Would you say that follow-through is an essential quality for your employees to demonstrate? Of course! Most organizations agree that follow-through is a valuable skill for anyone in business. And your online shoppers expect the same from ecommerce companies like yours.
Customers expect the companies they do business with to demonstrate follow-through by delivering their orders on time — and they certainly don’t want to wait very long. In today’s modern world of fast shipping and instant gratification, longer lead times to process orders and ship them to the customer’s doorstep won’t give your company a competitive advantage. And if their order is backordered or lost? You may lose the customer altogether.
So how can you evaluate your order fulfillment process to ensure you’re following through on your customer’s expectations? By using a simple but highly useful calculation called fill rate.
Defining and Calculating Fill Rate
Your business’s fill rate (also known as order fulfillment rate or fill percentage) is the percentage of orders you can ship at any given point in time without running out of stock, lost orders, or backorders. Fill rate will help you understand how well you’re getting your orders to your customers.
Knowing your fill rate gives you an insightful window into your logistics operations and your ability to keep up with your customer’s demands and expectations. Though typically calculated near the end of your supply chain (as you need to your total customer orders for a given time), you can use different types of fill rate calculations at various stages of order fulfillment, including:
- Order Fill Rate - this gives you the percentage of your total customer orders that have been met. Order fill rate is the standard fill rate typically used. Other fill rates drill down into the supply chain from here.
- Warehouse Fill Rate - this calculates the fill rate for a specific warehouse, allowing you to evaluate a warehouse operation’s efficiency.
- Line Fill Rate - analyzing order lines (the line items on an order), line fill rate determines the percentage of line orders entirely filled from all order lines.
- Case Fill Rate - applied for both inbound and outbound product cases, this calculates the percentage of product cases shipped initially from total product cases ordered.
- Vendor Fill Rate - great for analyzing vendor follow-through, vendor fill rate determines the percentage of vendors able to ship confirmed orders.
- Supplier Fill Rate - calculates the percentage of suppliers who have delivered supply orders to your warehouse on time.
- Inventory Fill Rate - this indicates the percentage of inventory used for customer orders out of your total inventory on hand.
The Fill Rate Formula
To calculate your company’s fill rate, you simply need to divide the number of orders you’ve shipped by the total number of orders placed and multiply this result by 100.
Fill Rate = (Orders Shipped / Total Orders Placed) x 100
For example, let’s say you shipped 225 orders for the previous month, but you determined that 260 orders were actually placed. Using the fill rate formula, you’d have a fill rate of almost 87% for the month.
How to Use Fill Rate to Your Advantage
Fill rate ideally should be evaluated regularly, often calculated each week, month, and year. On average, typical fill rate ranges fall between 85% - 95%. In a perfect world, you would have a fill rate of 100%. However, to set yourself apart from your competitors, you should strive for a fill rate as close to perfect as possible (at least 95%). The higher the fill rate, the better you’re able to fulfill your orders without issues like backorders, which are always a letdown for your customer.
Using fill rate can help you see what’s working in your order fulfillment process and what isn’t so you can make necessary adjustments. With fill rate, you can identify slower suppliers more quickly, as well as determine if the interval in which you order inventory to restock (called your reorder point) works well for keeping shipments going out on schedule.
Over time, your fill rate can help you understand your customer demand so you can more easily forecast your inventory needs (including seasonal demand fluctuations) — leading to more accurate inventory management without stockouts or excess inventory.
Boost Your Fill Rate with Smart Warehousing
While fill rate can give you vital fulfillment insight, you still need to execute order fulfillment in a way that keeps your customers loyal and satisfied. That’s where the right 3PL partnership can give you the boost your ecommerce company needs to thrive. At Smart Warehousing, we can help you exceed customer expectations with omnichannel fulfillment solutions (and ideal fill rates), as well as logistics needs like warehousing, replenishment, transportation, and more. Contact us today to get started. Your fill rate (and your brand’s reputation for follow-through) will thank you.