DIFOT: The KPI That Kills “Cheapest Carrier Wins”
- Danyul Gleeson
- 1 hour ago
- 10 min read
You saved 12% on linehaul, then your DIFOT dropped 8 points and your CX team caught fire...
If supply chains had a lie detector, it wouldn’t live in finance or procurement.
It wouldn’t care about rate cards, tender decks, or how many percentage points someone just shaved off freight. It would sit quietly on a dashboard. Three letters. Always on. Impossible to sweet-talk.
DIFOT.
Delivered. In Full. On Time.
And every time someone says, “We saved 8% on freight,” DIFOT does something deeply inconvenient. It asks who paid for that saving.
Because while teams argue over cents per pallet and congratulate themselves for “winning” a carrier tender, DIFOT is watching the stuff that actually hurts.
Late deliveries.
Split orders.
Partial cartons.
Customers refreshing tracking links like it’s a nervous habit.
DIFOT doesn’t care that the truck left the depot on time.
It doesn’t care that most of the order showed up. It doesn’t care how good the savings slide looked in the board pack. It only cares whether the promise was kept. And when it wasn’t, the bill doesn’t land where the saving was booked.
It lands with the customer who waited.
The planner who spent Friday night firefighting.
reshuffle loads.
The margin that quietly leaked out through refunds, re-deliveries, and lost repeat business.
That’s why DIFOT is dangerous.
Because it exposes what “cheapest carrier wins” is really doing once the applause stops. It turns freight savings into evidence. And it shows, in cold percentages, whether your supply chain is actually working… or just winning tenders.
In mature supply chains, that’s why DIFOT doesn’t argue with “cheapest carrier wins”.
It kills it.
A 1% drop in DIFOT In the Real world...
A 1% drop in DIFOT doesn’t look scary on a dashboard, but play it out in the real world: if you’re shipping 10,000 orders a month, that’s 100 extra customers getting their delivery late, every single month. Those 100 aren’t just “events” in a report – they’re support tickets, appeasement credits, churn risk and awkward conversations with sales. That’s the hidden tax you pay for chasing the cheapest rate instead of protecting service.
The villain isn’t low pricing
The bad guy here isn’t carriers sharpening their pencil on price – it’s the procurement mindset that stops the analysis at “who’s cheapest on the rate card?”.
When you strip out DIFOT, customer promises and total cost to serve, you’re effectively asking your network to run blind.
The result is predictable: you “save” a few cents on the label and quietly burn it all (and then some) in missed delivery windows, extra handling, customer service noise and churn.
Price pressure is healthy; pretending price is the only variable is what kills you.
DIFOT: The KPI That Kills “Cheapest Carrier Wins”
Let’s call this what it is.
“Cheapest carrier wins” is the corporate equivalent of surviving on instant noodles and calling it a nutrition strategy.
You save money in the short term. You feel clever. And eventually, something important collapses.
DIFOT - and its close cousin OTIF (On Time, In Full) - is the KPI that ends the fantasy.
It doesn’t care about intentions.It doesn’t care that the truck left the depot “on time”.
It doesn’t care that 80% of the order arrived and the rest is “on its way”.
It measures one brutal thing:
Did the customer get exactly what they were promised, when they were promised it, without drama?
Binary. Pass or fail.
Which is precisely why “cheapest carrier wins” rarely survives contact with it.
What DIFOT Actually Measures (And Why It Hurts)
On paper, DIFOT is a tidy percentage.In reality, it’s a live feed of customer patience, planner stress, and margin erosion.
DIFOT measures whether your supply chain delivered:
The right product
In the full quantity
To the correct location
Within the agreed delivery window
The formula is simple:
Orders delivered in full and on time ÷ total orders × 100
If you shipped 1,000 orders and 950 arrived exactly as promised, your DIFOT is 95%.
No partial credit.
No “close enough”.
No footnotes.
And that’s exactly why it dismantles rate-only decision making.
Why DIFOT Beats Cost-Per-Pallet Every Time
Cost-per-pallet is a spreadsheet metric.
DIFOT is a business outcome.
Here’s what actually happens when DIFOT moves.
An ANZ FMCG case showed that improving DIFOT lifted on-shelf availability from 87% to 98%, reduced emergency freight, cut waste by roughly 20%, and added around 3% to EBITDA within 12 months.
No new products. No price increases. Just deliveries that stopped letting the business down. That’s the delta “cheapest carrier wins” never accounts for.
How to Measure DIFOT Without Lying to Yourself
Most businesses say they track DIFOT.
Fewer do it in a way that’s actually useful.
One global DIFOT number is comforting - and mostly useless. It’s like averaging rainfall across an entire country and concluding nobody needs an umbrella.
To make DIFOT matter, measure it where the damage actually occurs.
By lane
Auckland to Christchurch
Sydney to Perth
LA to Midwest DC
By channel
Retail / FMCG
B2B wholesale
Ecommerce / D2C
By customer or segment
Key accounts
Regional vs metro
Large vs small orders
That’s when you uncover truths like:
Network DIFOT: 95%
Ecommerce to regional NZ: 88%
US D2C during promos: 84%
Suddenly the average looks less impressive – and far more actionable.
