OTIF (On Time In Full): how to measure and improve service levels in the supply chain

OTIF (On Time In Full) is one of the most widely used indicators for measuring service levels in the supply chain and also one of the most misunderstood. Many organisations track it as a standalone percentage without analysing what sits behind that number or how it connects to inventory, planning, cost and customer experience. The result is often frustration: an apparently high OTIF alongside recurring operational issues.

In this article, we take a closer look at what OTIF really is, how to calculate it correctly and, most importantly, how to use it as a decision-making tool. We will explore why a good OTIF does not always mean efficiency, how it links to forecasting, inventory and suppliers and which approach helps improve it sustainably without constant firefighting.

What OTIF is and why it is one of the most critical KPIs in supply chain

OTIF has become a benchmark KPI because it captures, in a single measure, the basic promise of any supply chain: delivering the right product at the agreed time and in the committed quantity. However, its apparent simplicity hides complexity that is worth understanding to avoid misleading conclusions.

OTIF (On Time In Full) definition

OTIF (On Time In Full) measures the percentage of orders delivered on time and in full, based on the conditions agreed with the customer. For an order to count as OTIF, it must meet both criteria at the same time: punctuality and completeness. If either one fails, the order is considered non-compliant.

This binary approach makes OTIF a demanding indicator but also one that closely matches the customer’s real perception. From their point of view, a partial or late delivery is simply a service failure.

What OTIF really measures and what the indicator leaves out

OTIF measures the final service outcome not the process that leads to it. It shows whether the promise was met but it does not explain why. It does not distinguish whether the failure comes from poor forecasting, a supplier issue, a stock shortage or a logistics error.

That is why, although it is an excellent compliance indicator, it should not be used in isolation. Without complementary metrics, OTIF can highlight the issue but not help solve it.

How to calculate OTIF step by step

Calculating OTIF correctly is essential if the indicator is to be reliable and comparable over time. Small differences in criteria can significantly change the results.

OTIF formula explained simply

The OTIF formula is straightforward:

OTIF (%) = (Deliveries completed on time and in full / Total deliveries made) × 100

Only orders that meet both requirements count as OTIF. There are no averages or weightings: it is either compliant or it is not.

Practical example of OTIF calculation

If, over a period, 100 deliveries were made and only 80 arrived on the agreed date and with the full quantity, OTIF will be 80%. Even if some of the other 20 orders were almost on time or almost complete, from an OTIF perspective they count as failures.

This example helps explain why OTIF is often lower than other, less strict service indicators.

Common mistakes when calculating OTIF

One of the most common mistakes is not defining what “on time” actually means. Is there a tolerance of hours or days? Another frequent error is treating partial deliveries as valid or not managing split orders correctly when they are delivered in multiple shipments.

Without clear, consistent criteria, OTIF loses value as a management indicator and becomes a source of internal debate.

Why a good OTIF does not always mean an efficient supply chain

A high OTIF is desirable but it does not guarantee an efficient operation on its own. In fact, in many cases it can hide significant inefficiencies.

The risk of optimising OTIF without analysing inventory and cost

Some organisations improve OTIF by increasing safety stock or using expedited shipments. Service improves but costs rise sharply. The indicator looks good but the business suffers.

Optimising OTIF without analysing inventory and cost to serve can lead to defensive decisions that are not sustainable.

When OTIF is achieved at the expense of expediting and excess stock

Urgent transport, last-minute production changes or exceptional purchases are symptoms of poor planning. While they help meet customer commitments, they create operational stress and erode margin.

In these cases, OTIF reflects the team’s heroic effort not the quality of the system.

High OTIF and low margin: more common than it seems

It is relatively common to find organisations with high OTIF and tight profitability. The service metric is not connected to economic impact so decisions maximise compliance rather than profit.

This is where OTIF must evolve from an operational KPI into a decision KPI.

OTIF and its direct link to inventory, demand and planning

OTIF is not created in the warehouse or in transport. It is the final reflection of decisions made much earlier in demand planning, inventory policy setting and capacity management. When these decisions are not aligned, service levels become unstable regardless of the operational effort that follows.

Seeing OTIF as an outcome of the planning system makes it possible to act on the right levers. That is the only way to improve it sustainably without relying on defensive fixes that increase cost and complexity.

How forecast accuracy shapes OTIF

Forecast accuracy is one of the main drivers of OTIF. An unreliable forecast creates systematic mismatches between expected sales and actual demand which leads to stockouts or excess stock depending on the direction of the error.

Even with efficient logistics execution, a weak forecast limits the ability to deliver on time and in full. That is why improving forecast accuracy and stability is one of the most direct ways to raise OTIF structurally and reduce the need for last-minute corrections.

OTIF’s impact on stockouts, excess stock and tied-up capital

Low OTIF often translates into stockouts, lost sales and a poorer customer experience. However, a high OTIF achieved through overstock also carries a hidden cost: more tied-up capital, higher obsolescence risk and pressure on margin.

Analysing OTIF in isolation can lead to unbalanced decisions. Only when it is assessed alongside inventory, turns and cover metrics is it possible to find the right balance between service level and financial efficiency.

OTIF as an outcome not a starting point

OTIF should not be the first KPI you act on. It should be the outcome of a well-designed planning system. When it is managed as an isolated target, teams tend to treat visible symptoms rather than address the real causes.

