Fill Rate is associated with measuring the ability of an inventory in meeting the demand of the customers. So, the percentage of customers that can be satisfied with the stock that you have at hand can be understood as Fill Rate or Demand Satisfaction Rate.
In this post, we will dive deep into the world Fill Rate and understand its importance in boosting the customer retention rate and enjoying the satisfied customer base. So, let us get started right away-
Introduction to the Fill Rate
When it comes to wholesale sales, it is essential to make sure that you have some methods in line so that you can measure the amount of success that you have.
Some critical metrics can be used when it comes to evaluating the performance of the business that you have in the best way. We are going to be talking about one such metric and it is known as the fill rate.
It is one of the most amazing and yet pretty salient metrics that are used by the wholesalers these days. This is a proper metric that can be used to view the inventory management process and is based on the decisions made by the customers. The percentage of the customer orders which are shipped to the customers from the immediate stock availability is known as the fill rate.
Well, it should be the way that you service the customers in the first place for the customer satisfaction.
So, it can be said without a doubt that it is a critical metric for sure. This certainly has a profound impact on the relationship that you have with the retailers of yours.
To gain the trust of such people, you need to have a proper fill rate. So, here we are going to discuss it in an in-depth fashion so that you can have a decent idea in the best way. Let us now have a more proper look upon the definition and formula of Fill Rate-
Fill Rate Meaning
The fill rate is defined as the right proportion of the orders of your customers that you have in the company stock, so you can satisfy them without having some backorders. Now you must be wondering what backorders are.
Well, the backorders are the customer orders for specific items that are not in stock temporarily.
Fill rate can also be defined as a fraction of the demand of the consumer that your current stocks can meet without actually losing any sales.
So, now, it must be evident that Fill Rate is an important metric that you can use to measure the inventory or stock strength in the best way.
If we try to put it in simple terms, it will reflect the ability of the supplier to provide the services to the customers accurately without any trouble or hassle in the first place.
When you want to know how well the company of yours would be able to provide for the customer demand, the fill rate is something that you go ahead and measure to know.
Types of Fill Rate
Here we’ll look at the different types of fill rates.
1. Order fill rate
This is the percentage of orders that were filled by the vendor. For example, 90% of an order was fulfilled by a vendor.
2. Line fill rate
Line fill rate is the percentage of items in each line on an order that were fulfilled by a vendor. For example, out of 20 items on an order, 19 were fulfilled by a vendor.
3. Case fill rate
This is the percentage of cases on an order that were fulfilled by a vendor. For example, out of 10 cases on an order, 9 were fulfilled by a vendor.
4. Warehouse fill rate
This is the percentage of warehouse space used in fulfilling orders for a given time period (monthly or yearly). For example, out of 1000 square feet in your warehouse, 900 square feet were used during this period for fulfilling orders.
5. Vendor fill rate
Measures how often vendors deliver products on time compared to how often they promise deliveries will happen on time (and what happens when they don’t).
Why Calculate Fill Rate?
Calculating fill rates is an important part of order fulfillment and supply chain management. Every time you receive an order from a customer, you want to make sure that the order is filled accurately.
The fill rate is the percentage of customer orders that were filled correctly by your company, and it can help you identify any problems or issues with your current order fulfillment process.
You may also want to calculate the fill rate for specific products, departments or regions within your business. This will help you better understand how well each product or department is performing compared to others in your company’s overall operations.
Fill Rate Formula: How to Calculate Fill Rate
For calculating Fill Rate, it is important to have a proper look upon the below-given formula-
The fill rate ?1 isà ?1(s) = E[min(X,s)]E[X]
The service level ?2 isà ?1(s) = P(X?s)
X represents demand over the next cycle
S represents the available stock
Min (X,s) talks about the restrictions available stock imposes upon the quantities that can be offered without any delay
So, it can be simplified as
If demand value X is < (lower than) the available stock (s) then X unit will get served easily or else, only S units will be served
Example of Fill Rate Calculation
Imagine your client orders 50 books, and you can only deliver 20 books at the time of order, in such case, your fill rate will be-
(20/50) * 100 = 0.4 * 100 = 40%
Understanding the Importance of Fill Rate
When you have a business of your own, you need to know how you are going to meet all the needs and expectations of your customers in the best way. This is the thing that you need to do when you have to manage your inventory without any trouble.
The main goal is to fulfill the wishes of your customers and provide them with an experience that they are not going to forget. With the help of Fill Rate, you will be able to do this.
There are some other benefits that you can have, as well.
It helps you in managing the expectations of the customers in the best way. In case you have knowledge that you cannot fulfill some of the orders, you can let them know and they have the option to substitute it with something else or wait.
There is no doubt that you will also be able to offer them some other products in the line. In case you know that you cannot achieve that particular product to satisfy the customers, you can communicate appropriately with them. This offers you an opportunity to provide them with something else which can improve the fill rate.
Knowing about the fill rate also helps in the whole process of inventory management in the best way.
When your fill rate is going consistently low, it is time to focus on the inventory and make some changes. Admittedly, that will help you out in fulfilling the needs of the customers.
So, in brief, you can say that Fill Rate plays a crucial role in improving the fulfillment processes, optimizing inventory management processes, and enabling you to offer some alternative products in case you cannot fulfill the demand on the go.
How to Increase Order Fill Rate
Order fill rate is a metric that indicates how well a company fills orders. It’s important to know what your company’s order fill rate is in order to understand the quality of service you provide.
There are many steps you can take to increase your order fill rate, including:
- improving your automation process so that customer orders can be fulfilled more efficiently and effectively
- increasing the number of items sold per customer and increasing average order size, so that fewer products need to be shipped out individually
- having a more streamlined inventory management system, which will allow you to make sure that there are enough products available before an order is placed
In addition to increasing your order fill rate, it’s also important to keep track of the average order size. This will allow you to better understand what customers want and how they’re shopping online.
Wrap Up for Fill Rate!
So, we have already made it pretty clear that the fill rate is significant to businesses these days. That is why you need to ensure that you are paying proper attention to it so that you can get some great results.
Aiming for a 100% fill rate will help suppliers in productively influencing their relationships with the customers. Suppliers having better fill rate enjoy more trustworthiness and loyalty from their customers. A better fill rate also guarantees adequate cash flow for the businesses.
While if your fill rate is low, it can destructively impact your sales, customers, and reputations.
So, how important do you consider the fill rate for your business? Do you have any interesting stories related to Fill Rate? Share with us in the comments below.