OTIF Retail Compliance and its Impact on UAE Market
Things are no longer the way it was several years ago. The evolution of the world system and time has also impacted the way products are traded. This gives rise to the booming eCommerce industry.
The eCommerce industry is growing at a fast pace since everyone seeks more comfortable ways of purchasing using mobile gadgets. The case is not different for the UAE market. The UAE e-commerce market hit a value of $3.9 billion in 2020. And the growth of about 53% has been recorded yearly up till now.
The experienced success of eCommerce brands in the UAE hinges on several factors. One major is the tracking of business performance using key distribution metrics. There are a bunch of distribution metrics, but the On-Time In-Full (OTIF) is the focus of this piece.
This piece will take a deeper dive into the On-Time In-Full (OTIF) metrics and how it plays out in the UAE market.
Table of Contents
What is OTIF?
OTIF is an acronym- On-Time In-Full. It is a distribution metric that measures the number of orders delivered on time and in full. It gives the business insights into how well they meet customers’ delivery needs. It also answers whether orders were fully delivered at the expected date or not.
OTIF is a delivery key performance indicator largely employed by e-commerce brands, although several other forms of businesses also employ OTIF in the supply chain.
Why is OTIF Important in Retail or Ecommerce Business?
As a useful key performance indicator, OTIF is indispensable, especially for brands. Here are the following ways OTIF shows its importance in the eCommerce business.
An Assessment Tool for Fulfillment and Delivery Process
The On-Time In-Full (OTIF) KPI helps keeps brands in the loop with all that is going on with their fulfillment and delivery operations. It gives the brand an insight into the efficiency of the fulfillment process if it transits into delivering products on time and in full.
Help Assess Shipping Partners
A part of delivery efficiency is hinged on the shipping partners of the brands. As a result, OTIF can help track the efficiency of your 3PL distribution.
Gives an Overall Picture of the Supply Chain
The efficiency in delivery also speaks volumes about the previous processes of the supply chain. The OTIF can easily help identify areas of the supply chain that needs improvement.
Beyond Delivery- OTIF Impacts More Than You Might Think
It’s fine that OTIF is majorly seen as a delivery KPI. But a view of the supply chain shows that all processes are interwoven such that one process influences the other. It would also help to bear in mind that delivery is at the later stages of the supply chain and can also be implemented in between the supply chain in special models. Hence OTIF impacts the following areas of the supply chain.
This involves making products readily available for customers to make orders. It’s simple –products have to be in stock to facilitate orders and shipping.
Warehouse and Storage
A good storage facility will enhance the availability of products for orders and shipping. A low OTIF may be suggestive that the warehouse isn’t effective. Beyond storage, fulfillment also begins in the warehouse. This involves picking, packing, and organizing orders for shipping. Hence OTIF could be a trigger for eCommerce businesses to look back at their warehousing facility.
OTIF will clearly show if the shippers are doing a great job or not. Shipping partners have the responsibility of delivering orders on time. The OTIF KPI can also reveal if orders were delivered in good condition.
Once orders are delivered in full and on time, customers are bound to be happy. Hence a low OTIF score could suggest that customer satisfaction is below par.
How to Calculate OTIF
It’s quite relieving that an important KPI as OTIF isn’t difficult to calculate. It can be calculated using the mathematical relationship below;
On-Time In-Full Rate = (Total deliveries made on time and in full/ Total deliveries) X 100
This will give results in percentage, which depicts the OTIF score. For example, if an eCommerce brand makes 1000 total orders, and 800 of the orders were delivered on time and in full, the OTIF will be calculated thus;
OTIF = (800/1000)X 100 = 80%
This is a good OTIF score; according to standards, and OTIF of 80% to 90% is worthy of success.
Causes of Low OTIF
It’s not all rosy in the business world, as there are times when brands record low OTIF. Some causes include;
OTIF will definitely be low in situations of late deliveries. Businesses can receive calls, complaints, and emails about delivery delays. This can also be seen in the order management dashboards.
Consistent delays in deliveries will dissatisfy the customers and can run the business down. The reasons for late deliveries could include; the supplier, shippers, and warehouse operators.
When making orders, customers select components of the product to suit their desires. This could include size, color, weight, etc. When customers receive a product different from what was ordered, it becomes an inaccurate order.
Increasing inaccurate orders will yield a low OTIF score.