By J.P. Wiggins, Vice President of Logistics
Visibility is a hot topic in transportation right now, and it should be. With TMS systems now able to deliver better visibility than ever before – including connecting internal and external systems, as well as gathering, translating and sharing data – visibility in-transit helps you address problems as they happen and improve automation.
But visibility doesn’t get you operational execution. So when you hear “visibility,” you should really be thinking “OTIF.”
OTIF is “on time and in full.” It’s a catch-all phrase for the different types of compliance fees imposed by many of the larger shippers, as well as large retailers, grocery and drugstore chains.
We in transportation are only going to see more OTIF demands with higher and stricter penalties. Why? The quick answer is that it’s a result of the e-commerce era. Manufacturers, retailers and nearly all shippers are collaborating more closely with customers and vendors to get products out as fast and as cheaply as possible. So if they don’t get freight on time and in full, those collaborations can fall apart and the results are disastrous.
In addition, service has become a crucial part of a product sale; logistics and the ability to service orders can be even more important than cost. Service is becoming more unique with every customer, often requiring specialization and specific needs (for instance, retail and grocery often have specialized logistics requirements that can differ by customer and even by each customer’s location). All of this puts more pressure to deliver OTIF – and to assess fines when that requirement isn’t perfectly met.
A closer look
Delivering OTIF is more than just knowing where your truck is located; OTIF is knowing where your orders are at all stages, from creation through delivery:
- It’s choosing the best mode and carrier
- It’s creating data like shipping and delivery windows
- It’s cleansing missing or bad data
- It’s automating the contact/scheduling of carriers
- It’s finding the best method that keeps costs down but still meets delivery windows
One little secret is that OTIF fines are becoming a profit center for many companies. Shippers implement OTIF policies, but these policies quickly become a source of revenue and managers operate them as a profit center (this happens with all sources of revenue). This means that shippers, especially the larger shippers, are going to be more aggressive on assessing fines.
Meeting OTIF with a TMS
It’s common for a shipment to be delivered on time but, due to dock congestion, isn’t able to get in. Yet the shipper and their OTIF profit center still hit you with fines because they say the delivery was late! So what does “on time” mean to this shipper?
It’s not a simple answer. There are many different dates and times to manage, such as order, shipper appointment, hours of operations, in-dock, GPS reported, carrier status reported, carrier delivery milestones and more. The amount of data you need to track every version of OTIF is immense.
- Can you take into consideration the shipping window – when is the product available to ship, is a delivery appointment needed, are there specific equipment requirements for the product, origin or destination locations?
- What are the transit times by carrier by mode?
- Are you addressing holiday/weekend days correctly? If your carrier is moving on July 4th or New Year’s Eve, does this change the delivery window?
The list of customer demands is only going to get worse. I’m waiting to see deliveries that require dock door payments of M&Ms with the brown ones removed (Van Halen fans will get that reference).
To make matters worse, the logistics planner often gets a single date for delivery. The customer has a delivery date via the order management system, but shipping windows need to be created. And shipping windows are ranges of dates and times on both shipping and delivery. For example, is early delivery allowed? If so, how many days early? Are delivery appointments required?
Thousands of data points can come into play if you want to deliver OTIF. But if you don’t have good data on these necessary points, you get stuck paying the OTIF fine. In other words, delivering on time may still lose you money! It’s a bit of the Wild West out there, but the new sheriff in town is Good Data – and your TMS can marshal that data. A modern, properly configured TMS will create the missing data points, but more importantly it will use this data up in the routing/planning/execution process to make sure the freight is delivered on time according to the customer’s definition.
The right TMS helps planners create data that did not exist, but that is critical to know for OTIF delivery. For example, a modern TMS doesn’t just receive information; it cleanses it and creates it to fill in the gaps of knowledge. It can do the hard part of managing all those exceptions.
For example, do you have a customer that only receives freight on Saturdays or after hours? Use your TMS to set them up so that’s all they get. Are you allowed to ship some customers freight but need to restrict product types so incompatible products don’t go in the same truck? A modern TMS can help you do that. Track those important customers that have high OTIF failure fees, and make sure you put the best carrier (and mode) on that shipment.
It’s not about delivering freight cheaply
Delivering freight more cheaply is now just a commodity. Customers expect MORE from their carriers and 3PLs; they need to see new services that enhance the experience, provide better predictability, and deliver OTIF better than the competition. Leveraging the right TMS will give you the power and configurability to gather and manage your data for optimal operational execution.