Well first of all if your shift rod is off by that much its never going to be right. 1/8" is a lot. I have the 3 OMC tools, I got them from Crowley Marine. You can do without the shift rod tool but you have to measure carefully.
I start with the drive off, and the cable disconnected on both ends for the transom cable. I also disconnect the other 2 cables (remote cable at the engine bellcrank and throttle cable at the carb lever) as well. Then I install the bellcrank tool on the pivot housing. This will hold the bellcrank exactly at 90*. Then go up on the engine side and set the correct length for the cable and also for the trunnion on the shift cable. Then re-connect the cable retainer on the shift guide and tighten the bolt. Next you have to adjust the remote cable after reconnecting the cable end at the engine bellcrank. Then re-connect the throttle cable. You disconnect that so it does not exert pressure against the engine bellcrank which could throw the adjustment off.