When you know you can’t achieve an ideal fill rate, you can offer buyers alternative products to keep order values as high as possible, and in turn, improve your fill rate. Order fill rate is a Percentage of consumption orders satisfied from stock available at a moment. In addition to access to these powerful analytics, sellers on Alibaba.com have access to over 14 million users who are ready to buy.
Additionally, some B2B platforms have tools that help you take the guesswork out of determining how much inventory to hold. Alibaba.com, for example, offers demand forecasting and industry analytics tools that can help you adequately plan your stock levels. Using an established B2B eCommerce marketplace can help you improve your fill rate.
First-time customers are also more likely to make future purchases when they have a positive experience ordering and receiving products from your company. Simply divide the number of orders you’re able to fulfill completely by the number of total orders customers place.
How Do You Calculate Order Fill Rate?
So for retailers to avoiding gaps in their range, you should offer alternatives and substitutes for products that are out of stock or face a long delivery cycle. The idea is to fill the balance of the order with similar products that are available immediately.
The short answer is – the higher your order fill rate, the better. On average, companies manage to keep their FR at around 85-95% and the best-performing companies reach up to 98-99%.
The order fill rate simply refers to the percentage of customer orders that are immediately fulfilled by available stock. It is also known as the demand satisfaction rate because customer satisfaction is closely tied to how many orders that can be filled by stock on hand. A satisfied customer will see all or most of their orders fulfilled and shipped immediately. An unhappy customer will experience stock-outs and delays in replenishing stock. Tracking order, warehouse, case and vendor fill rates can all help your company determine how effectively the supply chain processes are operating. Lower fill rates can give more insight into which areas of the process require improvements, and a business can better develop strategies when it understands this metric. Additionally, measuring the fill rate allows you to analyze the methods you use to distribute your products to customers.
For example, you can segment your fill rates by customer to see if certain customers are being repeatedly disappointed. You can segment your fill rate by sales channel to see if one channel is causing most of your issues. You segment your fill rate by product to see if a certain product or product line is your main issue. Let’s take a closer look at the charts on the dashboard and see what they tell us about this company. The dark line at 98% is the goal they would like to reach this year. Below are 3 practical ways on how to improve your demand satisfaction rate. You should be careful with your numbers and figure out what type of demand satisfaction rate you actually calculate.
A company may choose to calculate its fill rate monthly, quarterly or yearly. With data being so readily available, I’ve also monitored fill rates on a daily basis. This is possible as long as your data set doesn’t become so large that it slows down the tool you use to view the metric. Another reason may become a product that has suddenly gained popularity and gone viral, not allowing you to make appropriate forecasting and get ready for a large sales volume.
Inventory Management And The Product Lifecycle
The number of deliveries made on time and complete / the total number of deliveries. If your fill rate is above 95%, chances are you have reached a surplus of inventory and are not optimizing the number of stored goods. In this case, you may end up sacrificing revenue because of damaged or lost products.
A low fill rate due to packing or delivery issues tells you that you should look at ways to improve your fulfillment processes. You can access data and reports that are developed by an in-house specialist or you can use dedicated software for both demand planning and inventory management. These specialists can be a great addition to your team since they typically come with specific expertise in customer demand forecasting and your specific industry. To increase your order fill rate, you’ve got to fill more of the orders that you receive.
- In the broadest sense, Fill Rate calculates the service level between 2 parties.
- The first is to use a fulfillment center that is close to your customers.
- If your fill rate is above 95%, chances are you have reached a surplus of inventory and are not optimizing the number of stored goods.
- You know that you can’t supply the quantity required because you only keep minimal stock due to their high prices.
- Effectively controlling your inventory to match item fill rates at an appropriate level is complicated and stressful.
For example, let’s say that your retail customers find that sales of baby nappies and beer spike in the countdown to Super Bowl. It’s because when young dads are tasked to buy baby nappies at the local supermarket, they often pick up packs of beer alongside as well. You can calculate fill rates for line items, SKU or cases for individual invoices. The various methods that businesses use means that it is not simple to compare one firm’s order fill rate with another. Let’s look at the following two example invoices shipped in units of cases.
