OTIF! For Whom? - CVMARK

1 1. 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 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.

2 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.

3 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.

4 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. Copyrights 2013 Shridhar Lolla. All Rights Reserved. 2. 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.

5 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-In voiced). 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.

6 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.

7 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.

8 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 Copyrights 2013 Shridhar Lolla.

9 All Rights Reserved. 3. 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.

10 _____. 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, read the game changing books on operational excellence by the Author, Shridhar Lolla The Path - Leveraging Operations in a Complex and Chaotic World Co-created by 188 practitioners in an innovative way Building Manufacturing Competitiveness Connects management methodology to industry's growth agenda Copyrights 2013 Shridhar Lolla. All Rights Reserved.