What “Good” DIFOT Looks Like in ANZ and the US
There’s no universal benchmark, but the patterns are consistent.
Retail and FMCG: 97–99% DIFOT for strategic customers 95–97% for well-engineered core lanes
Ecommerce: Anything below 95% should trigger discomfort High 80s is not “fine” – it’s a churn engine
B2B / Industrial: 95%+ for business-critical lanes, with documented exceptions
Why the higher bar?
Because consumer tolerance is gone.
Average US ecommerce delivery times fell 43% between 2020 and 2024
69% of shoppers are less likely to return after one late delivery
Failed deliveries cost around $17 per parcel once re-delivery, admin, and service time are included
That’s before you price in reputation and future lifetime value.
The Maths Everyone Avoids: A 3–5 Point DIFOT Drop
Let’s make this uncomfortably concrete.
You ship 10,000 orders per month.
At 97% DIFOT:
9,700 arrive as promised
300 fail
Now procurement finds a carrier that’s 7% cheaper.
DIFOT slips to 93%.
Suddenly:
9,300 arrive as promised
700 fail
That’s 400 additional failures every month.
Even conservatively:
$40 per failed order in re-delivery, service, and margin impact
That’s $16,000 per month
$192,000 per year in blunt costs
Add even a modest loyalty hit and the “saving” evaporates fast.
That’s what a small DIFOT drop actually costs.
Why DIFOT Fails First Where You Least Want It To
DIFOT doesn’t fall evenly.
It fractures.
Cheapest-carrier strategies usually fail hardest in:
Regional and rural ANZ lanes
US inland and cross-border flows
Promo and peak ecommerce periods
Retail accounts with penalty clauses
So your “only 3-point drop” hides:
Regional DIFOT in the high 80s
Promo performance in the mid 80s
Silent customer churn
And increasingly, poor delivery performance feeds directly into reviews, marketplace rankings, and algorithmic visibility.
Cheap freight doesn’t just annoy customers.It trains systems to recommend your competitors.
DIFOT and Total Cost to Serve: Where Grown-Ups Play
DIFOT becomes lethal to “cheapest carrier wins” when you connect it to Total Cost to Serve.
That includes:
Freight
Warehouse labour and overtime
Inventory buffers
Customer service
Refunds and write-offs
Lost revenue and churn
Cost-per-pallet sees none of this.
Value-based logistics procurement – balancing cost, service, and reliability – consistently improves logistics ROI by 30–35% over time.
Not by finding cheaper carriers.
By buying stability.
A carrier that costs 5% more but delivers 3–4 points higher DIFOT is often the cheapest freight decision you’ll ever make.
What Good DIFOT Governance Actually Looks Like
If DIFOT is going to kill “cheapest carrier wins”, it needs authority.
That means:
DIFOT in CEO, CFO, and COO packs
Lane-level visibility, not global averages
Quarterly reviews that rank lanes worst to best
Carrier scorecards where price cannot win alone
Design your network intentionally:
Ecommerce prioritises Fast and Good
Predictable B2B uses Good and Cheap
Fast and Cheap is a tactical exception, not a strategy
And align incentives so everyone feels the outcome, not just operations.
Fast, Cheap, Good
Think of it as a triangle with three corners:
Fast
Cheap
Good
You only ever get to lock in two.
The third becomes the sacrifice. Every time.
What the combinations actually mean in the real world:
Fast + Cheap
Gets it out the door quickly
Costs less upfront
Quality, accuracy, service, or reliability quietly takes the hit
This is where rework, returns, WISMO tickets, and late-night fire drills are born
Cheap + Good
Built properly
Looks great on paper
Moves slowly
This is where growth stalls while everyone waits for capacity, approvals, or “the next window”
Fast + Good
Done properly
Delivered when it matters
Costs more for a reason
This is the option businesses swear they want, until the invoice lands
The mistake most teams make is pretending they’ve found a magic fourth option.
They haven’t.
They’ve just deferred the cost.
And deferred costs always come back louder, messier, and more expensive.
FAQs: DIFOT: The KPI That Kills “Cheapest Carrier Wins”
What is DIFOT and why does it matter more than freight cost?
DIFOT (Delivered In Full, On Time) measures whether customers receive exactly what they ordered, in the right quantity, at the promised time. Unlike freight cost or cost per pallet, DIFOT directly reflects customer experience, operational stability, and revenue protection. A low freight rate with poor DIFOT often increases total cost to serve through re-deliveries, customer service, stockouts, and lost repeat sales.
Why does DIFOT expose the failure of “cheapest carrier wins”?
“Cheapest carrier wins” focuses on rate cards, not outcomes. DIFOT exposes whether low-cost carriers can actually keep delivery promises consistently. Even a small DIFOT drop of 3–5 percentage points can translate into hundreds of failed deliveries per month, creating hidden costs that far exceed any freight savings. DIFOT removes the illusion of savings by measuring real-world performance.
What is a good DIFOT benchmark for ANZ and US supply chains?
