As more and more companies implement supply chain digitization, there are many metrics brands can track to analyze the effectiveness of their fulfillment operations. One of the most simple supply chain KPIs to use is fill rate. Read on to find out the types of fill rates brands might want to track, how to calculate fill rate, and how to improve fill rate for customer orders.
What Is Fill Rate?
Fill rate is the percentage of orders a brand can fulfill without running out of stock. The item fill rate is a good indicator of order management, fulfillment efficiency and a brand’s ability to meet customer demand with their inventory levels. When a company has a higher fill rate, it is able to minimize lead time and prevent lost sales to items on backorder.
Types of Fill Rate
The most common type of fill rate used by brands is order full rate. Still, various kinds of fill rates can give the retailer valuable insights into how efficient their supply chain and order fulfillment operations are.
Order Fill Rate
Order fill rate measures the percentage of total orders that have been filled. This metric gives brands insight into operational efficiency, product demand, and supplier relationships. A brand can also use the order fill rate to find areas for improvement in unloading stock, packing time, and product buying decisions.
Line Fill Rate
Brands generally list individual items as lines on an order, so the line fill rate refers to the percentage of order lines completely filled out of the total number of order lines. For example, a brand could have five orders with 10 total order lines.
Case Fill Rate
This particular fill rate metric is used mostly by wholesalers and distributors. It’s the percentage of product cases that were shipped compared to the total number of product cases that were originally ordered. For example, if a brand sold 10 cases but shipped nine cases, the case fill rate would be 90%.
Warehouse Fill Rate
The warehouse fill rate measures the percentage of orders that a warehouse ships compared to all of the orders received. This metric is similar to the order fill rate but from the perspective of warehouse operations. The warehouse fill rate gives brands insights into the efficiency of their warehouse operations.
Vendor Fill Rate
Vendor fill rate measures the percentage of vendors who have completed order shipments out of the total number of vendors. This metric allows brands to assess vendor performance.
Why Is Fill Rate Important?
The fill rate is a relatively simple metric that allows brands to see how productively, efficiently and quickly they can process orders and ship them out. When brands understand their fill rate, they can improve it, which has many benefits for a growing ecommerce company.
When a brand consistently fills orders—without stock outs—customers notice the good fill rate. A consistently high fill rate can establish a reputation among first-time customers and breed loyalty among return customers.
But fill rate is not just important for customers; it is also crucial for internal management. Tracking warehouse, case, and vendor fill rates can help brands determine how effectively the supply chain is operating and identify areas for improvement.
What Is a Healthy Fill Rate?
While the theoretically ideal fill rate is 100%, which means a brand can fulfill every order received, that is nearly impossible to achieve in a real-world situation. The average brand’s fill rate is between 85-95%; however, aiming for 97-99% is a good goal for brands.
However, a high fill rate is only sometimes better. If a brand’s fill rate is close to 100%, it might have a surplus stock situation and is not optimizing its warehouse space. It’s possible to stock too many products, which can also result in products getting lost or damaged and never sold. Like many fulfillment metrics, fill rate is best considered when compared with other metrics.
How to Calculate Fill Rate
Calculating fill rather is rather simple, and many third-party softwares calculate various fill rates automatically to provide brands with insights in real time.
Fill Rate Formula
To calculate order fill rate, use this formula:
Fill rate = (total completed orders / total orders) x 100
The key part to this formula is deciding on a time frame for calculating the fill rate. This can be a day, a week, a month, a quarter or even longer. The time period chosen should reflect what insights a brand is trying to uncover. Calculating the fill rate for different periods at other points throughout the year can reveal additional insights.
First, a brand needs to determine the total number of orders it could fill without running into a stock out situation. Next, a brand needs to calculate the total number of orders placed during that same time period. To calculate the fill rate, divide the number of orders filled by the total number of orders placed and multiply by 100 to get a percentage.
Let’s look at an example:
A brand wants to calculate the fill rate for the past month. Over the past month, they have had a total of 1,200 orders placed and were able to fill 1,029 of them completely.
Fill rate = (1089 / 1200) x 100
The fill rate for this example is 90.75%, which is right in the middle of the average range for fill rate.
How to Increase Fill Rate with OmniFlow by Flowspace
Fill rate is one of many factors measuring how effective fulfillment is for any given brand. As we already pointed out, aiming for a 100% fill rate is not necessarily ideal because that could mean a brand is overstocking its products. Ideally, a brand would look at demand forecasting and inventory optimization to ensure overstocks and then aim for a 100% fill rate.
If a brand can accurately forecast which of its products will sell quicker, it can calculate how often to place new orders from suppliers to avoid stockouts—without overstocking products. An inventory management system is a critical tool in this endeavor and can help brands avoid mistakes, unsatisfied customers, and missed sales.
The best way to do this is to work with a third-party logistics optimization partner like Flowspace. Flowspace offers an industry-leading inventory management software that provides brands real-time insights and demand forecasting recommendations to help them make smarter inventory management and allocation decisions.
Flowspace’s fulfillment software powers the entire post-purchase experience and provides brands seamless integration with online stores and every other sales channel. With Flowspace, teams can manage orders and reporting, and monitor fulfillment and delivery activity, all in one dashboard. Real-time visibility allows brands to stay ahead of low inventory and provide visibility from fulfillment through shipment with platform-level transparency. This feature can help improve fill rate—ensuring optimal stock without overstock on a brand’s most popular products.
Flowspace makes product inventory management easy by providing complete inventory visibility of inbound logistics, outbound logistics, and in-progress stock. Ensure an optimal stock level with real-time inventory tracking, low inventory level alerts, and a predictive view of remaining product. With accurate customer analytics like demand insight, brands can better manage inventory by having safety stock to avoid low inventory count situations while also avoiding excess inventory cost.
Flowspace is the best way to optimize your order filling process, minimize shipping times, and increase customer satisfaction. Contact us today to get more information.