Food & Beverage Manufacturers Face $100 Billion Annual OTIF Losses, Cleo Research Reveals
Cleo, a global provider of AI-native supply chain orchestration solutions through its Cleo Integration Cloud (CIC) platform, has released new research estimating that On-Time, In-Full (OTIF) performance failures cost North American consumer packaged goods (CPG) and food and beverage manufacturers approximately $100 billion annually. According to the research, nearly 90% of the total economic impact stems from indirect costs, including lost sales, reduced retail shelf presence, excess inventory, and manufacturing inefficiencies.
The findings are detailed in a report titled The $100 Billion Supply Chain Penalty: OTIF’s Total Economic Impact. The study examines how delivery performance influences manufacturers’ financial results, operational efficiency, customer relationships, and competitive positioning. It also highlights a significant gap in how organizations manage OTIF performance: although companies routinely monitor retailer deductions and delivery metrics, the wider financial consequences of missed or incomplete deliveries often remain disconnected from executive-level decision-making.
For manufacturers operating in increasingly demanding retail environments, delivery reliability extends beyond transportation and logistics. Failure to deliver products on time and in full can affect retailer relationships, future orders, shelf availability, and opportunities to participate in promotions. These consequences can create substantial financial exposure that is not always reflected in traditional delivery-performance reports.
“A missed delivery can cost a manufacturer its next order, its shelf space, and ultimately its standing with a retailer. The chargeback captures only a fraction of that damage,” said Mahesh Rajasekharan, President and CEO of Cleo.
Rajasekharan explained that fragmented accountability remains a major challenge for manufacturers. Logistics teams typically monitor delivery performance, finance departments manage deductions, and sales teams assess lost business. However, the connections between these functions are frequently overlooked, making it difficult for leadership to understand the complete financial impact of OTIF failures.
He emphasized that CEOs should establish OTIF as a shared business priority, with clear accountability for its overall financial consequences. Supply chain orchestration can help connect decisions and actions across manufacturers, carriers, and retailers, allowing organizations to address emerging problems before delivery failures turn into commercial losses.
Indirect Costs Account for the Majority of OTIF-Related Losses
Drawing on industry benchmarks, publicly documented retailer programs, and scenario-based economic modeling, Cleo’s research estimates that OTIF failures generate approximately $10 billion to $11 billion in direct annual costs for U.S. and Canadian CPG and food and beverage manufacturers. Indirect costs are estimated at $85 billion to $90 billion annually.
This distinction demonstrates why traditional approaches to measuring delivery performance may underestimate the scale of the problem. Direct expenses, such as retailer chargebacks and deductions, are comparatively easy to identify and record. Indirect consequences, however, can extend throughout the business and may be spread across several departments.
Reduced shelf presence, lower order allocations, and lost sales opportunities can continue to affect a manufacturer long after the original delivery issue has been resolved. When products are unavailable at the expected time, retailers may adjust their purchasing decisions, reduce promotional support, or allocate valuable shelf space to competing brands.
Manufacturers can also face additional inventory costs as they attempt to compensate for unreliable deliveries. Excess inventory may accumulate in some locations while shortages occur elsewhere, creating an imbalance between supply and demand. These challenges can increase warehousing requirements, complicate production schedules, and reduce operational efficiency.
The report suggests that manufacturers should evaluate OTIF performance as a business-wide financial issue rather than treating it exclusively as a logistics metric. A more comprehensive assessment can help leadership identify the full cost of poor delivery reliability and determine where corrective investments are likely to deliver the greatest benefits.
Supply Chain Problems Often Begin Before Transportation
Another important finding is that OTIF failures frequently originate before products enter the transportation network. While delayed shipments are often associated with carriers or distribution operations, underlying problems may begin much earlier in the order fulfillment process.
Inaccurate demand forecasts, delayed purchase order transmission, and unexpected promotional demand can place pressure on production capacity and logistics planning. If manufacturers do not receive accurate order information in time, they may struggle to secure materials, schedule production, prepare inventory, and coordinate shipments according to retailer requirements.
Promotional periods can create additional complexity. Sudden increases in demand may require manufacturers to adjust production volumes and distribution schedules quickly. Without timely information and coordination among planning, manufacturing, order management, and transportation teams, businesses may find it difficult to meet delivery commitments.
Addressing these issues requires organizations to look beyond the final shipment and examine the processes that influence fulfillment performance from the beginning. Improved communication between departments and trading partners can help manufacturers identify potential disruptions earlier and coordinate corrective actions before service levels deteriorate.
Supply chain orchestration provides a framework for connecting these activities, allowing information to move across systems and organizations rather than remaining isolated within individual departments.
Chargeback Recovery Does Not Eliminate the Underlying Risk
Retailer chargebacks and deductions remain important concerns for manufacturers, particularly when delivery requirements are strict and penalties accumulate across multiple orders. Many organizations devote considerable time and resources to reviewing deductions, gathering documentation, submitting disputes, and attempting to recover disputed amounts.
Although these activities can help recover some financial losses, Cleo’s research indicates that chargeback management alone does not address the underlying operational problems that cause OTIF failures.
