DIFOT in Manufacturing: How ERP Helps You Improve Your DIFOT Ratio
DIFOT stands for delivery in full, on time. It refers to the ratio of product orders that are delivered in their entirety within the specified timeframe. For example, if your DIFOT is 90%, this means 90% of your orders are being completed with no delays and with no components missing. You can calculate your DIFOT with a simple formula:
DIFOT = (Number of deliveries completed on time and in full / The total number of deliveries) x 100
But what kind of DIFOT percentage should you be aiming for? Of course, the target is 100%, but research shows that the average is around 89% for many industries. With the right approach to software and data, the ratio can be pushed to 96% and above.
As a manufacturer, this is what you aim for when you fulfil product orders for your clients. However, this is not always easy to achieve.
The Role of ERP
An Enterprise Resource Planning (ERP) software solution that has been built for manufacturers will be a major driver towards achieving a high DIFOT ratio. It enables your business to streamline its operations, giving you the capabilities to meet your customers’ expectations, on time. But how do you accomplish this? What are the key DIFOT benefits of an ERP system? Read on to learn more.
An enterprise resource planning solution can provide the answer here. With this solution, you will be able to streamline your operations and give your customers exactly what they need, when they need it. But how is this accomplished exactly? What are the key DIFOT benefits of an ERP system? Read on to learn more.
Improving Your DIFOT Ratio with ERP
- Optimised Supply Chain
Your manufacturing business can only operate efficiently if you have the right parts and materials flowing into your facility. You also need to know when you will need these parts and supplies, and what volume you will need for each order. Perhaps you are about to experience increased demand for a seasonal product, or maybe one of your customers has just scaled up their operations and will be placing bigger orders in the future. The ability to pre-empt an increase in business is key to ensuring DIFOT.
An ERP system allows you to keep track of operational changes, optimising your supply chain and providing the business with the flexibility it needs to keep up with demand.
- Reduced Shrinkage for Parts and Materials
You might think that as long as the parts and materials are ordered and ready for manufacture, your business has all the flexibility it needs. While this is true to an extent, you also need to factor in the effects of shrinkage. For example, if you store a consignment of 1,000 parts in your warehouse for an extended amount of time, the number of parts that are ready for use when needed is likely to be depleted due to shrinkage.
Parts are revealed to be defective, parts become damaged, parts may even get stolen. This means you need to order replacements in double-quick time, and you may be too late to achieve DIFOT.
The insight that an ERP platform provides you will reduce this risk. The timely supplier deliveries mentioned above will ensure that you do not need to keep parts and materials in your warehouse on an indefinite basis, greatly curtailing shrinkage. The platform may not be able to reduce shrinkage to zero, but it will certainly help to minimise it.
- Full Inventory Visibility
This insight also works at the other end of the manufacturing chain. Every time you manufacture a product, your business needs to spend money — whether this is in operational costs or other expenses. Of course, this money is recouped when you make a sale, and the surplus is added to your profits. But until those products are sold, you are running at a loss.If products are languishing in your ready-for-sale inventory after manufacture, you are not making a profit. This is where enterprise resource planning software makes a real difference. With a comprehensive view of your supply chain and your manufacturing process, you can make sure that you have enough completed products to fulfil demand while also controlling your operating costs, resulting in a far more cost-effective business model.
- Comprehensive Equipment Insight
There is much more to your manufacturing operation than just your parts, materials and finished products. At the intermediary stage, there is also your equipment and machinery to consider. Without this machinery and equipment, your business is simply not able to operate. Machinery and equipment has a lifespan, just like anything else. As pieces of infrastructure reach the end of their lifespan, their output rate begins to fall, leaving your business at a disadvantage. Epicor ERP helps you keep track of the age of your equipment so that you know when it is due for replacement.
- Optimised Supply Chain
You’ll also be able to extend this equipment lifespan by scheduling necessary maintenance and other tasks that keep your machinery running at optimal efficiency. All of this is achieved through a comprehensive knowledge of your facility and infrastructure.
- Historical Analysis and Future Forecasting
A good quality ERP platform will help you to maintain accurate historical records that you can draw upon as you analyse your output and performance. Has this output increased or decreased in the last quarter? Is your DIFOT ratio higher or lower than it was at the same point last year? All of this is critical information that you can use to better understand your business and to build a platform for the next stage of its development. Looking back is just one part of the advantage. You can also use your ERP solution to look forwards, deploying powerful forecasting tools to predict your resource demand in the coming weeks, months and even years. This is where you will begin to develop an effective strategy for boosting your DIFOT ratio going forwards.
- Historical Analysis and Future Forecasting
DIFOTQ: Beyond DIFOT
DIFOT alone is not going to wow your customers. While they certainly need their orders delivered in full, on time, this is no good if the timely delivery comes at the expense of quality. As you develop your DIFOT strategy, make sure to include this all-important addition in your reckoning: Q, for quality.
In fact, if you are targeting DIFOT through a data-driven approach — supported by your ERP platform — you are already well on your way to achieving this extra criterion. The solution will help you as you enhance your quality control, identifying areas in which your production line and your operations can be improved.
Data and Understanding Is Critical to All Aspects of DIFOT
Is it time to start to truly gain insight into your operations and ensure the delivery of high-quality products, in full, and on time, every time? Speak to one of our experienced manufacturing experts to discover how Epicor ERP and its partner solutions can help you meet the ongoing demands of your valued clients.