On Time In Full (OTIF) KPI Guide Mining... · 2019-11-25 · re Definition, formulas, tips,...

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Definition, formulas, tips, practical applications

On Time In Full (OTIF) KPI Guide

© QPR Software | www.qpr.com

OTIF is a KPI applicable in almost all industries, such as manufacturing and services, in both B2B and B2C businesses.

OTIF is typically related to the Order-to-Cash process and a corner stone of customer satisfaction - did customers get what they ordered and when it was promised?

OTIF calculation often varies depending on the organization’s goals. However, some common characteristics can be identified.

What is OTIF?


OTIF consists of two parts - on time & in full. It is often used as a KPI measuring the efficiency and accuracy of delivery in supply chain.

OTIF Definition

Delivered On Time

• Organizations define a time which they should be able to reach.

• This can be requested delivery date, production cycle, or agreed response time.

• One typical on time criteria is that the delivery should not be late. However, what is equally important is that the delivery should not be too early either. If a case is closed much faster than average, it typically means some exceptions have been made.

Delivered In Full

• The most common way to define in full is that customer gets exactly the amount they have ordered.

• However, for example in medical industry, the manufactured batch size varies, and the in full criteria should be defined so that customer gets at least the amount they have ordered.


On Time In Full =

(Cases matching the criteria) / (Total number of cases)

On Time = (Delivery time) - (Confirmed delivery time)

• In this case, the organization should be able to match a promised delivery time and there is no lower limit, meaning it is not a problem if a case is delivered very early.

• Target: => 0

In Full = (Delivered amount) - (Confirmed amount)

• Target: = 0, if the delivered amount should be exactly what is promised.

OTIF Formulas


With process mining, OTIF is calculated on a case level based on the number of order lines that were delivered On Time In Full.

This is the right way to do it to reveal process capability.

Basing the calculation on delivered tons or euros puts weight on big orders. For a well-functioning process, the size of the order is an irrelevant factor. Both small and big orders are delivered as promised. By weighting big orders in calculations, many unsuccessful small orders can be hidden behind the averages. This will not provide truthful and accurate information of the process performance.

Calculate OTIF KPI Using Process Mining


Process mining uses transactional event data to visualize individual process cases and calculate process KPIs like OTIF.

Process mining provides full drill down capability from, for instance, OTIF KPI, to the list of individual orders that didn’t fulfill the OTIF criteria.

No datamarts or cubes are used between the transactional data and the management report hiding calculation and data transformation rules.

There is no need to suspect or argue the results, as the facts on lowest level of detail are available, and calculation rules are transparent. Any KPI with unexpected results can be broken down to the order line level to see what went wrong.


Learn more about process mining

https://www.qpr.com/solutions/process-mining?utm_source=download&utm_medium=otifguide&utm_campaign=learnmoreaboutpm


3 Tips to Cut Lead Time in Half

1) Identify and reduce changes

2) Make sure you know where the bottlenecks are

3) Automate in right places


Conduct process analysis to gain a better understanding of why the OTIF KPI is not met.

Some analysis examples are:

• Requested delivery vs outbound delivery

• Delivered once vs delivered several times

1) Identify and reduce changes


Late deliveries:• In order to locate root causes for deliveries that take longer than

average, run a duration analysis and select the relevant cases for influence analysis.

2) Make sure you know where the bottlenecks are


Recurring deliveries:• In order to locate root causes for deliveries that delivered more

than once, select the looping events for influence analysis.


As you identify changes and bottlenecks for improvement, your OTIF KPI should look better than before the improvements.

3) Automate in right places

To take it further, you can work on reducing the variations and improving the conformance.

As the compliance improves, some of your subprocess should be ready and beneficial for automation, reducing human errors and improving the KPI.


Improving supply chain based on data – analysis of real process

Customer Needs

Predictability needed to be improved and operating models harmonized in

order to respond better to customer needs and requests.

Understanding the real status of the Order-to-Cash process through a

process analysis based on SAP data.