Recovering a deduction does not necessarily restore lost shelf space, replace missed sales, or reverse a retailer’s decision to reduce future orders. Similarly, resolving an individual dispute does not guarantee that the same delivery problem will not occur again.
Manufacturers therefore need to combine effective deduction management with measures designed to improve delivery reliability. Identifying recurring causes, strengthening order accuracy, improving demand planning, and coordinating execution across trading partners can help reduce the likelihood of future failures.
A preventive approach can also enable organizations to use operational information more effectively. By connecting delivery exceptions with their causes and financial consequences, leadership teams can prioritize problems according to their potential business impact instead of focusing solely on individual penalties.
Improving OTIF Performance Could Unlock Billions in Value
Despite the scale of the estimated losses, the report identifies a substantial opportunity for manufacturers that improve delivery performance. Cleo estimates that a 5- to 10-percentage-point improvement in OTIF performance could unlock approximately $11 billion to $23 billion in recoverable economic value across the North American market.
This potential benefit highlights the commercial importance of improving fulfillment reliability. Even incremental improvements can contribute to better inventory management, fewer retailer deductions, stronger product availability, and more dependable customer relationships.
For CPG and food and beverage manufacturers, these improvements can also support more efficient use of manufacturing and distribution resources. Better alignment between demand forecasts, production plans, inventory levels, and shipment schedules can reduce unnecessary costs while helping businesses meet retailer requirements more consistently.
However, capturing this value requires manufacturers to understand where their losses originate and how operational decisions influence financial outcomes. Companies must establish a clear picture of their current OTIF exposure before determining which processes, systems, or partnerships require improvement.
Delivery Reliability Influences Retailer Relationships and Future Revenue
OTIF performance can influence more than immediate fulfillment costs. Retailers may use supplier scorecards and delivery records when making decisions about shelf placement, promotional opportunities, and future order allocations.
Repeated failures can create a compounding cycle for manufacturers. Poor delivery performance may weaken supplier evaluations and reduce commercial opportunities. Lower sales and tighter margins can then limit the resources available for operational improvements, making it more difficult to restore performance.
In competitive consumer markets, this cycle can threaten both revenue and long-term customer relationships. Manufacturers that consistently meet retailer expectations may be better positioned to maintain distribution opportunities, support promotional activities, and protect their standing with retail partners.
Cleo’s report recommends that manufacturers develop a unified view of OTIF’s financial impact and establish an executive sponsor with profit-and-loss (P&L) accountability. This approach would bring delivery performance, retailer deductions, inventory expenses, and commercial outcomes into a shared management framework.
By assigning clear responsibility for the total economic impact, manufacturers can encourage collaboration between logistics, finance, sales, manufacturing, and planning teams. It can also help executives evaluate operational investments according to their contribution to broader business objectives.
A Phased Approach to Reducing OTIF Exposure
The research outlines a phased approach for manufacturers seeking to improve OTIF performance and reduce related financial exposure. The first step is to measure the total economic impact, including both direct penalties and less visible indirect costs.
Once the scale of the problem is understood, organizations can identify the planning and execution failures that contribute most significantly to missed or incomplete deliveries. This involves examining demand forecasting, purchase order processing, production scheduling, inventory availability, transportation coordination, and communication with retailers.
The next step is to strengthen the processes and technologies used to prevent disruptions. The report evaluates several approaches, including tactical compliance management, logistics technology, supply chain intelligence, retailer collaboration, and supply chain orchestration.
Each approach addresses different aspects of delivery performance. Compliance management can help organizations handle retailer requirements and deductions, while logistics technology can support transportation visibility and execution. Supply chain intelligence can improve access to operational information, and retailer collaboration can help trading partners coordinate expectations and respond to changes in demand.
Supply chain orchestration focuses on connecting planning, execution, and collaboration across the broader supply chain. By linking activities and information across manufacturers, carriers, and retailers, organizations can identify risks earlier, coordinate responses, and reduce the likelihood that an operational issue will develop into a costly delivery failure.
The final stage involves sustaining improvements and using more reliable delivery performance to strengthen retailer relationships and competitive positioning. Continuous monitoring can help organizations determine whether corrective measures are producing meaningful operational and financial benefits.
Research Provides a Framework for Executive Decision-Making
Cleo’s report, The $100 Billion Supply Chain Penalty: OTIF’s Total Economic Impact, provides a detailed methodology and modeling framework intended to help manufacturers better understand their own delivery-related exposure and evaluate the economic trade-offs associated with service improvements.
The research emphasizes that OTIF should not be viewed solely as a measure of whether shipments arrive according to schedule and contain the required quantities. Instead, it presents delivery reliability as a business performance issue with implications for revenue, profitability, inventory management, operational productivity, and customer retention.
For North American CPG and food and beverage manufacturers, the estimated $100 billion annual impact underscores the importance of connecting operational execution with financial accountability. By moving beyond chargeback recovery and adopting a coordinated approach to prevention, manufacturers can work toward reducing avoidable losses and improving the consistency of their supply chain operations.
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