More mature organisations use OTIF as a validation indicator: if the system works, OTIF improves. If it does not, the focus returns to demand, inventory and capacity planning where service level is actually built.

OTIF for suppliers: how to identify and manage critical suppliers

A significant share of OTIF depends on supplier performance. Measuring it correctly is essential for proactive management.

Measuring OTIF by supplier not only at an aggregated level

A global OTIF can hide suppliers with very uneven performance. Analysing OTIF by supplier helps identify risk hotspots and prioritise actions.

This approach is especially relevant in environments with multiple suppliers and variable lead times.

Classifying suppliers by operational impact and risk

Not all failures have the same impact. Combining OTIF with volume, criticality and available alternatives makes it possible to segment suppliers and define differentiated strategies.

This way, supplier management stops being reactive and becomes more focused.

OTIF as a foundation for procurement and negotiation decisions

OTIF is an objective tool for renegotiating terms, redefining contracts or rethinking procurement strategy.

To support this analysis, visual tools are essential. That is why we have prepared a free OTIF dashboard in Excel that helps you analyse supplier performance, detect patterns and make decisions based on real data. Download it and take the first step towards professionalising how you manage service.

OTIF as an executive KPI: from operational metric to strategic decision-making

When integrated properly, OTIF stops being a purely operational indicator and becomes part of the executive dashboard. It is not only about whether commitments are met. It is about understanding what commitments are being made, at what cost and what risks they create for the business. At this level, OTIF acts as a thermometer of the organisation’s overall reliability with customers, partners and the market.

Analysed from an executive perspective, OTIF helps align tactical choices with strategic objectives and avoids local optimisations that damage margin, stability or customer experience. This is where the indicator delivers real value.

Connecting OTIF with service level, cost and customer experience

OTIF does not only measure deliveries. It measures trust. A failure directly affects customer perception, satisfaction and the likelihood of repeat business or contractual penalties. From an executive perspective, OTIF should be read alongside service level, cost to serve and margin indicators.

When these metrics are analysed together, leadership can assess the true trade-offs: what service level is profitable, where unnecessary costs are being absorbed and which customers or channels create the greatest operational strain.

OTIF within an S&OP or S&OE process

In a mature S&OP or S&OE process, OTIF acts as an early signal of imbalances between demand, capacity and inventory. It is not analysed after the fact but as part of discussions on future scenarios and service commitments.

When integrated into this forum, OTIF helps anticipate risks before they materialise: demand peaks that are hard to absorb, suppliers with declining reliability or unrealistic production plans.

From measuring deliveries to governing commitments

When OTIF is used correctly, the organisation moves beyond measuring whether it has delivered and starts governing what it promises and how it promises it. This involves setting realistic commitments aligned with operational capacity and financial objectives.

With this approach, OTIF becomes a tool for organisational discipline. It helps decide which orders to accept, what lead times to offer and how much flexibility to take on without compromising system stability.

How to improve OTIF sustainably (without constant firefighting)

Improving OTIF sustainably means changing how the organisation understands and manages service level. It is not about reacting better when failures occur. It is about structurally reducing the situations that cause them. Lasting improvements do not come from heroic efforts. They come from stable processes, early decisions and alignment across functions.

When OTIF is addressed through planning rather than urgency, it stops being a recurring problem and becomes a natural outcome of a well-designed supply chain.

Fix root causes not symptoms

Most OTIF improvement initiatives fail because they focus on correcting visible symptoms: one-off delays, specific shortages or isolated incidents. However, behind these issues there are often repetitive patterns linked to unreliable forecasting, poor stock policies or badly managed capacity constraints.

Identifying and tackling these root causes reduces the recurrence of failures. It also frees teams from constant expediting and creates a more stable operating environment where OTIF improves consistently and predictably.

Align demand, procurement, inventory and logistics

OTIF does not improve within a single department. It is the outcome of connected decisions that start with demand forecasting and end with delivery to the customer. When these functions work to different targets, data and horizons, non-compliance is almost inevitable.

Sustainable OTIF improvement requires a shared view. Aligning demand, procurement, inventory and logistics helps anticipate needs, adjust commitments and avoid contradictory decisions. This coordination reduces internal friction and improves service levels without relying on systematic extra cost.

Moving from reactive management to proactive planning

The difference between unstable and reliable OTIF is often the ability to anticipate. Reactive organisations act when the issue is already visible. Mature ones detect risks before they affect the customer.

Proactive planning supported by realistic forecasts and scenarios helps protect service levels without inflating inventory or relying on constant expediting. With this approach, OTIF stops being a last-minute target and becomes a natural result of decisions made with time and judgement.

OTIF is not a logistics indicator. It is a trust indicator

OTIF reflects the real health of the supply chain and an organisation’s ability to deliver what it promises. Measuring it well matters but using it properly matters even more. When it is connected to demand, inventory and business decisions, it becomes a lever for real improvement.

At Imperia, we work to make OTIF part of an integrated planning model where demand, operations and finance share a forward-looking view through our Supply Chain Planning software. Our approach helps improve service levels sustainably without compromising margin or efficiency. If you would like to see how, feel free to request a free advisory session with our experts.