Customer satisfaction is one of the best ways to measure business success. Providing customers with positive experiences is a great method to increase your bottom line. For online retailers, this ensures that your inventory can meet customer demand. Enter fill rate (FR), a crucial supply chain KPI that all online businesses should keep track of.
These metrics are crucial to running an effective company supply chain as they can monitor and subsequently improve your business.
Customer expectations have rapidly risen in recent years.
Customer expectations have rapidly risen in recent years as buyers want their products to arrive quickly. So an effective fulfillment process is essential. Today, companies cannot afford to have delivery delays brought on by backorders and stockouts, especially if the firm is expanding.
To promote business growth, fill rates should be carefully watched and efficiently optimized. Doing this can increase fulfillment and delivery times. When analyzed correctly, it can even help create new strategies.
Fill rate is a metric that calculates the percentage of customer orders that a company successfully ships. It serves as a gauge of your capacity to satisfy client demand at any given moment.
Understanding Fill Rate
FR is a measurement of satisfaction and disappointment. Because no customer likes to be disappointed after waiting for their orders, your business needs to be reliable.
To gauge how well your supply chain management fulfills order needs, FR is typically measured over specific periods. The basic formula to calculate FR is as follows:
Fill Rate = (Total Orders Shipped / Total Orders Placed) x 100
Let’s illustrate this formula with a simple example using products. For example, your customers placed 1,800 orders in a month, and you shipped only 1,753 of the total. Your total FR would then be equal to 97%.
However, bear in mind that FR can also be used to describe other requirements for your company.
While customer orders are often referenced when discussing FR, several other metrics that are also used for order fulfillment.
1. Order fill rate
This rate is sometimes the most frequently monitored. It shows how well businesses can satisfy client expectations. High order FRs indicates a company’s ability to promptly and effectively complete client orders.
2. Line Fill Rate
The percentage of completely fulfilled order lines to the total number of orders is known as the line fill rate. Any specific line item on an order bill is referred to as an order line. For example, if you have six( 6) orders out of 12, you have a line fill rate of 50%..
Case Fill Rate
Frequently used by wholesalers and distributors, this is the percentage of initial product cases successfully shipped out of the total number of actual product cases ordered.
3. Warehouse Fill Rate
This metric assesses the effectiveness of warehouse operations based on the same idea as order fill rate. It’s calculated by taking the percentage of orders your supply chain can fulfill and shipping from the company warehouse out of all customer orders.
4. Vendor Fill Rate
Companies that buy from vendors in wholesale and distribution frequently assess vendor fill rates. This is the number of vendors who delivered confirmed orders as a percentage of all vendors.
The Importance of Tracking Fill Rate
Regardless of your industry, keeping track of key metrics helps quantify your performance. The demand satisfaction rate is one of the most important variables to monitor in supply chain management. It highlights how well you satisfy customer demand.
You can evaluate other components of your fulfillment process and find areas for improvement by calculating your FR. Various factors could also affect your metrics.
For instance, problems with order accuracy may result in taking more time to recount inventory, return items, and repackage products. As a result, you may fill fewer orders, and the fulfillment procedure takes much longer. Therefore, a low FR may require looking at the various stages of your fulfillment process to identify any bottlenecks or inefficiencies.
Get a deeper understanding of your inventory management process through FR. You may need to check your reorder points to replenish inventory at the right moment. If required, recalculate them using the reorder point formula if you constantly see poor poor fill rates as a result of stockouts. Getting efficient vendors could potentially solve this.
It could also help make more precise procurement plans to maintain ideal stock levels and adapt to shifting demand.
Ideally, your company’s FR should be as near to 100% as possible. With this pace, you should be able to complete all orders submitted without running into stock outs or backorders. However, going for a perfect FR is almost impossible due to the numerous variables that might affect the fulfillment process.
Online businesses usually keep their fill rates between 85% and 95%. However, you will want to aim for an FR between 97% and 99%.
Companies can satisfy client requests, promptly complete orders, and achieve customer satisfaction if they have consistently high fill rates.
When your business regularly completes client orders and maintains a high fill rate, it enhances its reputation and builds market confidence. Clients will likely believe they can trust your business to rapidly process and dispatch their purchases. When first-time clients are satisfied with your business’s ordering and delivery processes, they will make more purchases.
A high FR might also signify that your business builds long-lasting relationships and maintains loyal clients. Customers are more willing to make repeated purchases from a business if they believe it can handle and complete orders swiftly. As a result, increasing client retention may depend on raising your fill rate.
What Your Fill Rate Says About Your Business
Your business may assess the performance of your supply chain operations by monitoring order, warehouse, case, and vendor FRs. Lower FR can provide more information about the parts of the process that need improvement. And when a corporation is aware of this indicator, it can build plans more effectively. You may also examine the strategies you employ to deliver your items to clients by evaluating the fill rate.
Optimizing business operations to raise your fill rate is easy after you understand how to calculate it. The FR is only one of several elements that contribute to efficient warehouse management.
Reduce your dead stock and expedite the order processing process by implementing inventory management software in your warehouse management process flow. Your FR will increase as you complete orders more quickly. Revenue could increase, especially if you understand how to compare wholesale and retail prices.
It also frees up more time for B2B marketing and enhances your brand’s visibility on the internet or eCommerce platform. A high fill rate is essential for eCommerce success, especially with top-notch customer service.
Ready stock of alternative items is a great way to keep customers engaged with your store, even if the preferred order is out of stock. It prevents them from going to a competitor and browsing your ready inventory more. If your product isn’t too specific or difficult to replace, consider offering similar products for sale.
If your internal order fulfillment procedures are reliable yet your FR is consistently poor, you may need to strengthen your ties with your suppliers. It will entail speeding up price-change discussion for reducing the time it takes to respond to demand spikes. You could also simplify your order management procedure.
Finally, ineffective packing or shipping procedures could significantly impact your logistics’ capacity to complete orders on schedule. If your fill rate is low because of packaging or shipping problems, look into streamlining your fulfillment procedures.
Take advantage of digital solutions designed to make logistics processes more efficient. In a fast-paced online market, these tools and software are becoming necessities.
Demand forecasting and inventory management software provide more significant insights about items that sell quickly and easily. This information also tells you the best times to make fresh orders with your suppliers to cover any gaps. You can find this data in the inventory management program. It’ll save you from making incorrect assumptions, displeased customers, and lost sales opportunities.
Improve your fill rate by working with a tech-powered third-party logistics provider like ZhenHub. Our powerful logistics software solutions can integrate directly into your eCommerce stores, allowing you to automate many fulfillment processes while giving you better control over inventory management and warehouse operations. Sign up now and get started with smarter business growth.