Whether retail customers are missing one wine glass in an order of 12 or manufacturing customers are rejecting 100 off-spec parts in an order of thousands, they are rightfully upset when companies fail to deliver on time in full (OTIF).
Over the last 30 years, working with retailers, suppliers, and industrial manufacturers, SGS Maine Pointe has learned one truth: the obstacles to meeting your customers’ OTIF demands extend across every link in the plan-buy-make-move supply chain. The following three strategies help businesses unlock improved OTIF and increase customer satisfaction:
- Data analysis
- Network optimization
- Sustainability strategies
Data analysis for OTIF delivery
The data that affects OTIF delivery includes:
- Metrics used to qualify suppliers based on past compliance with deadlines
- Overall equipment effectiveness that tracks uptime, maintenance and accuracy
- KPIs to measure performance and throughput
- Pallet and SKU information to track locations and ensure transparency
- Optionality analysis to optimize capacity, geography, sourcing and capabilities
The lack of trustworthy, complete data can be costly. A distribution company found itself stuck with $25 million of inventory and as much as $15 million in lost sales every month. Yet they had no data to pinpoint the root cause, lacking cost-to-serve metrics, an up-to-date SIOP process, warehouse tracking, and executive dashboard. Once the SGS Maine Pointe analysts established clear and consistent data, we were able to effect an 8x improvement in dock shipping days. We also ended their expensive dependence on third-party logistics (3PL), contributing to a 16% improvement in unit gross margin.
Network optimization to solve several problems at once
Once the data is available, network optimization sheds light on the relationship between procurement, operations, and logistics and how their interaction affects your company’s ability to meet customers’ OTIF demands. Though it might be easy to cast all the blame on warehouse or logistics management, at least some issues will originate outside those areas. For example, non-conforming products may be a design or operations issue; unrealistic demand forecasts may be a sales issue; and damaged products may reflect a procurement issue with inferior raw materials.
Customers at a distressed die casting and machining company were so frustrated with the quality of products they received that they insisted on a third-party inspection. Even after the company’s quality control, those inspectors rejected 12% of parts before shipment. The SGS Maine Point team significantly improved first-pass quality and detection of defects at the machine level, in part by ordering new gauges, creating a more efficient workstream, and enhancing standardizing documentation. By analyzing process cycle times and work in progress (WIP), we reduced inventory and the cost of finished goods while meeting customer requirements. As the engagement closed, even the customers agreed that third-party inspection was no longer needed—a result that involved procurement, quality control, warehousing, and operations.
Meeting OTIF criteria requires asking questions that affect the entire end-to-end supply chain. Are you better off making or buying? Will your existing suppliers be able to source the raw materials you need for a new or redesigned product? How quickly can operations switch from one product line to another? What happens to throughput during shift changes? Do your logistics decisions account for extreme weather, transportation regulations, labor shortages, fuel shortages and other potential roadblocks?
Sustainable change to bring everyone on board
Once OTIF metrics have reached targets, sustainable change requires reinforcement by leadership, who must continually champion cross-functional communication, a single source of truth for data (from calibrations to KPIs), and shared goals. These governance issues become even more critical when a company is in distress or a recent acquisition or divestiture has upset the standard way of doing things.
All key roles must have a voice in decision making before their ability to meet those OTIF goals is considered. To that end, the ORCI (owner, responsible, consult, inform) process, giving assurance that each person along the supply chain knows their role in meeting OTIF goals. Then, by breaking down silos and offering expert mentoring and training, you can raise the maturity of procurement, operations, and logistics simultaneously.
Sustainable change brings improvement across the supply chain. Remember that distribution company? Productivity at its warehouse soared 240% when new and immediate-need products were moved closer to the production area. A redesign of the pick production zone bolstered productivity, shipping and loading productivity.
A 5S initiative (sort, straighten, shine, standardize, and sustain) raised throughput to the point where people could be reassigned to other duties—a bonus in a tight labor market.
The moral of these stories? Meeting your customers’ OTIF demands delivers profitability to your bottom line.
