19 Nov DIFOT – Is it delivering in a B2C world? (Part 1)
DIFOT – Is it delivering in a B2C world?
DIFOT (Delivered In Full, On Time) has been the cornerstone of the transport industry for many years. A lot of weight has been put on measuring DIFOT, as a key performance indicator. A good DIFOT score (expressed as a %) has traditionally been an indicator of success in a company’s logistics and supply chain performance. But is DIFOT still a gold standard performance indicator given changing market dynamics?
Logistics companies are awarded work based on their ability to deliver a certain DIFOT % score. In Australia, anything over 95% is regarded as acceptable, depending on the industry sector.
For some of you, DIFOT may be a foreign concept. Let’s look at similar KPI, which is used to measure the Public Transport service providers in Melbourne, Australia, and see how this effects the consumer.
On my regular commute to work, I catch a bus, train and sometimes a tram, to get to and from work. I like many am very reliant on a predictable service. If a train is running late, or cancelled, it can throw my whole day out. And, if a bus is running early, I can be left with a 20-minute walk to the station.
Often seen around stations are “How we’ve been Tracking” posters claiming a 98.8% Service Delivery, and a 91.8% punctuality score. On the surface this looks ok. But after doing some deeper analysis of this, I found that these figures are used to measure the performance of the services, and, that compensation must be paid if these figures drop below 98.5% for Service Delivery, and 92% for Punctuality. A 92% punctuality target means that close to 1 in 11 trains will be late (unlike buses, trains are a lot less likely to be early), and this will be a satisfactory level of service.
The freight transport industry is measured in a similar way, however… the punctuality score above has a tolerance of 4 minutes and 59 seconds, the freight transport industry is generally measured on a delivery date. For example, premium services are sold as “Same Day”, and “Next Day”. So, for a “next day “service, a delivery between midnight, and 23:59pm, will be positive result for the LSP (Logistics Service Provider), against their DIFOT target.
In the B2C (Business to Consumer, e.g., eCommerce) market, consumers have come to expect exceptional levels of service, as a result of companies offering exceptional levels of service in the taxi and food delivery industries. Uber, and Dominos, offering real time tracking, and Dominos also offers a delivery guarantees of 20 minutes. eCommerce shippers are now wanting to follow suit, offer more delivery options, with more accurate delivery windows to customers.
But how can the transport industry make the transition from the current DAY based services, to new, HOUR based services, if DIFOT is still how they are measured? Offering an hour delivery window, or, a 15-minute delivery window, is going to have a huge impact on DIFOT.
The issues with DIFOT as a performance indicator is its static nature, or more importantly, the dynamic nature of road transport. From the point goods are picked up, which is generally when the timer starts for OT (On Time), many outside influences will impact the carrier’s ability to mean the targets, as well as the receiver’s ability to be in attendance to receive the goods. The previous gold standard in Australian Logistics was the car manufacturing industry. Goods would be delivered in sequence to the production line @ a specific time. To enable this, warehouses were built within proximity to the factories. Why? Because this was the only way to ensure DIFOT.
We help our customers, be it Logistics Service Providers, or Shippers, improve processes, and accurately measure and improve DIFOT. But we also see this as a challenge that we are holding the industry back.
So, is DIFOT a good KPI for the Transportation and Logistics Industry, or is it just a good sales tool? We would love to hear your thoughts.
In our next post Part 2, we take a deeper look “what good looks like” in the B2C market. Are there some better options the industry needs to start looking at?
FourPL Contact for more information: firstname.lastname@example.org
About the Author: James Foran is FourPL’s “Transportation Guru” and is well known as a thought leader in the Industry. James’s expertise is helping business stakeholders understand technology capabilities and how to get the most out of their current technology, or, help develop a strategy to introduce new technology into their business.