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Can we use Value Fill Rate as a Supply Chain metric instead of OTIF?
When I wrote about OTIF a couple of days back, many supply chain professionals got in touch with me. They are currently using Value Fill Rate (VFR) as a metric and they wanted to know if they should switch to OTIF. Let me clarify.
OTIF and VFR measure two different aspects of customer service. OTIF is customer-centric and aims at delivering peace of mind to the customers. They don’t have to keep additional inventory buffers, they don’t need to follow up, they can rest assured that the order will be supplied on time in full.
VFR is more internal looking. It measures what percentage of potential revenue is lost due to stockouts. If VFR is 90%, it means that potential revenue to the extent of 10% of customer orders was lost by the company. It does pinch to lose so much sales, doesn’t it? That’s the purpose of VFR… to create a sense of urgency to reduce stockouts, eliminate this loss of sales, and accelerate the top line.
Since OTIF and VFR serve two different purposes, we can use both of them together. It will motivate the team to deliver peace of mind to its customers, and also spur them into action to reduce lost sales.
Of course, when OTIF touches 100%, VFR will also reach 100%.