For example, suppose you have 10 customers and they each order 5 bottles of hand lotion from your web site. You happen to have 57 bottles of this particular hand lotion in stock and you ship 5 of them to each of these 10 customers. Fill rates and OTIF (on-time, in-full) metrics can be used to measure the level of customer satisfaction from an order fulfilment point of view. Ask your sales reps not to sell goods that are out of stock – Whether your sales team members close a sale during a phone call or at a store, agree upon one simple point. If a prospect is asking for a recommendation, your team should check availability, avoid offering missing products and focus on other options.
What Is Fill Rate? Definition, Types And How To Calculate
That way, when sizable orders come in, you don’t have to worry about being short on the products that your customers need. Stores don’t want customers to see gaping holes in shelf space or an “out of stock” sticker where products once sat.
Item fill rates and inventory management are incredibly important regarding customer service and sales. You never want to stockout or backorder products, as it negatively affects your company’s customer service level and is a cause for lost sales. Anything below 85% and you are sitting on non-liquidated products and are losing money. Anything above 95% and you are entering the danger zone of stockout. Make sure to do your research and analytics to get the best insight into your forecasted product sales. Simple tools such as the item fill rate can help you with effective inventory management.
Analytics Articles For Business, Supply Chain & Hr
We’re going to cover how to calculate your fill rate and tips for improving your fill rate. Inventory and supply can be difficult for wholesalers to get a grip on. This is especially true for industries that typically find success in trendy or fad-related products. So you can see from this example that invoice 2 looks like the best performing invoice because you managed to fulfill 96.6% of the quantity ordered. However, from a line count fill rate perspective, you only fulfilled half of your orders.
Types Of Purchase Order Every Business Should Know
Or if a customer is asking for that particular product, not available at the moment, your team should at most try to implement point N1 – offer an alternative. Shows how well you manage your inventory and use data – Are you a professional manager who is good at working with data and relying on it for long-term business gains? That’s all about your internal management activities that directly influence your sales opportunities. If you can make data-driven decisions instead of resting upon approximate calculations, you can expect stable business growth and a high reputation. Having inefficient packing or shipping processes can negatively impact your ability to fulfill orders on time.
The product lifecycle is important to understand regarding item fill rates and inventory management, as it dictates the certainty/uncertainty and demand level of goods. By better understanding how your item fill rate will respond to each stage of the process, you can improve your inventory management practices and streamline your warehouse operations. Warehouses are required to receive and store inbound freight for customer order fulfillment, and any projects that require warehousing are more than likely moving a lot of product. Sadly, frequent, large inbound and outbound movement of goods can lead to a lack of inventory management. Luckily, there are a few simple formulas and processes you can use to help improve your order fulfillment practices, such as item fill rates (IFR’s) and inventory management. Understanding how well you’re able to meet customer demand is key to refining your wholesale inventory management and fulfillment processes and improving customer experience. The fill rate is the fraction of customer demand that is met through immediate stock availability, without backorders or lost sales.
Your customers probably wouldn’t like to wait for some time until you ship their desired order and will prefer to try an alternative . Many wholesalers compromise their fill rates by failing to optimize their fulfillment processes. There are a few ways that you could approach fulfillment optimization. This means that you can fulfill 3 out of 4 line items which means you have a line count fill rate of 75%. However, you’re only able to fulfill 85 of the 100 requested units, so your case fill rate is 85%. Other than real-time information, historical data is immensely useful when forecasting sales for particular products.
Being informed means they’re likely to ship complete orders to retailers. Fill rate in wholesale and retail business is the percentage of customer orders a company can fulfill without running out of inventory to fill customer orders. You can measure your company’s fill rate at any time throughout the year to determine how efficiently supply chain management meets order demands. If your item fill rate ever exceeds 100%, it means that you are backordering goods due to stockouts. Worse than having excess inventory is losing sales and customer service quality due to sales in excess of your inventory.
A higher order fill rate is preferable because this means that you hold enough inventory and have a fulfillment process that is effective enough to meet your customers’ needs. In the broadest sense, Fill Rate calculates the service level between 2 parties. It is usually a measure of shipping performance expressed as a percentage of the total order.