DIFOT: A Metric of Supplier Performance

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Delivery In Full On Time, or DIFOT, is a metric used to analyse how accurate and efficient your supply chain is.

Your supply chain is the very lifeblood of your business. Without it functioning correctly, your supplies may not arrive in the correct amount or the correct timeframe, severely compromising your ability to meet your customers’ needs.

What is DIFOT?

DIFOT is the number of orders delivered on time, in totality and with exactly what was ordered. This gives us a percentage KPI to track.

For example, if 100 orders were received and 95 of them were delivered accurately, in totality and at the right time, then the DIFOT value is 95%. Incidentally, this the threshold below which successful organisations should not fall. It is all about accuracy and efficiency.

So, it seems pretty simple but its worth is in the way it is applied.

How is DIFOT applied?

It can be used to measure supplier performance so that you can easily and quickly get a feel for which suppliers are consistently reliable in their supply and which either do not deliver in full or are perpetually late in delivery. When it comes time to reassess the approved supplier list, then you can use these metrics to disqualify problematic suppliers and improve your own performance and supply chain.

If you are measuring your own DIFOT scores as a distributor, you can use the metrics to promote your own success and ability to fulfil demand. Your claims would not be whimsical but would be based on an accepted metric from considered analyses and therefore would stand you in good stead to secure more business.

How is DIFOT impacted?

Since DIFOT is reliant on having stock to supply, it stands to reason that it is negatively impacted by failures of the inventory management system. This includes:

  • Understocking where you carry too little stock to supply demand. This also affects accurate forecasting which can be affected by seasons and trends
  • Human error in counting where inaccurate stock counts are recorded, forming the basis of erroneous ordering and decision making.
  • Failure to organise the warehouse properly can hurt order fulfillment efficiency and spell disaster for the DIFOT. If you are perpetually having to fix mistakes or hunt for products that are not in their designated location then it is inevitable that the DIFOT will be negatively impacted.
  • Failure to implement a manufacturing quality system can have an enormous impact on the ability to supply. Without a quality system, the company has no measure of their quality index, how much to over produce to account for faults and how to improve quality in the long run. Failure to do these things accounts for poor quality products being sent to customers and the inability to accurately fulfil orders when suboptimal products have been removed from supply.

How to improve DIFOT rate

Understandably, many of the suggestions to improve your DIFOT rate are connected to your suppliers and involve strengthening those relationships for organisational success. Here we highlight some key items to consider:

1. Establish a conversation with your suppliers

The relationship between your company and your suppliers is a two-way street and good communication needs to be emphasised. If you fail to communicate your requirements clearly with enough time to facilitate them, you create angst and make it very difficult for your supplier to comply. Sometimes all it takes is a bit of forewarning and open communication about requirements and expectations.

2. Draw up a Service Level Agreement

If this is something you have neglected to put in place with your suppliers, then you may be missing out on an enormous opportunity. You may feel as if your relationship is a sure thing, built to last. However, if your suppliers perceive your orders to be haphazard and unreliable, then without an agreement in place, they will continue to supply ad-hoc, without ever pre-empting orders or investing in new equipment to better their service to you. If an agreement was in place denoting some sort of long-term commitment, they may be more willing to go the extra mile.

3. Measure supplier performance

This seems to be a no-brainer, especially with our explanation of DIFOT rates, however analysing supplier performance may also involve how well they communicate issues to you, whether you can trust them to prioritise your business and the general ease when you work with them. It is no good having a supplier that has a fantastic DIFOT rate, but they only get there with a lot of coaxing and micromanaging, utilising a disproportionate amount of your time.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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