Overall goals: Improve delivery accuracy, improve production efficiency,

optimize stock rotation, reduce number of changes.

Solution

With the help of QPR ProcessAnalyzer and QPR’s connector for SAP, Metsä

Board gained fact-based insights into their process performance and

efficiency through end-to-end process analyses on their SAP data.

Benefits

QPR ProcessAnalyzer’s process visualization feature revealed the influence

of order changes being the bottleneck of Metsä Board’s Order to Cash

process efficiency, and the root causes being ad-hoc requests and internal

adjustments.

Process analysis results allowed Metsä Board to focus on fixing the root

causes by training personnel on agreed process guidelines to drive internal

efficiency, rather than investing further in SAP development.

“The process insight and facts delivered

by QPR ProcessAnalyzer were

priceless. We were immediately able to

focus our process improvement

activities to the right things to reach the

results our business needed. And not

wasting time on trial and error.”

Jari Vuori VP Supply Chain

Company Overview

Metsä Board is a leading European board producer and pulp supplier. In 2016, Metsä Board’s sales totaled EUR 1.7 billion and has approximately 2,500 employees.

▪ Delivered when delivery has been promised.

▪ Delivered the amount customer has requested .

→ Reduced the amount of business critical changes by 55%.

Practical Applications - OTIF in Manufacturing (Forestry)

Customer interview with Matti Ketonen,

VP Supply Chain:

https://www.qpr.com/customers/mets%C3%A4-board


Improved invoicing through data-driven process insight

Customer Needs

Harmonization of core processes due to demerger, including sales,

financial, project and service processes.

Cash flow slowed down after rolling out a harmonized ad hoc

service process and SAP in three countries.

How to identify process bottlenecks?

Solution

As-is process visualization and root cause analysis using QPR's

connector for SAP and QPR ProcessAnalyzer.

Benefits

Quicker invoicing and improved cash flow from discovering and

removing process bottlenecks.

Important process performance indicators and KPIs are put in

place for measuring process effectiveness, monitoring the results

of corrective actions, and comparing process performance and

variations on a country basis.

“With QPR ProcessAnalyzer, we

were able to see the whole Ad Hoc

Service process. Without the data

and the product we wouldn’t have

been able to discover the reasons

behind the process bottlenecks.”

Aila AaltonenCIO

Company Overview

Caverion was established through a demerger. Caverion provides building systems and industrial services in Europe. Caverion has approximately 17,000 employees in 13 countries.

▪ Delivered within 7 days of the request.

▪ No need to order spare parts = able to fix immediately

Note! If this fails, it usually has also an impact on the first criteria.

▪ Invoice immediately after the assigment has been completed.

▪ → Harmonized especially invoicing lead times and shortened them from up to 3 months to an average of 10 days.

Practical Applications - OTIF in services (infra services)


1. How long does it take to set up the OTIF KPI?

• The biggest effort is usually required to select the criteria for the KPI, implementation

is usually a matter of hours.

2. What if the criteria changes?

• This is natural behavior and happens often; I encourage my customers to review their

Process KPIs on regular basis and see where the focus should be.

3. Is OTIF orderline or order related or could it be both?

• It can be both.

4. Is it only possible to extract data from automated processes?

• No, the process does not have to be automated; there just needs to be data available

of the execution of the process. For example, a sales process executed with the

support of ERP but performed completely by an actual person can be used as source

for data.

5. Can you extract the data from ERP – e.g. Oracle and SAP for this analysis?

• Yes. SAP and Oracle – along with many others - are actually very good source

systems from process mining point of view.

Common Q&As


Do you have questions regarding this OTIF KPI guide?

Would you like to speak to our experts to learn more about how process mining can help improve your KPI and streamline processes?

How can we help?

Chat with us today

https://www.qpr.com/yes-i-want-demo?utm_source=download&utm_medium=otifguide&utm_campaign=chatwithus

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On Time In Full (OTIF) KPI Guide Mining... · 2019-11-25 · re Definition, formulas, tips,...

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