While benchmarks vary by industry, high-performing supply chains typically target:
97–99% DIFOT for key retail and FMCG customers
95%+ DIFOT for ecommerce and customer-facing delivery promises
95%+ DIFOT for business-critical B2B lanes
Anything consistently below the mid-90s on core flows should be treated as a commercial risk, not an operational inconvenience.
How does DIFOT impact total cost to serve and profitability?
DIFOT directly affects total cost to serve by influencing inventory buffers, emergency freight, warehouse overtime, customer service workload, refunds, and customer churn. Improving DIFOT reduces volatility across the supply chain, lowers indirect costs, and protects margin. Many businesses see stronger EBITDA performance by improving DIFOT than by chasing incremental freight rate reductions.
How should businesses use DIFOT when selecting carriers?
DIFOT should be used as a primary decision metric alongside cost, not after the fact. Best practice is to assess DIFOT by lane, channel, and customer, then select carriers who can consistently meet service targets. Carriers with slightly higher rates but materially better DIFOT often deliver lower total cost to serve and better long-term financial outcomes than the cheapest option.
DIFOT: The KPI That Kills “Cheapest Carrier Wins” - And What Comes After
Once you truly see DIFOT:
Rate-card heroics stop looking clever
“Savings” start looking like deferred costs
Reliability becomes a commercial strategy, not an ops preference
For supply chains across Australia, New Zealand, and the US that want growth without chaos:
Put DIFOT: The KPI That Kills “Cheapest Carrier Wins” on the same level as revenue and margin. Measure it properly. Use it to make decisions – not excuses.
Because if you don’t let DIFOT kill “cheapest carrier wins”, your customers will do it for you.
Insights from Danyul Gleeson, Founder & Logistics Chaos Tamer-in-Chief at Transport Works
Danyul has been in the trenches - warehouses where pick paths were sketched on pizza boxes and boardrooms where the “supply chain strategy” was a shrug. He built Transport Works to flip that script: a 4PL that turns broken systems into competitive advantage. His mission? Always Delivering - without the chaos.
Sources and References
DIFOT, OTIF, and delivery performance fundamentals
GS1 – OTIF and DIFOT Best Practice Guidelines Industry definitions, measurement frameworks, and best-practice use of DIFOT and OTIF in retail and FMCG supply chains.
ORTEC – Delivered In Full, On Time (DIFOT) Explained Practical explanation of DIFOT as a performance KPI and why it matters beyond transport cost.
MRPeasy – On-Time In-Full (OTIF): A Complete Guide Clear breakdown of OTIF/DIFOT logic, calculation methods, and operational implications.
DIFOT, on-shelf availability, and financial impact
Deloitte – On-Time, In-Full: Why OTIF Still Wins in Supply Chains Links delivery performance directly to on-shelf availability, retail penalties, and margin protection.
Australian Food & Grocery Council – Supply Chain Performance and Availability Studies ANZ-focused insights into DIFOT, shelf availability, emergency freight, and cost leakage in FMCG networks.
McKinsey & Company – Supply Chain Excellence Through Reliability Research connecting delivery reliability to EBITDA performance, waste reduction, and network efficiency.
Customer behaviour, loyalty, and delivery failure impact
PwC – Experience Is Everything: Here’s How to Get It Right Consumer research showing delivery experience as a major driver of repeat purchase and brand trust.
Parcel Perform – E-commerce Delivery Benchmark Reports (US, AU, NZ) Data on late deliveries, customer dissatisfaction, and post-purchase behaviour across major markets.
Descartes Systems Group – Home Delivery Consumer Sentiment Report Evidence of how late or failed deliveries directly impact customer loyalty and brand perception.
Cost of failure, re-delivery, and service friction
Harvard Business Review – Why So Many Packages Don’t Get Delivered Analysis of delivery failure rates, first-attempt failures, and downstream operational cost.
Loqate – The Cost of Failed Deliveries Research estimating failed delivery costs at approximately USD $17 per parcel once re-delivery and admin are included.
OneRail – The Hidden Cost of Failed Deliveries Commentary and analysis on failed delivery economics and customer service impact.
Total cost to serve and logistics ROI
Gartner – Reframing Logistics Procurement Around Value, Not Cost Research showing 30–35% improvement in logistics ROI when shifting from rate-only decisions to value-based procurement.
Boston Consulting Group – Total Cost to Serve: The Metric That Changes Supply Chains Breakdown of how hidden logistics volatility erodes margin despite lower headline freight rates.
MIT Center for Transportation & Logistics – Cost-to-Serve Models in Modern Supply Chains Academic research linking DIFOT, inventory buffers, and true end-to-end supply chain cost.
Delivery speed expectations and market pressure
DC Velocity – ShipMatrix Parcel Delivery Report Data showing average US ecommerce delivery times improving by over 40% since 2020, resetting customer expectations.
Drewry – World Container Index Evidence of ongoing freight rate volatility and why “too cheap” pricing often signals hidden risk.
UNCTAD – Review of Maritime Transport Global freight volatility, capacity pressure, and downstream impacts on supply chain reliability.
Algorithms, reviews, and delivery reliability
Google – Consumer Trust, Reviews, and Search Visibility Documentation and guidance on how delivery experience, reviews, and reliability influence discovery and ranking.
Comments