What is DIFOT, and why is it key to logistics success for manufacturers?

Article By John Boorsma, Interim CEO, Ontime Delivery Solutions

Why is DIFOT such an important term for Australian manufacturers? Because it is often the difference between an efficient, reliable, well-functioning logistics delivery system and one which creates headaches, inefficiency and cost overruns.

DIFOT stands for Delivered In Full On Time, and is a key metric for understanding the operational efficiency of your logistics and transport operations.

DIFOT refers to the percentage of deliveries that arrive with every single item correct, undamaged, and within the time promised. It is an important benchmark for Australian manufacturers for several reasons.

Your DIFOT performance is hugely influential on your bottom line. In these times of inflation, economic shocks, and high fuel prices, it is arguably more influential than ever on profitability. 

A poor DIFOT score acts as a drag on profitability, and reflects poor efficiency. Consider that every failed delivery can easily double or triple your cost for a single order: you pay for the initial trip, the return trip, and for a second attempt. 

A high DIFOT score is desirable, because it is a significant marker of efficiency. While it doesn’t explain absolutely everything about your supply chain, it is a great place to start. 

What does a healthy DIFOT look like? For reference, average DIFOT rates in Australia tend to be around 88-91%. A DIFOT score below average requires urgent attention, and often suggests systemic issues.

As for what Australian manufacturers should aim for, there’s no reason why manufacturing companies cannot aim for a high DIFOT score of 98% or higher. 

A DIFOT of 98% not only elevates you well above average, it is achievable for most companies, but there needs to be a high commitment to efficiency across the business. 

DIFOT also reflects your reliability, and this cannot be underestimated. According to research by McKinsey, consumers rate reliability ahead of speed, with 60% of consumers now valuing reliable delivery over pure speed. Survey respondents also showed a preference for transparent tracking and timely updates. 

While this may have been a consumer-focussed, last-mile study, we often see these trends play out in business-to-business logistics. In fact, we could make a case that reliability is even more important for B2B, as in many cases we are delivering items fundamental to business operations. 

So while speed can be great, it is only a plus if it does not sacrifice reliability in any way. 

Reliability leads to customer loyalty, whether your business is B2B or B2C, and again a healthy DIFOT performance will have a major positive impact on customer loyalty. There is much to gain for Australian manufacturers targeting repeat business in having a good DIFOT score.

How does a manufacturer improve their DIFOT score? 

There is no simple answer as every manufacturer will face different challenges, but there are some key principles to keep in mind. 

First, be completely honest when measuring all costs, as this provides a crucial benchmark for future measurement. Delivery transport often suffers from ‘hidden costs’ and bringing everything out into the open is the best starting point.

From there, manufacturers should review their responsiveness and flexibility, as only a flexible fleet is able to drive efficiency. Analyse the structure of the delivery transport fleet and see how more flexibility can be introduced.

Stress-testing can create a fleet which is more resilient and able to handle peak periods. Tracking and communications systems are essential for keeping your clients informed. 

All these combined can improve your DIFOT performance, with benefits for profitability and client loyalty.