5%.

Retailers will determine how many orders you delivered that meet their requirements for OTIF. For example, they might define "On-Time" as delivering exactly within a specific delivery slot. And they might define "In-Full" as goods that are delivered in good quality and undamaged that meet their original purchase order amounts.

You can review your own retailer agreements to understand how they define on-time and in-full.

How can I improve OTIF rates?

One of the best ways to improve OTIF rates and reduce fines is through using a retail consolidation service (RCS).

Retail consolidation is a service where products are received from multiple brands, suppliers, and manufacturers, normally as part of a Less-than-Truckload (LTL) shipment. A consolidator will bundle these shipments together and create one or more Full-Truckload (FTL) shipments for a particular retail customer.

How can retail consolidation improve my OTIF deliveries?

RCS helps to improve your on-time, in-full deliveries in several ways:

Consolidates multiple LTL shipments into one FTL shipment so only one truck needs to deliver on time
Audits products being sent to retailers to ensure every SKU is accounted for, helping to meet in-full requirements
Understands each retailer's OTIF needs and creates standard operating procedures
Uses established retailer relationships to benefit brands and optimize deliveries
Works with trusted carriers that have historically achieved high OTIF rates
Provides real-time tracking on the location of shipments
Connects with retailer supply chain technology and systems
Owns the entire retail order fulfillment process on behalf of brands

What are some other benefits of retail consolidation services?

RCS can work as part of an integrated retail logistics approach. Further benefits include:

Lowering costs by minimizing the amount of trucks and drivers needed to transport goods from warehouses to retail stores and distribution centers
Reducing harmful emissions due to fewer trucks being on the road
Receiving a brand's products and bringing SKUs into consolidation centers
Auditing every aspect of consolidating products and delivering them to retailers
Managing freight, assigning carriers, and arranging delivery slots with retailers
Loading and unloading of trucks and transport
Managing all paperwork associated with a shipment
Reporting on multiple KPIs including OTIF scores
Understanding changes to OTIF rules for retailers and updating RCS processes
Packaging products in line with retailer needs
Challenging retailer chargebacks and fines

What are some OTIF fines charged by retailers?

OTIF fines do vary between retailers, especially big-box stores. For example:

CVS charges either 1.5% or 3% of the purchase order amount that did not meet its OTIF standards
Walmart charges 3% of the whole purchase order amount if goods are not delivered on time, and up to 3% of the value of the missing goods if they are not delivered in full
Target charges up to 5% of the purchase order amount that did not meet its OTIF requirements
Amazon may reject entire shipments if products do not meet its OTIF standards

The penalties laid out above are general examples. Conditions, fines, and measurements do change from time to time and can vary between retailers and brands. Always check your specific retail agreement to confirm your own OTIF commitments and the penalties for not meeting them.

Why do OTIF penalties matter?

Retail and FMCG brands are often operating on thin profit margins. Retailer fines reduce your revenue and impact your bottom line.

Failing to meet OTIF has other impacts too:

It can mean your own supply chain and logistics operations are inefficient
Repeatedly failing to meet OTIF goals can damage relationships with retailers
Poor retailer relationships limit your opportunities to expand shelf space and increase product visibility
Not meeting OTIF goals might eventually cause a retailer to stop doing business with you
Trucking carriers might have contracts canceled if they're continually unreliable

How can OTIF fines help me optimize my supply chain?

Although OTIF fines and penalties are a problem, that also means there's room for improvement. For example:

Do you need to move to more reliable supply chain partners?
Should you revise service level agreements with your suppliers or manufacturers?
Are there deep-rooted issues elsewhere in your supply chain that you need to resolve?
Is your demand planning and forecasting providing realistic scenarios for supplying retailers?
Do you need to schedule your workforce, equipment, and other factors in a more optimal way?
What do you need to change with your logistics partners to meet OTIF goals?

Digging into your OTIF scores and what's causing them helps you to make data-driven decisions that can benefit your entire supply chain.

What else can I do to stay up-to-date with retailer requirements?

There are several ways to understand changing OTIF and other retailer needs:

Keep current on retailer communications: Sign up to receive communications from your retailers and incorporate any updates on a regular basis
Regularly analyze your OTIF scorecard: Retailers will provide reporting and dashboards on your OTIF performance, ensure you look at your KPIs regularly
Review routing guides and delivery instructions: Each retailer will have specific requirements that they will set out in routing guides and other vendor guidelines
Access your vendor portal with each retailer: Once you're accepted as a vendor, retailers will often give you access to a supplier portal where you can check the status of purchase orders, deliveries, KPIs, documentation, and other factors
Challenge inaccurate OTIF fines: Retailers aren't always accurate in assigning OTIF penalties, so it's important to do your own analysis and push back if needed

In many cases, retail consolidation providers will carry out these tasks on your behalf.

What problems do retailers have if brands don't meet OTIF requirements?

Retail stores run on very precise forecasting. There's only a limited amount of shelf and storage space, so if products arrive early, there may not be anywhere to store or display them. SKUs that arrive too early may also need to be handled more, which can result in quality issues and damage. This can be especially problematic for food and beverage retailers who rely on product freshness to attract consumers. Fresh products arriving early need to be stored for longer, lowering their appeal.

Retail employees have multiple roles and stores often work on tight shifts with little overhead. Stores must consider many factors when scheduling staff. Early or late deliveries mean that employees must be diverted way from their main roles to assist with handling products. This means cashiers, customer service specialists, managers, and others can't assist customers or run the store due to problems with deliveries.

Loading docks run on a tight schedule and have limited space. If your delivery isn't on time, this causes congestion and has a knock-on impact on other trucks that are trying to deliver products.

While early delivery can be great if you're going directly to the consumer, that's not the case when shipping to retail stores. The earlier you deliver something the longer it needs to be stored. This increases a retailer's costs, and takes up space that they may need for products that reach them on time.

Late delivery means products aren't in stock, leading to empty shelves. If a consumer can't get the product they want, they might go to a competing retailer or order the product online.

How GEODIS can help you with retail logistics and consolidation

GEODIS is one of the biggest retail logistics and RCS providers in the U.S. and around the world. Here's what you can expect when you work with us:

A leading on-time, in-full rate of 98%
Strategically located warehouses and distribution centers throughout the U.S.
Reach 99.5% of the continental U.S. in two days or fewer
Strong relationships with major big-box retailers
A wide and deep national, regional, and local carrier network
Best-in-class retail consolidation services
Standard operating procedures to meet retailer guidelines
Complete quality control and auditing of all retail shipments and products
Integration with the full range of transportation, warehousing, and freight forwarding GEODIS services
Real-time visibility throughout the supply chain

Delight retailers by choosing GEODIS as your 3PL partner. Get in touch with us to discover how we can optimize your retail operations to reduce OTIF fines and enhance your retailer deliveries.

Table of content