Supply Chain
DIFOTAI – Delivered In Full On Time Accurately Invoiced (E)
How does customer service level influence the competitiveness and position in the market? Why and how the service level should be measured?
Posted: Dec 2011
Introduction to DIFOTAI
Service level to the customer is one of the most important aspects of business. Competitive market forces every company to fight for every customer. Having product excellence is not enough. The excellent product needs to be accompanied with excellent service. The customer expects to receive ordered quantity of the product, as per scheduled delivery time, with proper invoice.
If the product is not available, if the delivery is late and if invoice need to be corrected, than customer could be eager to choose another supplier, in case that these problems continuously appear. Therefore, excellence in service is the only key of obtaining and protecting competitive advantage on the market.
DIFOTAI
The service level should not be just an expression that serves to show good will of the supplier. The service to the customer should be measured in a understandable and relevant way. Measurement should be transparent with enough relevant data that can provide clear tracking of service level.
DIFOTAI abbreviation means:
D Delivered to the customer
IF IN FULL - QUANTITY FILL RATE (% OF PH.C. DELIVERED VS REQUESTED)
OT ON TIME - % of ORDERS (SHIPMENTS) DELIVERED ON TIME
AI ACCURATELY INVOICED - % of CORRECT INVOICES
Only this kind of thorough analytic can give relevant tracking. Tracking can show the gaps and can point to potential solution. For example, if invoicing seem to be inaccurate on the long run, than certain actions, ( technical or human related ) should be taken.
DIFOTAI concept has a base in OTIF ( On Time In Full ) concept of measuring the service level. The difference is that DIFOTAI covers the invoicing accuracy aspect.
Calculation of DIFOTAI
The DIFOTAI is calculated as multiplication of its segments:
…where each segment is a rate of its fulfillment. Therefore, DIFOTAI is measurement of total fulfillment.
Example:
IF = 99% ( 100 units ordered, 99 were delivered, 1 is not delivered due to stock out )
OT = 99% ( 100 orders placed, 99 were delivered on time, 1 delivery was delayed )
AI = 99& ( 99 invoices correct, 1 invoice need to be corrected )
DIFOTAI = 99% x 99% x 99% = 97%
As we see, the DIFOTAI calculation is not the average of its segments, but it is product of segments. The formula can not be the average, since in above example there were three mistakes in service to customer. One unit was not delivered due to stock out. One order was delivered with delay. Finally, one invoice needs to be corrected. Therefore, total score of DIFOTAI is product of all three elements
Impact of DIFOTAI on Organization
The impact of DIFOTAI to the whole organization is tremendous. The rate of success affects both market and internal organization.
The effect on the market is obvious, through service level to the customer. The high rate will provide good supply of sales outlets, uninterrupted sales, customer satisfaction and will build the image of the company.
Also, DIFOTAI affect the organization internally. Frequent stock outs can create problems to the sales, when generating orders. In case that orders are not correct ( wrong SKU number, wrong address ), this can create a lot of troubles to the warehouse and distribution. Dispatching that is not optimized can give headache to the distribution for their delivery schedules. Warehouse that forgot to load a certain SKU will make finances to issue the invoice.
As it is obvious high efficiency and alignment of organizational processes are directly influencing market and customers on the one side and organizational flow on the other side
Improving DIFOTAI
The effectiveness of DIFOTAI can be influenced by proper execution of all functions. Efforts need to be synchronized, since errors created within one department can cause chain reaction in other departments. Success of the DIFOTAI and service to the customer is dependant on multiple factors:
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DIFOTAI - Delivered In Full On Time Accurately Invoiced
DIFOTAI - Delivery In Full
DIFOTAI - Delivery On Time
DIFOTAI - Deliver Accurately Invoiced
